It all started with Bitcoin, a set of computer codes introduced in 2009 by a person or persons named Satoshi Nakamoto that revolutionized the financial ecosystem. Before Bitcoin, few people were familiar with the term digital currency, but gradually the phrase became a household word, and today almost everyone is talking about it.
Digital currency or cryptocurrency is a new form of money that exists on the Internet and in a decentralized space called blockchain. These currencies were created with the aim of eliminating intermediaries such as banks and connecting people directly with each other, and they have been very successful in the decade since they were created.
In addition to eliminating intermediaries, digital currencies, using blockchain technology, allow for fast and low-cost transactions; especially compared to traditional banking systems that usually require more time and fees to process transactions. In addition, cryptocurrencies have created new opportunities for investment and usually provide higher returns for individuals than traditional investments, provided they are chosen correctly and invested wisely.
To better understand digital currency, or cryptocurrency, you must first become familiar with three terms: blockchain, decentralization, and cryptography.
What is digital currency?
In today’s world, where we are witnessing significant developments in the field of technology, new phenomena are emerging that challenge traditional concepts. One of these phenomena is digital currency, which has revolutionized monetary and economic systems. But what exactly is digital currency and what are its features?
Digital currency is a type of virtual asset that, unlike traditional money, does not exist physically and can only be stored and exchanged in the form of digital units. These currencies are based on new concepts or technologies such as blockchain, decentralization, and encryption that ensure the security and transparency of transactions.
Blockchain is a new technology that lies at the heart of digital currencies and is considered the backbone of these currencies. Blockchain acts like internet servers and stores transaction details. But if blockchain and internet servers, for example, bank servers, are so similar, what was the need for blockchain?
The answer to the above question lies in decentralization. One of the distinctive features of digital currencies is their decentralization. Unlike traditional monetary systems controlled by banks and governments, digital currencies have no central authority. This means eliminating intermediaries and additional fees, and making transactions faster, cheaper, and more efficient, which are only possible with the use of blockchain.
But what is the role of cryptography in digital currencies? Transactions in blockchain networks are encrypted using complex algorithms; in this way, the security of digital currencies is ensured and users and investors can use them with confidence.
Bitcoin was the first digital currency to meet all three of the above conditions and, by introducing the world’s first blockchain and new cryptographic algorithms, created a decentralized platform for monetary and financial transactions. Of course, before Bitcoin, there were attempts to create online currencies, which we will discuss later. However, Bitcoin is considered the first real cryptocurrency or coin on the market.
History of Digital Currencies; Where did cryptocurrency start?
Where did digital currencies come from and when did the idea for them come from is like the chicken or the egg puzzle! Although Bitcoin in 2009 provided all three conditions of blockchain, decentralization, and encryption and introduced the first real cryptocurrency on the market, the idea of creating digital currencies goes back many years, perhaps even to the creation of the Internet.
From the early years when people traded goods for goods until they invented coins and turned to paper money, humans have been looking for new ways of making money, introducing new forms of money each time. With the advent of the Internet, the idea of creating digital money and moving away from paper money gradually took shape.
In the 1980s, computer scientist David Chaum published a paper titled “Blind Signatures for Untraceable Payments” and proposed the idea of an electronic currency called “DigiCash.” DigiCash was based on cryptographic algorithms and its transactions were carried out anonymously. However, the system did not achieve significant success due to technical problems and the lack of a suitable platform for public acceptance, and Chaum’s DigiCash project went bankrupt in 1998. However, the ideas of this company and some of its cryptographic formulas and tools became the basis for the development of subsequent cryptocurrencies.
In the 1990s, other attempts to create cryptocurrencies were made, such as “eCash” and “HashCash”. These systems also faced similar challenges and failed to find their place in the market.
The main turning point in the history of cryptocurrencies occurred in 2008. At that time, an unknown person or group named Satoshi Nakamoto submitted a white paper, or an introduction to something called Bitcoin. This white paper presented the idea of a new digital currency called Bitcoin using blockchain technology, decentralization, and encryption. Bitcoin was eventually launched in 2009 and quickly gained worldwide attention.
