## The Basics of Investing in cryptocurrency 

As the price of Bitcoin and other cryptocurrencies has risen, more people have been investing in cryptocurrency without knowing how it works or where to start.

In this guide, we’ll help you learn how to invest in cryptocurrency, manage risk, explain the best crypto to invest in, and legal issues you may face. 

## What Is Cryptocurrency?

![What Is Cryptocurrency?](https://blog.exolix.com/uploads/Article_3_1_min_c3bb59c5f8.jpg)

Simply put, cryptocurrency is digital money. It allows people to send currency from one person or location to another via an encrypted computer network. In some ways, it operates similarly to an exchange like eBay—but with digital currencies instead of physical goods.

Essentially then, investing in cryptocurrency is just like trading in foreign currencies or stocks—but with less regulation.

Cryptocurrency is decentralized, meaning it is not controlled by any authority. This is one of the major reasons why it is being adopted so widely.

## How to Safely Invest in Cryptocurrency

To ensure the safety of your cryptocurrency when buying it, it is important to choose an exchange that is operating legally and takes steps to ensure that transactions are encrypted and secure.

Additionally, as soon as you get your hands on cryptocurrency, transfer it to a paper wallet. Paper wallets are an easy way to store your coins offline—the keys aren’t stored digitally anywhere and can’t be hacked remotely.

All you need is a clean computer (which hasn’t been previously connected online) with a printer and some bitcoins. Once you create a paper wallet, print out your public and private keys on separate pieces of paper.

The public key will be used to deposit funds into your account; keep that one safe! The private key should never leave its secure location. If someone gets their hands on that piece of paper, they could steal your money from any account linked to that address.

## Decide Where to Buy It

You can buy cryptocurrencies with fiat money on exchanges, such as Coinbase or GDAX. Look for cryptocurrency exchange with the following features:

● 	Simple and easy to navigate

● 	Low exchange fees

● 	Good UI/UX

● 	Has a mobile app

● 	Keeps your data secure (e.g., two-factor authentication, automated logouts, etc.)

● 	Offers a wide variety of payment methods

● 	Shows current market trends

● 	Has additional features (e.g., automatic withdrawals, buy and sell orders, etc.) 

● 	Registered with state authorities and operating legally

If you’re looking for other options, check out LocalBitcoins (for P2P transactions) or Bitstamp (one of the first crypto exchanges). It’s important to ensure that the exchange you choose is available in your area, as many states have regulated the use of crypto.

## Choose How You'll Pay

The number of cryptocurrencies out there is growing, which means more options when it’s time to pay. The key is knowing what payment methods are available, where you can use them and how they impact your investment.

Choose an exchange that supports secure and widely used payment methods in your country, including (but not limited to):

● 	Visa/Mastercard

● 	PayPal

● 	Apple Pay

● 	Google Pay

● 	Paysafe card

● 	Instadebit

In most exchanges, you’ll need verified payment methods to first purchase USDT and then buy cryptocurrency coins.

## Add Value to Your Account

Adding value to your account allows you to make smart investment decisions. First, you must learn how each cryptocurrency works and what problems it’s designed to solve.

The better informed you are, the more likely you are to invest wisely and remain safe from potential scams. Second, consider diversifying your holdings: once you buy a currency, don’t put all of your eggs in one basket.

## Select a Cryptocurrency

New cryptocurrencies are emerging all over, and it can be hard to know which one will last. If you’re looking for new crypto to invest in, these key factors can help you make a decision:

● 	Market Cap (The total value of a currency)

● 	White Paper (A document issued by developers that explain the technology and purpose of the project)

● 	Use Cases (Major factors that drive investment)

● 	Total coins (to be mined and in current supply)

## Keeping Crypto Safe

![Keeping Crypto Safe](https://blog.exolix.com/uploads/Keeping_Crypto_Safe_9b622697d5.png)

Once you’ve bought cryptocurrency, it’s important to keep it safe. Here are several ways you can ensure the safety of your holdings:

● 	Cold Wallets: cold wallets, also known as hardware wallets, are not connected to the internet and hence are not vulnerable to cyberattacks. Keeping your private keys in a cold wallet is the safest choice because these wallets are encrypted.

