Cryptocurrency (or “crypto”) is a class of digital
assets created using cryptographic techniques that
enable people to buy, sell or trade them securely.
Unlike traditional fiat currencies controlled by national governments,
cryptocurrencies can circulate without a monetary authority
such as a central bank.
This is not financial advice.
What are cryptocurrencies
Cryptocurrencies are virtual or digital money designed with cryptography to prevent counterfeiting or double-spending. Cryptocurrencies use a technology known as a blockchain—a distributed ledger implemented by a different network of computers in charge of managing and recording transactions.
One of the perks of most cryptocurrencies is that they have a decentralized system, not issued by any central authority; therefore, no organization or governmental authority can influence or control the network.
There are different types of cryptocurrencies. The first, most popular, and most valuable of them all is Bitcoin. Created in 2009 by an individual or group known by the pseudonym “Satoshi Nakamoto,” there are over 18 million bitcoins currently in circulation out of a maximum amount of 21 million Bitcoin that will ever exist.
The other types of cryptocurrencies are grouped under one term known as “altcoins,” some of which were created from scratch or were cloned or forked from Bitcoin.
Cryptocurrencies are used to buy or pay for services online while some invest it as you would with other assets, like stocks or precious metals.
How crypto is made
The units of cryptocurrency are created through a process called mining.
Mining is the process of validating cryptocurrency transactions and creating new units of cryptocurrency. The mining process uses powerful computer hardware and software to solve complex mathematical problems that generate coins.
Cryptocurrencies use blockchain technology. Therefore, whenever a cryptocurrency transaction occurs, cryptocurrency miners (who also act as nodes on the blockchain network where these types of cryptocurrency transactions take place) try to decrypt the block containing the transaction information.
The block not only verifies the transaction but also provides information about who sent how much cryptocurrency to whom, when and on what date. Once a block is decrypted and accepted as authentic by the majority of nodes in the blockchain network, the block is added to the blockchain.
The verification process is very resource-intensive in terms of the required computing power.
As a result, individual cryptocurrency miners often find the process too expensive, So because of this miners join mining pools to share computing power.
If you are interested in buying cryptocurrencies, there are different platforms you can do that on. These platforms are known as exchanges or brokers. These exchanges play an integral role in the crypto ecosystem.
They serve as the bridge between the fiat world and the crypto world, and they fall into two categories: Fiat-to-Crypto exchanges and Crypto-to-Crypto exchanges.
According to their names, you can buy cryptocurrencies with fiat currency using fiat-to-crypto exchanges. In contrast, for crypto-to-crypto exchanges, you can get a particular type of cryptocurrency by exchanging it with another kind.
Unlike the cryptocurrency network, some crypto exchanges are centralized, with a central authority in charge of affairs. Here is a list of exchanges for anyone who wants to get into cryptocurrency.
Binance
Binance is the world's largest cryptocurrency exchange by trade volume. The company was founded by Chanpeng Zhao (CZ) in July 2017 after a successful Initial Coin Offering [ICO] that raised about $15 million. CZ claims Binance doesn't have a headquarter because Bitcoin does't have one. The company has a goal of becoming a Decentralized Autonomous Organization (DAO) in the future.
Binance currently offers basic and advanced trading with a high number of crypto assets that you can purchase with over 40 different fiat currencies. The platform also offers margin trading with up to 125x leverage.
Coinbase
Coinbase is also one of the largest cryptocurrency exchanges globally and the most established crypto trading platform in the United States. The San Francisco-based company was founded in 2012 by Brian Armstrong and Fred Ehrsam and is a fully regulated and licensed cryptocurrency exchange in 40 U.S. states and territories.
The platform offers high traffic, liquidity, and trading volumes. They also provide 32 cryptocurrencies to their U.S. customers and 36 on Coinbase Pro. Clients who visit their website can find educative videos to brush up their knowledge of new cryptocurrency projects.
Kraken
Kraken has been in business since July 2011. Founded by a serial entrepreneur, Jesse Powell, Kraken was established in San Francisco after the Mt Gox security breach but is presently based in California.
The platform is known to have high liquidity and security since it has never been hacked. Some other advantages of trading on Kraken include low fees and traders' ability to trade in cryptocurrencies and fiat currencies.
eToro
eToro is a licensed brokerage registered by the Cypriot Investment Firm (CIF) and regulated in both Europe and the U.K. The platform, founded in 2007 specializes in social copy trading and cryptocurrency trading.
The cryptocurrency trading is limited to just their U.S. customers while the forex and equity trading is available to only customers in other countries. They require a minimum fund to set up and account and offer access to about 15 cryptocurrencies.
Gemini
Gemini is a New York-based cryptocurrency exchange founded in 2014 by the Winklevoss twins (Cameron Winklevoss and Tyler Winklevoss). The platform is regulated in the U.S. by the New York State Department of Financial Services (NYSDFS).
The platform offers a trade for over 20 cryptocurrencies, including its currency Gemini dollars (GUSD). Traders can conduct both fiat-crypto trading and crypto-to-crypto trading. New traders can also make use of their Sandbox website as a practice account.
Even though this article has listed out these platforms, individual traders have the sole responsibility of choosing a platform best suited to his trading pattern.
Alternatively, you can use bitcoin investment apps for more flexibility with managing your assets.