But what was the purpose of creating Bitcoin? Nakamoto was clearly unhappy with traditional financial systems controlled by banks and governments. He believed that these systems were inefficient, unreliable, and prone to corruption. Bitcoin was actually designed as an alternative to these systems, allowing people to transact directly with each other without the intervention of centralized intermediaries.
In addition, Nakamoto believed that traditional monetary systems based on fiat currencies such as the dollar, the euro, etc., are prone to inflation and instability, and that excessive money printing by governments is detrimental to the people. Therefore, Bitcoin, with its limited supply of 21 million units and its anti-inflation mechanism, can protect people from inflation and currency devaluation.
He also attached great importance to privacy and individual freedom. Therefore, he designed Bitcoin in such a way that transactions could be carried out anonymously (or in other words, semi-anonymously) and users would have complete control over their digital assets.
Bitcoin’s success in creating a truly decentralized digital currency paved the way for the development of other digital currencies, and gradually other cryptocurrencies with their own unique features and capabilities entered the market.
Today, the world of digital currencies is expanding and evolving rapidly. Despite the challenges facing the field, the potential of cryptocurrencies to transform monetary and economic systems and create a fairer and more transparent world is undeniable.
How does cryptocurrency work?
We said that blockchain technology is the main backbone of cryptocurrencies. In blockchain, transactions are stored in a space called a block and are eventually added to previous blocks, effectively eliminating the possibility of changing and manipulating them.
To understand how cryptocurrencies work, it is better to take a close look at their transaction process. The basis of this process is common to all cryptocurrencies, with only minor differences in the algorithms used.
Suppose you want to send some Bitcoin to your friend. What happens in this case?
1- Create a transaction: Using your cryptocurrency wallet, you create a transaction that includes details such as the sender’s wallet address, the recipient’s wallet address, and the amount of Bitcoin to send.
2- Broadcast the transaction: Your transaction is sent to the peer-to-peer network of the desired cryptocurrency (such as Bitcoin). This network consists of millions of computers around the world.
3- Transaction confirmation: At this stage, miners (network users who are responsible for confirming transactions) receive your transaction. They use their computer processing power to solve a complex cryptographic equation. Solving this equation verifies the authenticity of your transaction.
4- Added to the blockchain: If the equation is solved by the miner, your transaction is considered valid and added to a new block in the blockchain. Each block contains a set of confirmed transactions as well as information about the previous block in the chain.
5- Transaction finalization: When a new block is added to the chain, your transaction is finalized and the bitcoins are transferred to your friend’s wallet. Since this chain is constantly growing and updating, it is no longer possible to reverse or tamper with your transaction.
Overall, with this process, you can send money and make financial transactions from anywhere in the world to anywhere else without the need for centralized intermediaries such as banks and governments.
What is the difference between regular money and digital currency? The conflict between the traditional and modern worlds
Currently, regular money and digital currencies are used to purchase goods and services, make transactions, and store value (savings). Both have many similarities, but the new features of digital currencies have made this category of currencies different from regular money. But what are the main differences between regular money and cryptocurrency? Let’s examine them separately:
Essence
Regular money refers to fiat currencies, which include coins and banknotes that are printed by governments and distributed to the public. This money exists both physically in the form of cash and digitally in the form of credit cards.
On the other hand, digital currencies are completely electronic assets and have no physical form or shape. This means you cannot touch a Bitcoin coin. In fact, these currencies are computer codes and their transactions are carried out through decentralized blockchain networks.
Centralization and Decentralization
Central banks and governments essentially control regular money and monitor it by enacting various financial laws and policies. On the other hand, digital currencies are decentralized; this means that control of these currencies is in the hands of a collection of users and participants in the network (miners or depositors). In addition, traditional banking systems are inefficient, unreliable and prone to corruption, but digital currencies such as Bitcoin have practically prevented this inefficiency and corruption by providing a transparent and decentralized platform.
Security and Transparency
Fiat currency transactions are recorded and verified by banks and credit institutions, and their information is usually confidential and accessible only to banks and regulatory bodies. However, most cryptocurrency transactions are publicly recorded on blockchain networks, and anyone can view their details. This helps greatly in reducing corruption and fraud.