● 	Secure Internet Connections: use only a known internet connection and avoid public Wi-Fi networks when trading or conducting crypto transactions. Use a VPN even when connecting to your home network for added security. Your IP address and location are changed using a VPN, which keeps your internet behavior secure and confidential from potential threats.

● 	Multiple Wallets: you can diversify your crypto investments by using numerous wallets because there are no restrictions on wallet creation. Use one wallet for daily transactions and another for everything else. This will safeguard your cryptocurrency assets and reduce the risk of a security compromise.

● 	Secure Device: to protect against newly identified vulnerabilities, make sure your device (laptop, phone, etc.) is up to date with the newest anti-virus software. To prevent hackers from exploiting any flaws by building programs to target the vulnerability, use a robust antivirus and firewall to increase your device's security.

● 	Password Protection: unfortunately, many people are prone to hacking because they use easy-to-guess passwords or similar passwords across various accounts.
Make sure you have a strong, complicated, and difficult to guess password that you change regularly. If you have many wallets, use different passwords for each. For added protection, use two-factor authentication (2FA) or multi-factor authentication (MFA).

● 	Avoiding Scams: do not open suspicious emails, pop-ups, or advertisements on the internet. These could hack into your device and steal sensitive information. It’s best to keep a firewall always enabled so that your device will automatically block or warn you about malicious content. Moreover, using a reputable crypto exchange will also lower the likelihood of scams.

## Advantages to Investing in Cryptocurrency

Crypto is gaining increasing popularity for many reasons. If you’re still hesitant about investing, check out these benefits that it has to offer:

- Diversification: diversifying your portfolio allows you to spread your risk, which could help you sleep better at night if one asset’s performance goes sour. 

In 2017, many thought Bitcoin was on track to reach $50,000 or more, and some predicted it would go even higher. While that didn’t happen, there are indications that investors who spread their money across multiple cryptocurrencies have fared well so far.
- Return Potential: in general, cryptocurrencies are considered a great investment for their high rates of return. Ethereum has returned over 8,000% since its initial coin offering (ICO). With an average expected ROI of 1,153%, it’s no wonder people are clamoring to get into crypto. 

When compared with traditional investment vehicles such as blue-chip stocks or government bonds, cryptocurrencies have historically delivered much better returns. But they also come with higher risk than safe investments like CDs and money market accounts.

- Additional Utility: some cryptocurrencies, like XRP and Dash, can provide additional utility for their holders. Because of their unique structure, these cryptocurrencies’ tokens have real-world use cases outside of being a method of payment. 

One could even argue that cryptocurrency is less speculative than most early-stage startups, given that cryptocurrencies’ use cases are not only novel but have an established record of success.

## How to Choose a Cryptocurrency to Invest in

![How to Choose a Cryptocurrency to Invest in](https://blog.exolix.com/uploads/How_to_Choose_a_Cryptocurrency_to_Invest_in_ba62e2083a.png)

We see a new cryptocurrency in circulation every other day. This can make it confusing for beginners to choose which one to invest in. While newer coins are cheaper and have the potential to grow, it’s safer for newbies to invest in trusted coins that pose less risk. These include: 

### Bitcoin

Bitcoin is one of the biggest cryptocurrencies out there, and it boasts a market cap of over $758 billion. It is a decentralized digital currency that keeps track of transactions in a distributed ledger known as a blockchain.

Bitcoin miners use high-powered computers to solve difficult riddles to confirm blocks of transactions. These blocks are added to the blockchain record if they are successful, and the miners are paid with a number of bitcoins.

As Bitcoin is being adopted in many industries, you can use it to buy things online or even make purchases at certain stores.

### Ethereum

Ethereum is not just a cryptocurrency but an entire blockchain-based platform. Its network is secure because it is decentralized, a major reason why it is so valuable today (its market cap ranks second, just after Bitcoin).

Ethereum has a stable infrastructure of applications that are built on top of it, which makes it one of the safest crypto to invest in on a long-term basis. The best part about investing in Ethereum is that you can also use it as a payment method when shopping online or booking flights.

Moreover, with so many companies adopting ETH as their preferred payment system, there are high chances of your investment growing exponentially over time.

As compared to Bitcoin, which is priced at approximately $40000 for 1 BTC, the price of 
ETH ranges from $2,500-$3,500 depending on market fluctuations.

