What is Crypto? — Is it profitable?
Cryptocurrency is a virtual currency built on a distributed network, based on blockchain technology with no single/central body controlling the currency. This decentralized structure allows cryptocurrencies to exist outside the interference of central banks or governments and prevents a single body from manipulating its value which many see as a winner against inflation. Another advantage of this decentralized structure is that there are no points of collapse as thousands of computer nodes support the cryptographic structure rather than a single node that is prone to crash or failure.
There are 12,000+ cryptocurrencies listed on crypto exchange networks, but the most popular are Bitcoin, Etherium, Dogecoin, Litecoin, etc. Bitcoin is the biggest crypto by capitalization and was the first crypto released by the anonymous creator duped Satoshi Nakamoto back in 2008.
What is Blockchain?
A blockchain is a set of connected blocks(through a network), whereby each block holds the content of transactions verified by every member within the network. This makes it close to impossible to forge transactions. For every new transaction carried within the blockchain, its details are updated across all copies of the blockchain(online ledger), maintaining uniformity and consistency.
Experts see Blockchain as a game-changer once applied in Fintech, online voting, crowdfunding, or supply chains.
Why is crypto a big deal?
i) Cheap — It is possible to send and receive cryptos from peer to peer just like how you would make cash transfers via the banks. However, sending cryptos is cheaper compared to making bank transfers, more so when making transfers across different geographical regions. It minimizes the hassle of going through the kind of paperwork demanded by banks, declaring the source of funds, the charges imposed on you, need of verification of the payment by the banks, and also there will be no need to convert from one currency to another during the transaction which would increase costs.
ii) Fast — While it takes 2 to 4 days to transfer funds from one state to another using bank, it will only take a few minutes to a maximum of 2hrs to get complete transfers using cryptos.
iii) Anonymity — While making transfers using crypto, you don't have to provide unnecessary personal details and this protects one’s privacy from a breach.
iv) Accessibility — Since your cryptos are not tied to any territorial government or institution, your money will be accessible wherever you go in the world.
How to acquire cryptocurrency
There are two ways in which one can own crypto, either through purchasing the crypto or mining it.
i) Purchasing Crypto
There are many platforms that provide crypto buying and selling services. Personally, I use Coinbase, Binance, and Paxful as those three have proven to serve me to my satisfaction. It is very simple to buy crypto. All you need is to signup to these platforms, fund your account, and buy any crypto listed on them.
There are two approaches used by these platforms to facilitate crypto trading. You can either use Spot trading where you buy the cryptos directly from them or P2P where you can buy or sell cryptos from other traders on the platform. Through Escrow, crypto platforms ensure that you get your cryptos after paying for them and that you are not easily scammed.
ii) Mining Crypto
The other way to own crypto is by mining them. Crypto mining controls how new units of crypto are released into circulation. Cryptocurrency miners get awarded new units of crypto after validating transactions(mining). Remember in blockchain, transactions are validated by any node in the blockchain. As such, once a node validates a number of transactions, the owner gets awarded new crypto units.
While everybody can mine cryptos, it becomes too costly and in turn difficult to do so as the crypto network grows(new miners join the network). Much of the costs go to paying off electricity bills as the miners require a lot of energy to run.