Transaction fees and speed
Trading fiat currencies, especially internationally, can be time-consuming and expensive. Banks usually charge high fees for transferring money between different countries. In addition, due to economic sanctions, sending and receiving money between Iran and other countries is very challenging.
However, cryptocurrency transactions are fast and transfer money to any point in the world with a fraction of bank fees. Blockchain networks are also independent of governments and do not operate based on sanctions. This means that citizens of sanctioned countries, including our own, can easily transfer money to other countries with cryptocurrencies.
Liquidity and Public Acceptance
Conventional money is widely accepted and can be easily used anywhere due to the trust that people have in government and banks. Currently, almost all businesses and individuals accept fiat currencies.
On the other hand, cryptocurrencies are a new category and their acceptance has not yet reached the level of conventional money. However, the acceptance of these currencies is constantly increasing and has now gained momentum with the approval of Bitcoin and Ethereum exchange-traded funds (ETFs) and the start of their trading on the US stock market.
How are cryptocurrencies priced?
One of the most important questions for people who are new to digital currencies is that if these currencies have no specific backing, why have they gained value and their prices fluctuate? Why has the price of Bitcoin gone from a few cents in 2009 to more than $60,000 today?
In the past, fiat currencies, including the US dollar, were backed by a certain amount of precious metals such as gold or silver. This backing was known as the “gold standard,” and according to it, each unit of fiat currency had an intrinsic value equivalent to a certain amount of gold or silver. However, in the 1970s, many countries left this system and fiat currencies became practically “unbacked,” meaning that their value was no longer tied to any physical goods and “people’s trust in the country’s economy and banking system” made it valuable.
In the case of digital currencies, it can also be said that their value relies on “trust and acceptance.” However, instead of governments, it is valued by a network of users and investors around the world.
In addition to the trust of users and investors, the value of a cryptocurrency usually depends on the applications of its underlying blockchain. Of course, many things can also play a role in determining prices, including advertising on social networks and periodic market fever. However, cryptocurrencies that offer more applications tend to be more valuable.
Ultimately, what causes price fluctuations in the cryptocurrency market is the issue of supply and demand. In general, an increase in demand for a particular thing, for example, the car market in our country, causes the price of that particular thing to increase. This is also true in the cryptocurrency market, and prices generally increase as demand increases.
Types of Cryptocurrencies
The world of digital currencies is not limited to Bitcoin, and you can find different types of currencies with unique features and applications. For a better understanding, digital currencies can be classified into different groups.
Bitcoin and Altcoins
The world of crypto and digital currencies can be divided into two general groups: Bitcoin and Altcoins. Bitcoin was the first real digital currency on the market, revolutionized the cryptocurrency market, and currently accounts for more than half of the crypto market cap; that is why it is placed in a separate group. The other group is altcoins. Altcoins are all digital currencies that have emerged after Bitcoin, such as Ethereum, Cardano, Shiba Inu, and Dogecoin. The term altcoin is a combination of the words Alternative and Coin, meaning alternative coin.
Coins and Tokens
Another common classification of cryptocurrencies is their classification into two groups: coins and tokens. Coins each have their own blockchain and facilitate transactions with their own proprietary technologies. These currencies include Bitcoin, Ethereum, Ripple, Dogecoin, and Solana.
On the other hand, tokens have a simpler design and, instead of having their own blockchain, operate on the platform of other blockchains, including Ethereum and Solana. These currencies include Shiba Inu, Pepe, and most meme coins.
Tokens themselves also have different categories. Among the most important and common tokens in the crypto world are utility tokens, security tokens, governance tokens, and non-fungible tokens (NFTs). Utility tokens are generally designed to provide access to goods or services on a specific platform. Security tokens are tokenized versions of real assets such as stocks, real estate, etc. Sovereign tokens grant their holders voting rights in matters related to a project or blockchain. Non-fungible tokens are unique digital assets such as images, files, documents, etc., whose ownership can be proven on the blockchain.
Stablecoins
Stablecoins are one of the most key types of cryptocurrencies that play an important role in the crypto market. In the volatile world of cryptocurrencies where prices rise and fall rapidly, stablecoins provide stability like an anchor.