## Managing Cryptocurrency Risk

This section will help you calculate how much to invest in cryptocurrency and how to invest in cryptocurrency with only a little money. A lot of beginners invest because they see the market growing at a fast pace and don’t want to miss out when they see others trading.

However, it is important to remember that the crypto market is extremely susceptible to volatility. Thus, here are some important rules you should follow to minimize risk and improve the chance of profits:

- Calculate the trade's size: always follow the six-percent and two-percent rules. According to the latter, you should open a position with a maximum of 2% of your total investment. Some experts advise investing no more than 1% of the amount.

You will never lose your full deposit if you use this strategy. The six percent rule states that if you keep losing money in crypto trading and can't seem to stop, you should quit trading if you lose more than 6% of your initial investment.

In this instance, it is recommended that you take a 1.5–2-week sabbatical from trading so that you can mentally heal and avoid making rash decisions.

- Calculate the transaction's profitability: the profit/loss ratio is the most important factor to consider. It should ideally be 3 to 1 or at least 2 to 1. Keep in mind that not every trade will be profitable. Even the most experienced traders lose money. Losing is unavoidable in trading; you must simply accept it.

In addition to these, as we have emphasized above, make sure to always diversify your portfolio as the number 1 rule to minimize risk. These strategies will teach you how to know when to invest in cryptocurrency.

![Managing Cryptocurrency Risk](https://blog.exolix.com/uploads/Article_3_4_min_2f42412d07.jpg)

## Cryptocurrency Legal and Tax Issues

Since crypto is still new, it comes with a lot of legalities and taxation issues, including:

● 	Transacting parties' anonymity (you don’t know who you are dealing with)

● 	Lack of proper authority (in case you encounter an issue or fall victim to scams)

● 	Laws that aren't adequately specified

● 	Many users invest in crypto for tax evasion and money laundering

● 	Users are subjected to frequent phishing attempts

● 	Data loss, illegal trading, and purchasing systems

Currently, you are liable to pay tax when using mainstream cryptocurrencies such as Bitcoin and Ethereum. 

## Conclusion

The good news is that there are a lot of factors you can control when investing in cryptocurrency. Always remember to buy low and sell high.

While there’s no guarantee you won’t lose money, your strategy for how to invest in cryptocurrency can improve your odds of making smart investment decisions and making money, too.
 


The Basics of Investing in cryptocurrency

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In this guide, we’ll help you learn how to invest in cryptocurrency, manage risk, explain the best crypto to invest in, and legal issues you may face. 

## The Reasons Why The Ethereum Platform Is So Popular 

When answering the question of what Ethereum is, one may say simply that it's a cryptocurrency; another one would refer to it as a blockchain ideal to run decentralized applications. Some would associate Ethereum with different tokens based on the network. Let’s delve into the Ethereum platform development and explore what Ethereum is and why it is so successful.

## What Is Ethereum? ##

Ethereum is a large blockchain network that was developed to expand the use of blockchain technology rather than just to compete with Bitcoin in the field of cryptocurrency. With all respect to Bitcoin's innovativeness, its network doesn't offer many opportunities. Meanwhile, Ethereum was designed to allow people to create and run their own applications and smart contracts without a third party.

A young programmer named Vitalik Buterin developed the idea of cryptocurrencies. Ethereum was launched in 2015 with an initial capital of 72 million Ether. Although Ethereum uses the same principles as other networks, the main difference is the ability to create applications based on it. 
It has its own currency called Ether, sometimes referred to as Ethereum, which is a bit confusing. Ether is a utility token created to make payments. Apart from the fact that it is Bitcoin's closest competitor by market capitalization, it has some interesting features. On Ethereum, it is possible to mint stable coins, utility tokens, or newly stormed into the crypto-marked non-fungible tokens (NFTs). The system is characterized by its reliability and readiness for change.

## How To Buy Ether? ##

![Buy Ether](https://blog.exolix.com/uploads/Article_2_2_min_a902de2749.jpg)
Now that you are familiar with Ethereum and its ecosystem and perhaps even have your own tokens or are considering purchasing them let's take a look at where and how best to buy Ether. 

