10 years have passed since the appearance of Bitcoin, and even those who treated it as a frivolous project at first are forced to admit: cryptocurrency is gradually entering our life more and more densely. Our editorial staff decided to compile a small guide to working with cryptocurrency wallet for beginners, for all those who have just come to this area.
What is Cryptocurrency and How it Differs from Fiat Money
Cryptocurrency is an electronic means of payment. It is a program code and has no physical counterpart in real life. Cryptocurrency is not backed by anything, like fiat money, but on the contrary, it differs significantly from it:
- Emission. Traditional banknotes are issued by the central banks of the states. At the same time, the output is not limited, which inevitably leads to inflation over time. Cryptocurrency (most types) has a limited emission, so it does not depreciate, but, on the contrary, grows in value over time. And it is issued not by a single center, but by everyone.
- Release form. Fiat can be presented in paper, metal, plastic, electronic form. Cryptocurrencies only exist on the Internet. This is not a big loss, considering that today almost all payments can be made online, and more and more services and stores are connecting the possibility of cryptocurrency wallet online payments.
- Management. Fiat is completely controlled by government authorities. Its release and distribution are regulated by law, an ordinary person cannot influence this process. And digital blockchain systems are usually managed by the community, all changes are made to it only after the voting of the network participants. There is no definite center in whose hands the system is located.
- Commissions and speed. The costs of transferring funds, even abroad, are much less than bank charges. Plus, payments are faster.
- Anonymity. This is the factor that especially worries the state and at the same time attracts users to cryptocurrencies. Here it is impossible to determine the belonging of any transaction or cryptocurrency wallet to a specific person.
Of course, there are some drawbacks. Cryptocurrencies have very high volatility, that is, the instability of the exchange rate. And so far, there are very few places where you can freely pay with this digital currency – this is due to government regulation, since few countries are ready to fully recognize digital money as an official means of payment.
Promising Cryptocurrencies: TOP 10 Rating
For 2021, the most popular cryptocurrencies by market capitalization are:
- Bitcoin, $ 127,418,727,723
- Ethereum, $ 20,678,206,722
- XRP, $ 13,448,687,608
- Bitcoin Cash, $ 6,436,214,306
- EOS, $ 5,838,810,990
- Litecoin, $ 5,588,819,461
- Binance Coin, $ 3,057,667,953
- Cardano, $ 2,343,675,766
- Tether, $ 2,052,583,923
- Stellar, $ 1,953,680,677
Market capitalization is an indicator that displays the total value of coins currently in the possession of users. Along with the exchange rate, it is considered the main parameter from which conclusions can be drawn about the degree of recognition of a particular currency.
Where to Store Cryptocurrency. Instructions for Choosing a Cryptocurrency Wallet
To access and manage funds, a pair of encrypted keys is used: private and public. It is essentially to keep those keys secure for storing cryptocurrency. There are different programs and methods for maintaining cryptocurrency wallet security:
- Websites (e.g., Blockchain.com, Matbea). The private key is stored here on the server of the service provider. Therefore, the method is not among the safest. But they are very convenient to use – just log in to the site from any device and check your cryptocurrency wallet.
- Desktop wallet (e.g., BitcoinCore, Exodus, Jaxx, Electrum). The private key is stored on the user’s device, so you can use your money only from this device. If the system crashes or the hardware breaks down, then access is restored using a special code seed phrase or a backup copy.
- Cryptocurrency mobile wallet (e.g., Sotogtn, B1ox | at, uaxx). It is convenient for quick funds transferring using a smartphone or tablet. However, in other respects it is inferior to other types – the functionality is reduced to a minimum, the security is also low.
- Hardware wallet. This is a physical device in the form of a USB flash drive that connects to a computer. As long as the “flash drive” is disabled, it does not connect to the Internet in any way, and the funds are completely safe.
- Paper wallet. Just a couple of keys printed on paper. The most secure method from hacker attacks, suitable for long-term investment when you are not going to use money often. The downside is that the paper can be damaged, for example, burn out, and then access to funds cannot be restored. Websites for generating private keys are WalletGenerator.net; bitaddress.org, xrppaperwallet.com
How and Where to Buy Cryptocurrency
There are several ways to purchase cryptocurrency:
1. Cryptocurrency exchangers. There are a lot of exchange services working with digital money now. Their essence is no different from fiat-oriented exchangers – the user chooses the exchange direction, enters the details and confirms the operation. Some well-known services will help you choose the exchanger with the most favorable rates and commissions. The benefits of this cryptocurrency wallet exchanger are that only trusted resources get there, so there is no risk of running into scammers.
2. Cryptocurrency wallet exchange. This is a platform where you can create an account and sell or buy cryptocurrency wallet. Exchanges are conventionally divided into two types: those that work exclusively with cryptocurrencies, and those that also support fiat. Many sites also provide additional functionality – platforms for IE0 sales, numerous charts and trading tools.
3. Wallet. Many cryptocurrency wallet companies, in addition to the storage function, provide the ability to exchange currencies. It is quite fast and convenient; you do not need to register separately on any resources. However, the rate here is often overstated.
4. P2P sites. Here people trade directly with people. One person posts an advertisement for the cryptocurrency wallet buy and sell, others respond to it. Here, the site acts as a guarantor of the transaction – money from both sides is blocked until both users confirm the fact of the transfer.
How to Earn Cryptocurrency
The next guide is for those who wish to break the bank and receive additional income to their cryptocurrency wallet balance.
- Investments. The goal of investors is to recoup their investments after putting in money into cryptocurrency. Of course, investing is a serious matter, you need to know many different nuances, understand the prospects of a particular currency, be able to analyze the news background and be completely sure that the selected asset will sooner or later rise in price.
- Mining. This means earning cryptocurrency with the power of your equipment. The equipment of the miners continuously performs calculations, forming blocks of transactions, and the network issues a reward for each block.
- Trading is making money on fluctuations in cryptocurrency rates, which is usually based on the principle of “buy cheaper, sell more expensive”.
- Faucet. The case when you do not need to invest money, but you have to spend a lot of time. A cryptocurrency faucet is a site that issues free digital coins every few minutes for simple actions like entering a captcha.
- Airdrop. This is a free distribution of new (and sometimes old) cryptocurrency tokens in order to advertise and increase audience loyalty.
We hope that this guide with the provided cryptocurrency wallet explained information will help you and you will master the rest of the intricacies of working with cryptocurrencies on your own, if the topic interests you. Have we awakened your interest?
Author’s bio: Chris Delgado works as a freelance copywriter and writer. He studied international business administration for many years and today writes tailor-made web texts, advice and scientific texts. His specialist knowledge lies in the areas of business formation, marketing, financing, law, business ideas and everything related to self-employment. He has been publishing articles for the online portals since 2017.
Also published on Medium.