As we mentioned above, cryptocurrencies are generally unsecured and people’s trust in them is what makes them valuable. However, stablecoins are usually backed by other assets, such as the US dollar, gold, or a basket of other cryptocurrencies, and therefore their price is often fixed, usually equal to one US dollar.
The main goal of stablecoins is to provide a stable and reliable alternative to traditional cryptocurrencies, which can experience extreme price fluctuations. Tether (USDT) is the most popular stablecoin on the market.
Memecoins and Chatcoins
Meme coins and chatcoins are also considered one of the important and large categories of cryptocurrencies. By meme coins, we mean cryptocurrencies that are generally purposeless and have no specific use and are developed solely for fun. These currencies usually originate from trending social media images or memes, which is why they are called meme coins. Chatcoins are also cryptocurrencies with virtually no intrinsic value that have no specific purpose, use, features, or direction, and generally lose their initial value after a while.
Privacy Coins
As we said, most cryptocurrencies provide a transparent platform for financial transactions, and their details are publicly recorded on blockchain networks. This means that anyone can view these transactions and examine limited information, including the sender’s address, the recipient’s address, and the value transferred.
But in this day and age, privacy has become one of the most important concerns for users, and for this reason, some projects have decided to make arrangements so that even these small details are not revealed and users can conduct their transactions completely anonymously.
Privacy coins include Monero (XMR), Zcash, and Dash. These projects use unique technologies to hide transaction details and make them difficult or practically impossible to track. In this way, users can conduct their transactions without worrying about monitoring or control.
The most famous cryptocurrencies
Currently, if we visit the Coin Market Cap website, we see that the number of cryptocurrencies has exceeded 23,000. While a large part of these currencies are actually made up of hashcoins and featureless coins, there are a large number of currencies that are likely to grow and have value that can be found with proper investigation. In this section, we will introduce some of the most famous cryptocurrencies in the world and briefly explain each of them:
Bitcoin (BTC)
In this article, we examined a large part of the story of the emergence of Bitcoin. As we said, in 2009, an unknown person or people named Satoshi Nakamoto launched a decentralized peer-to-peer payment system called Bitcoin. Bitcoin is the first true digital currency on the market and has its own blockchain. The total number of Bitcoins is 21 million, and its anti-inflationary features, including halving, as well as its widespread adoption, have led to this currency gaining great value in recent years and being seen as the “most important cryptocurrency in the market.”
Ethereum (ETH)
The Ethereum cryptocurrency was launched in 2015 by Vitalik Buterin. If Bitcoin was an invention to decentralize money, Ethereum can be described as an invention to decentralize “everything.” The network supports smart contracts and is a powerful platform for decentralized applications (DApps). Ethereum is Bitcoin’s most serious competitor, and some even believe that it will one day claim the title of “the first cryptocurrency in the market.”
Binance Coin (BNB)
Binance Coin is the native token of Binance, the world’s largest cryptocurrency exchange, which was initially launched to offer discounts on the exchange’s fees. However, over time, this cryptocurrency has found many uses and has now become an integral part of the BNB China and BNB Smart Chain networks’ ecosystem.
Solana (SOL)
Solana is another of the most popular cryptocurrencies on the market, known for its high blockchain speed and low fees. The network uses a unique consensus algorithm and, in addition to providing Ethereum’s features, is highly scalable. In fact, this project is considered one of Ethereum’s most serious competitors, aiming to create an infrastructure for decentralized applications and smart contracts.
Cardano (ADA)
Cardano is another popular cryptocurrency in the crypto market, especially among Iranian users. This cryptocurrency was launched in 2017 by Charles Hoskinson, a former co-founder of Ethereum, and aims to provide a secure infrastructure for running smart contracts and decentralized applications, focusing on security, scalability, and sustainability.
Ripple (XRP)
The main goal of Ripple’s cryptocurrency is to facilitate fast and cheap international transactions and create a bridge between the traditional financial system and the emerging world of crypto. Of course, the project has been involved in a legal case with the US Securities and Exchange Commission (ETF) since 2020, but the case is expected to be concluded soon.