### Online Exchange Platforms ###

The largest decentralized exchanges and trading platforms like Coinbase, Binance, Kucoin, Huobi, and others offer their services for buying and selling Ether. To buy Ether, you need to take several steps:

- Create an account in the system or download the application
- Add a payment method
- Select Ether from the list of assets
- Enter the amount you want to spend on the purchase

### Peer-to-Peer ###

There is a peer-to-peer (P2P) transaction option. In this case, you will need the appropriate section on the trading platform. Peer-to-peer network technology allows multiple devices to communicate directly with each other without an intermediary. 
Such a process is not much more complicated than buying Ether through an exchange. You choose the currency you want to buy, the currency you will pay with, and check the possibility of transferring directly to the recipient's bank. In addition, you can benefit from the course difference with this type of transaction.

## How To Store Ether? ##

![Ether Wallets](https://blog.exolix.com/uploads/Article_2_3_1_min_d055eeb615.jpg)
 
The number of altcoins has increased significantly, so we witness the rise of the popularity of multi-currency wallets. For example, the Ethereum network has multi-currency storage that supports various tokens. 
The cryptocurrency wallet is a personal interface that provides reliable storage and makes transactions possible. Several options differ in their speed of operation, the purpose of use, and security.	

### Hardware Wallets ###

It’s possible to store your Ether offline in a hardware wallet, such as Trezor or Ledger. It is believed that this is the most reliable way to store cryptocurrencies since all private keys and other data are inaccessible to hackers. A hardware wallet, or as it is also called a cold wallet, is an external portable device that can be connected to your computer when needed. It is equipped with a special anti-hacking program, which allows you to increase the level of customer security. Best of all, hardware wallets are suitable for long-term storage of crypto since the time of operations in the network with them is extended.

### Desktop And Mobile Wallets ###

Desktop wallets are programs that can be downloaded and run locally on a PC. These wallets differ from some online versions as they give control over your keys and assets. Overall, desktop wallets can be considered more secure than most web adaptations. Crypto wallet developers create applications that synchronize with each other. The user can install the same wallet on the phone and PC and use a convenient option.

### Paper Wallets ###

A paper wallet is a piece of paper containing a private key or a seed phrase that gives you access to your cryptocurrency assets associated with the wallet. According to the same logic as in the case of hardware wallets, paper wallets are considered among the most reliable ways to store digital coins. The creation of a paper wallet is relevant in cases of storing significant amounts of currency since an extreme level of security is required.

### Web Wallets ###

Online (web) wallets are accessible from anywhere in the world where there is the internet. This is very convenient for the constant use of cryptocurrency. Usually, hot wallets are easier to set up, access and accept more tokens. However, the hot wallets are also more vulnerable to hackers, possible manipulations, and other technical problems.	
Today, a popular, reliable, and fast crypto wallet is TrustWallet. It is a software-based hot wallet that allows you to store more than 40 varieties of cryptocurrencies and provides access to a decentralized exchange.

## How Does Ethereum Work? ##

The Ethereum platform can be used for almost any purpose you would need a ledger for, such as simple or complex transactions, smart contracts, decentralized applications (DApps), and decentralized autonomous organizations (DAOs) development. Let's take a closer look at what mechanisms make up this system.	

### Smart Contracts ###

Smart contracts are similar to typical legal contracts, but digital and without the participation of a third party. This is code written most often in the Solidity programming language, which exists inside the Ethereum system, and its execution is guaranteed by the program. A smart contract is considered a reliable and useful tool. Through smart contracts, Ethereum company tends to expand the concept of cryptocurrency.	

### Ethereum Blockchain	###

Ethereum simultaneously works on thousands of computing machines around the world; that is, it does not have a single owner. Ethereum was a pioneer of second-generation blockchains, and in addition to financial transactions, it provides a greater degree of programmability. Ethereum gives developers much more opportunities to experiment with their code.
To reduce any risks, the Ethereum network introduced the concept of gas, the mechanism of additional commission fees. Anyone who's making a transaction or creating a token has to pay for the use of the Ethereum network in Ether. This is required for interacting with smart contracts, making transactions, developing DApps, etc. The Ethereum price of gas may vary, but a fixed minimum amount is required for each operation. Complex contracts require more gas than a simple transaction. Thus, the gas acts as a measure of computing power. 

