August 03, 2021
How To Get Started with Crypto
What is a blockchain? How do you keep Crypto in a wallet? Here’s our quick FAQ on all things cryptocurrency, as well as a quick overview on how to get started on investing.
The cryptocurrency boom continues apace, with names like Bitcoin, Dogecoin, Binance and Memecoin gaining traction across the internet, social media, and Reddit. Bitcoin has even gained heavy endorsement from Bill Gates and Elon Musk. But while the word ‘crypto’ is rife in today’s news features and current events, a simple explanation of the term feels surprisingly hard to find.
But what is a blockchain? How do you keep crypto in a wallet? All of these are understandable questions if you're not familiar with the terms.
Books like The Bitcoin Standard and documentaries such as Cryptocurrency, Explained have done an excellent job of distilling and explaining the key, need-to-know ideas on all things crypto. We’ve distilled a few of the key lessons here.
When was crypto invented?
Crypto began its life back in 2008. A white paper authored by Satoshi Nakamoto was released detailing the idea of a decentralised network to provide a new cryptocurrency called Bitcoin. It has taken a few years for the idea of cryptocurrencies to catch on, but they are now accepted by retailers. The result has seen a huge wave of new cryptocurrencies being founded in the years since and huge debate about their values drawing media attention and comment from high profile tech individuals such as Elon Musk. Crypto has operated and traded across a number of financial platforms with investment seeing prices of Bitcoin rise from $900 to $20,000, with the entire industry hitting a valuation of $600 billion in 2018.
What is cryptocurrency used for?
One of the major appeals of crypto is that it offers users the ability to transfer money anonymously in a decentralised way - over a blockchain- without any major bank, government, or institutional interference. It’s now used for much more commonplace matters, such as paying bills or purchasing goods, including the emerging topic of NFTs - non-fungible tokens - which are basically a product, be it a Tweet or a work of art stored in data or digital format. It is frequently used in the tech sector when it comes to setting up businesses.
What is cryptocurrency mining?
Cryptocurrency is mined, meaning the reward gained from verifying transactions on a blockchain. As transactions are encrypted when added to a block, they need to be verified before a blockchain can verify them. Miners therefore solve the verification process when securing transactions to a blockchain, receiving payment for this and therefore making it a very lucrative field.
Why is cryptocurrency popular?
The fact that crypto offers a new way of translating and storing value that’s ‘better’ than more traditional methods of currency means that it’s become a very popular way to both invest and spend. So, what are the main advantages?
- Portability: crypto is incredibly easy to transport.
- Divisibility: it can be divided into smaller amounts with significant ease.
- Censorship Resistance: governments and regimes have little ability to censor crypto in comparison to traditional currencies.
- Security: using a Blockchain makes crypto transactions very secure and transparent.
- Backing: Blockchain means that whoever’s behind an investment and purchase is incredibly transparent.
So, I’m ready to invest. How do I do that?
1. Pick a reputable Exchange
As is the case when investing in anything, it’s incredibly important to research the reputable brands in the market who provide exchange service. The exchange service you use will dictate how you trade, the community that you become involved in, and the currencies you choose to trade in. If you’re beginning the investment process, it’s important to choose a trusted source, rather than trying to make a high stakes investment. The nature of crypto means that scammers and impersonators are particularly prevalent. A deal that seems too good to be true in crypto tends to mean it is. So it’s worth finding one that’s trustworthy, even if it’s more expensive.
2. Pick a simple strategy
The crypto market is a fairly complex place, so starting small and simple is best. There are so many strategies dominating the internet and social media but the best thing to do is pick a simple strategy and stick to it. Guarantees are not to be expected, so high risk investments should be avoided at the start.
The crypto market is somewhat 24/7. Unlike traditional financial markets, there are no closing hours or holidays. Services and trades run every minute of the day, so it’s important to pick the times that you will be monitoring the market; you cannot do it constantly. So it’s important to find a service that helps you automate your portfolio and helps you monitor and sign up for trusted services.
4. Build a Portfolio
Like any investment opportunity, it’s important to diversify. Creating a portfolio reduces risk and provides stability in what is a very volatile market. So don’t simply buy a single asset; instead, distribute your investment across a number of investment opportunities and currencies. Then make small adjustments here and there. When starting out in crypto, it’s best to go small and slow at first. Huge investments or high risk strategies are very volatile until you are very experienced.
5. Keep assets in cold storage
The crypto market is notoriously hard to get a handle on; it can all come crashing down pretty quickly. It has a history of inflation and huge collapse with little warning. Similarly, hacks can mean that funds are lost or taken very quickly. So it’s important to find a way to keep your funds secure and off the exchange when you can.
One way to do this is through finding a reputable wallet. Crypto means that you are the one in charge of your bank or funds, but that means that you need to be the one to find the security for your money that traditional banks provide. So you need to find a way to store them securely and periodically review and keep them off the exchange.
6. Take your time
The major to remember with crypto is that starting out can take time. It’s so frequently seen as a quick fix all or an ability to get rich fast that many people expect their investments to take off and earn them serious cash quickly. Instead, see it as a gradual process. Pick a strategy, stick with it and for the reward to come in. If you gradually build your expertise it will pay off. It’s a long term market with a big future so playing the long game is certainly apt here.
If you’re interested in learning more, our selection of cryptocurrency Hacks - a distilling of the key ideas from books, courses and documentaries into 5-minute summaries - are available to check out on Uptime.
If you're still interested in investing but aren't sure if crypto is your best avenue for doing so, then we've compiled a few tips on Investing 101 in our easy guide here.