### Ethereum Virtual Machine (EVM) ###

The role of the Ethereum Virtual Machine is to run smart contracts. The EVM is a state machine. In input, there is the state of the external blockchain; in the output, the state is updated after a transaction has been applied. Each transaction is processed by the EVM sequentially. The EVM checks the correctness of the transaction, calculates the new state of the blockchain, and saves it. To update the state, a special mechanism called mining is used. It is performed using the “Proof-of-Work” algorithm.

### Proof-of-Work ###

“Proof Of-Work” (PoW) is a mechanism that prevents double-spending. Most cryptocurrencies use it as a consensus algorithm, which serves as a method of protection. Since digital currencies are just data, it was necessary to prohibit copying and sending the same units to different places. With the PoW mechanism, we can track all transfers and record them in an open, decentralized ledger. Any block containing an invalid transaction will be automatically rejected.

### Ether ###

Ether has a couple more differences from other cryptocurrencies. Ether has a no-issuance limit, and it cannot be replaced with other coins for its main use in Ethereum. A few years ago, this token practically did not exist outside of the Ethereum system, but nowadays, you can pay with Ether in some online stores or purchase gift cards for Amazon, Apple, and Uber, for instance. 

## Ethereum Use Cases ##

![Ethereum Use Cases](https://blog.exolix.com/uploads/Article_2_4_1_min_5af3b62c9a.jpg)

Since Ether is a utility token, let's look at where it can be applied, in addition to transactions, token swaps, mining, and making purchases, and explore which companies use Ethereum.

### Decentralized Finance (Defi) ###

The Defi ecosystem consists of financial instruments, such as services and applications created on the blockchain. Most of the Defi products are built on the same Ethereum foundation. This means that many products work together without any issues. You can borrow tokens on one platform and exchange them on another market or application. Based on the Ethereum network, Defi wallets, the best Ethereum tokens, and even entire organizations can be created. 

### Non-Fungible Tokens (NFTs) ###

The NFT segment brought significant popularity to the Ether network. NFTs hit the headlines in both the top Ethereum tokens and top Ethereum projects categories. They allowed for the tokenization of things like art, collectibles, and even real estate assets, making them unique, one-of-a-kind tokens.	Initially, such tokens protected the copyright of the owners and could not be illegally duplicated but, at the same time, could be transferred or sold to a new owner.
Since the Ethereum blockchain not only made it easy to create your own NFT and collections but also to protect them, the development of the system did not take long. Now it is even possible to develop your own marketplaces based on Ethereum.

### Decentralized Autonomous Organizations (DAOs) ###

With the advent of Ethereum, completely new ways of open cooperation through the internet have become possible. One such example is the DAOs, which are controlled by code similar to a computer program. 
To avoid hacker attacks, which, unfortunately, the Ethereum company had to face, the chain has undergone a division into two parts. In the new chain, malicious transactions were effectively canceled. Today, this chain is known as the Ethereum blockchain, while the one with the irreversibility of transactions is now called Ethereum Classic.

## How OriginStamp Uses the Ethereum Blockchain ##

OriginStamp specializes in creating blockchain timestamps for businesses. It can provide timestamp files, data, or documents. Its goal is to prove the originality and lifetime of a digital asset. For this purpose, the Timestamp API allows you to add tamper-proof timestamps. In particular, it works with NFT and applications based on Ethereum. 	

## Conclusion About The Ethereum Platform ##

Ethereum was launched in 2015 and since then has proved that it has long-running plans as well as ambitious goals. Thanks to its smart contract possibilities and the noble idea of creating a decentralized world, the Ethereum network has gained incredible popularity. This system includes the Ethereum blockchain, Ethereum crypto, called Ether, EVM that runs smart contracts, and a proof-of-work security mechanism. Thanks to its versatility and universality, Ethereum makes Defi DApps, DAOs, and marketplace developments possible. Despite gas prices, Ethereum remains the preferred option for users due to its security and reliability.

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Why The Ethereum Platform Is So Popular

Ethereum is a blockchain-based software platform with the native coin ether. It is the second-largest cryptocurrency in the world.


The crypto industry has become familiar to millions of people, retailers, and corporations worldwide. The news is full of facts about quotes and amazing investments. We aim to provide the ultimate explanation of cryptocurrency for beginners. In our cryptocurrency guide, you are going to gain a basic understanding of cryptocurrency, as well as learn about its history, use, and trading. You will also explore present trends like safety and reliability in the decentralized finance sector and learn how to invest in cryptocurrency for beginners.

## What Is Blockchain? ##

![Frame 482840-min.jpg](https://blog.exolix.com/uploads/Frame_482840_min_e32e8ab4c4.jpg)

Gradually plunging into the topic of cryptocurrencies, you need to have the term blockchain explained and fully understood. Basically, it’s a chain of blocks filled with information. Initially, it was a technology for ensuring trust, so it is very effective in finance.

Each blockchain is a chain that is built according to certain rules that ensure the connection of blocks with each other. It works because copies of blockchains are stored on many different computers independently, and it is almost impossible to forge a block without breaking the connection. There are public, private, and exclusive blockchains, each of which performs its own function. 

### What Is Blockchain Technology? ###
Blockchain technology helps users perform transactions that are authorized by their digital signatures. It authenticates the swap or money transfer and protects it from fraud. Thus, the information contained in the digital registry is protected.

Understanding blockchain as a new decentralized database or a so-called ledger of millions of instant transactions is exciting. Investors feel like they are a part of the skyrocketing sector of “finances of our future.” The new sophisticated system guarantees reliable storage of the blockchain wallet, allowing you to secure your finances. There are a few ways you could get involved in the system, which we are going to talk about later in the article.

Moving on, there are several ways how to invest in blockchain in order to support the system — for instance, a direct purchase of cryptocurrencies, taking part in an initial coin offering, or buying ETFs (exchange-traded funds). 

## What Is Cryptocurrency? ##

![Frame 482837-min.png](https://blog.exolix.com/uploads/Frame_482837_min_efad1d6721.png)

Let’s begin with the cryptocurrency definition. The concept of digital currency is very broad — it could be defined as any monetary unit that exists in electronic form. Such assets are divided into regulated and unregulated. For example, a regulated one is a digital yuan, which is currently being tested in China. But there is no government behind cryptocurrencies. 

### How Cryptocurrency Works ###

The decentralized system’s uniqueness lies in the fact that banks do not intervene in the verification of transactions — instead, the payment system itself manages them automatically. We can hardly underestimate the cryptocurrency meaning and its impact on the financial sector. In brief, this is a new method that helps users send and receive payments regardless of their location, local currency, or banking system. 

Currently, the top financial organizations are already solving the problem of how to pay with cryptocurrency. The most common way to make purchases using crypto (for example, Bitcoin) is to use a debit card. Such cards can be obtained when registering on famous crypto exchanges. All you need is to know how do you buy cryptocurrency on the exchange using your fiat money.

Furthermore, crypto developers have figured out how to earn cryptocurrency without investment in play-to-earn games. In such entertainment apps, players receive rewards for completing levels and achievements, and cryptocurrencies or NFT tokens become the most wanted trophy.

## History of Cryptocurrency ##

You are certainly aware of this, but Bitcoin is the most popular cryptocurrency. The token was launched in 2009, during the financial crisis. Due to a high degree of bias towards banks at that time, the economic situation boosted Bitcoin’s popularity.

The growth of cryptocurrency usage was supported and accelerated by publications in well-known magazines like Forbes. Economists argued about the usefulness of blockchain, Bitcoin, and other digital protocols, which attracted the interest of the general public. 

Consequently, new systems like Litecoin (launched in 2011) and PPCoin (in August 2012) began to appear. Along with them, starting from 2012, emerged the new blockchain-based payment network Ripple, which introduced its own XRP cryptocurrency. This was followed by the launch of the Ethereum blockchain, operating with smart contracts, in 2015. Since then, there have been many other systems and cryptocurrency exchanges. 

As of February 2022, we witnessed the rise of more than 17.5 thousand cryptocurrencies, which CoinMarketCap takes into account in its database. However, not all of them have hard and reliable capital. So, when exploring how to invest in cryptocurrency for beginners, it is best to pay attention to the most popular ones. But everyone should thoughtfully and carefully dive into the topic, as it also includes some risks.

## How Does Cryptocurrency Gain Value? ##

Both cryptocurrency and fiat, that is, government-approved and issued money, have value based on trust and usability. The decentralized structure allows people to see the value in investing, knowing that others also trust it, accept crypto in payments and use it as a means of exchange. 

Why is cryptocurrency valuable? Let’s explore some evident reasons: 

- Blockchain technology offers many advantages in terms of security and usefulness. 
- The ability to make cross-border transactions cheaply and quickly is crucial. 
- Because it excludes central authorities, blockchain gives more power and freedom to users.
- Bitcoin decentralization provides a highly reliable and anonymous system.
- Significant value is provided by the community, investors, and traders who invest in the development of blockchains and cryptocurrencies.

According to [the 2022 BitMEX report](https://blog.bitmex.com/five-ways-the-world-of-crypto-will-change-in-2022/), which aimed to predict the future of cryptocurrency, the use of crypto will likely rise worldwide, more women will grasp how cryptocurrency works, and the gaming sphere will skyrocket. So, is cryptocurrency the future? We’ll see.

## Pros and Cons of Cryptocurrency ##
Let’s consider the benefits and drawbacks of crypto.

### Advantages of Cryptocurrency ###
- Decentralization
- No personal information is needed for transactions
- Low price of transfers around the world 
- Non-exposure to inflation in contrast to fiat currencies
- Crypto can be a tool for trading on the exchange
- Great means for investment and capital savings
- A tool for earning money by mining

### Disadvantages of Cryptocurrency ###
- Volatility: cryptocurrencies are vulnerable to external influences, news, the level of recognition, and trust.
- High commissions: in some networks, fees are calculated in proportion to the number of funds in the transaction. Thus, transfers can be expensive.
- The risk associated with investing and trading CFDs: an inexperienced trader risks losing more than their initial investment.
- The difficulty of perception by society may be the reason that some people distrust cryptocurrency.
- The irreversibility of operations: a transaction cannot be canceled or adjusted, so no one will return the coins if they are manipulated or sent to the wrong person.
- With increasing complexity, cryptocurrency mining may become unprofitable.

## Types of Cryptocurrency ##

Altcoins or alternative coins are all the cryptocurrencies that are not Bitcoin. Most of them appeared after Bitcoin’s launch. Currently, there are many virtual currencies, but only a few have achieved popularity.

## Token vs. Coin ##
![Frame 482838-min.jpg](https://blog.exolix.com/uploads/Frame_482838_min_ffd30284ad.jpg)

Cryptocurrencies can be divided into two large groups: those that have their own blockchain, and those that use blockchains created earlier. Let’s compare coin vs. token.

Cryptocurrencies that have their own blockchain are Bitcoin, Litecoin, Ethereum, XRP, EOS, Cardano, etc. Such cryptocurrencies are called coins or altcoins. But many popular cryptocurrencies do not have their own blockchain yet have a market capitalization of over $1 billion: USDT, LINK, USDC, UNI, etc. These are called tokens. Tokens work on existing platforms. Many of them are based on the Ethereum blockchain, and in some cases, they serve as an analog of the dollar — stablecoins.

## How to Trade Cryptocurrency? ##

One of the most common queries is how to start trading cryptocurrency. Not surprisingly, the most important thing we would like to emphasize in this cryptocurrency guide is learning. Researching by reading news and articles will help you understand the growing digital world. It's valuable because making money with cryptocurrency is possible today.

Answering the questions of where to buy cryptocurrency, we advise easy-to-use P2P exchangers, followed by numerous multifunctional cryptocurrency exchanges and crypto wallet applications.

![Frame 482839-min.png](https://blog.exolix.com/uploads/Frame_482839_min_052c14aaa6.png)

Trading cryptocurrency involves several simple steps: 

### Step 1: Open an Account ###
To start trading digital assets, you need to open an account on the trading platform. The registration process will require the identity document, especially if you plan on trading large sums. The verification system called "Know Your Customer" (KYC) was created to avoid fake and illegal registration.

### Step 2: Fund Your Account ###
There is no fixed amount needed for your account, although different exchanges have different requirements. Depositing money into an account is a personal matter for everyone, and you can start with a fairly small investment amount. 

### Step 3: Placing an Order ###
Orders can be placed through the website or mobile application. To buy cryptocurrency, you need to select the "Buy" option, specify the amount of the purchased cryptocurrency, and confirm the order. Similarly, a “Sell” order is placed. 
A nice tip for you is to check the best time of day to buy cryptocurrency. According to some experts on the web, it is Thursday mornings.

### What Can I Buy With Cryptocurrency? ###
As we have mentioned above, large world companies like Microsoft, PayPal, and Starbucks accept payments in BTC. The list of available goods and services that can be purchased grows daily. You may buy software, apps, game items, real-world items, premium goods, and even coffee.

But if your chosen store does not accept crypto payments, you need to know how to cash out cryptocurrency. In any case, it seems that in the near future the financial system will be altered and this knowledge will not be necessary.

## How to Mine Cryptocurrency? ##
The most important cryptocurrency in the world, Bitcoin, has a limited number of coins that can exist on the network, and it’s still possible to mine them yourself.

So, what is mining cryptocurrency?

Mining cryptocurrency is the extraction of digital currency. Anyone who has the necessary computer equipment and special software can mine cryptocurrencies. Mining involves using computer power to solve tasks; this, in turn, forms new blocks on the cryptocurrency’s network.

### How do you mine cryptocurrency? ###
In the process of mining, solving algorithms produce a coin — a set of encrypted information. The decentralized currency is stored in a blockchain and distributed over the digital crypto wallets of users.

Eventually, calculations become more complex, which results in an increased need for specialized equipment. Moreover, with the growing complexity of the formation of blocks, the mining of cryptocurrency becomes less profitable.

## How to Invest in Cryptocurrency Intelligently? ##
Investing in cryptocurrency and other digital assets is considered high-risk because of their volatility.

Here are some things you might consider: 

- People tend to monitor the cryptocurrency market regularly and keep a diverse portfolio.
- For beginners, it is advisable to make a cryptocurrency investment with relatively small capital. A more general rule is: don't invest more than you can afford to lose.
- You might need a proper risk assessment, so many believe that it is useful to study fundamental and technical analysis, explore the assets, and consider experts’ opinions.

## How to Create a Cryptocurrency ##
Creating a cryptocurrency is not as hard as it may look at first glance. To make your own cryptocurrency, you need to act according to a certain algorithm.

1. Firstly, to create cryptocurrency, it is necessary to select a crypto code on which the currency will be based. You may download the code on specialized websites like Github.com.
2. After the code is copied, you need to make sure that there are all the necessary libraries on the PC to work with the code correctly. 
3. At the next stage, you need to come up with a cryptocurrency name.
4. Since all operations are carried out on the Internet, the program needs to configure network ports through which all data will pass. This is followed by setting up currency generation. 
5. The final stage is the installation of icons and pictures.

That’s it, but we advise you to explore how to make a cryptocurrency further and perhaps join a developer community.
 
## Is Cryptocurrency Safe? ##

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Decentralization and blockchain encryption protect cryptocurrencies from hacking. To complete transactions, you need two-factor authentication. To start a transaction, you need to enter a username and password; then, you may have to enter the authentication code sent to your mobile phone. Blockchain technology helps users complete transactions. Because each transaction is approved by the parties’ signatures, they are defended from fraud.

But the security measures do not exclude the possibility of hacking cryptocurrencies. [The largest cryptocurrency attacks](https://www.investopedia.com/news/largest-cryptocurrency-hacks-so-far-year/) were the hacking of the Coincheck exchange (valued at $534 million) and the BitGrail crypto exchange ($195 million) in 2018.

## Takeaway ##
Like the common banknotes and metal coins, crypto coins and tokens are the modern means of performing payments, money transactions, and trading. These virtual assets are gaining interest because of their level of capitalization, utility, speed, and price of transactions. As long as cryptocurrency users meet safety requirements, transactions in cryptocurrency networks are reliable. 

The world of cryptocurrencies and instant money transfers over long distances is growing. It is rightly considered an innovative and thriving sector, as well as a hotspot for investors. Having carefully studied the pitfalls and determined an acceptable level of risk, you can enter this promising area.

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Essential Knowledge About Cryptocurrency for Beginners

We aim to provide the ultimate explanation of cryptocurrency for beginners. In our cryptocurrency guide, you are going to gain a basic understanding of cryptocurrency, as well as learn about its history, use, and trading. 

The Exolix cryptocurrency blog is dedicated to providing useful trading tips, guides. More guides, trading tips and latest crypto news.

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