Dogecoin (DOGE)
Dogecoin is the first meme coin in the cryptocurrency market. In 2013, two young programmers named Jackson Palmer and Billy Marcus decided to create their own cryptocurrency with the aim of making fun of the cryptocurrency industry and attracting people’s attention to Bitcoin. Although this cryptocurrency was initially created for fun, it gained a lot of popularity over time. Dogecoin is currently supported by celebrities, including Elon Musk.
Shiba Inu (SHIB)
If Dogecoin is the Bitcoin of the meme space, then Shiba Inu is definitely its Ethereum. Shiba is another popular meme coin on the market, which was launched in 2020, inspired by the Japanese dog Shiba Inu, and attracted the attention of many investors and users. Unlike Dogecoin, Shiba does not have its own blockchain and is launched on the Ethereum network. Of course, this token has launched various projects in recent years, from a layer 2 network and a decentralized exchange to its own metaverse, and has somehow separated itself from aimless cryptocurrencies.
Applications of Cryptocurrencies
Until recently, the use of digital currencies was perhaps limited to money transfers. However, in recent years, especially with the expansion of the decentralized finance ecosystem, or DeFi, other uses have been added to cryptocurrencies in addition to their monetary nature. In this section, we will take a brief look at the most important uses of digital currencies.
Payments and money transfers
Every day, the number of businesses that accept Bitcoin and other digital currencies for their services and products is increasing. What is more interesting is that El Salvador has accepted Bitcoin as its legal tender, and this digital currency is widely used for payments in this country.
Using digital currencies to transfer money and make payments brings many benefits. One of the main criticisms of fiat money is excessive printing and the inflation it causes. Digital currencies like Bitcoin have tried to solve this problem by keeping their supply fixed. Additionally, the speed of crypto transactions is much faster than bank transactions, and the affordable fees make them efficient for international payments.
Getting a loan
Think of the process of borrowing from banks and credit institutions right now. To get a loan, you need to take people as guarantors and go through various paperwork. However, with the emergence of DeFi, everything changed.
If blockchain is the backbone of cryptocurrencies, smart contracts are the foundation of DeFi. Currently, in the DeFi space, there are various platforms that will lend you money in exchange for collateral that you provide in the form of cryptocurrency.
Investing and trading
The volatility of the cryptocurrency market has attracted many investors in recent years. Currently, investors can profit from this market through various methods, from buying and holding digital currencies to trading them. Unlike traditional financial markets, this market operates 24 hours a day, seven days a week, and its fluctuations provide many opportunities for traders.
Store of Value
In recent years, the discussion of whether cryptocurrencies, especially Bitcoin, are a store of value has always been a topic. Gold has long been said to be a store of value and, due to its limited nature, can protect the value of your money against inflation. Bitcoin, like gold, has a limited supply and is therefore known as “digital gold”. Many investors view Bitcoin as a hedge against inflation and currency devaluation.
Financing
Another use of digital currencies is their use in financing projects and startups. These projects are usually financed through processes such as Initial Coin Offerings (ICOs) or Initial Exchange Offerings (IEOs), which are the equivalent of Initial Public Offerings (IPOs) in traditional financial markets. These methods have gained popularity due to their transparency and lack of dependence on traditional financial institutions.
Charitable Activities
Due to the transparency and traceability of cryptocurrency transactions, they can be used in charitable and public interest activities. Currently, various charities have made it possible to receive donations through cryptocurrencies. Finally, due to the transparency of cryptocurrencies, philanthropists can be sure that the funds collected are spent on the right causes.
Gaming Industry
In recent years, we have witnessed the widespread integration of cryptocurrencies into the gaming industry. Currently, there are many games that use cryptocurrencies as in-game currency or even have their own cryptocurrency. Users can use digital currencies in these games to purchase various items and upgrade capabilities. In addition, blockchain games usually offer their items in the form of NFT tokens, which users can buy and sell on trading markets.
How to mine digital currencies (mining)
Mining is the process of verifying and recording transactions on a blockchain network in a distributed ledger. This process is performed using powerful hardware devices that solve complex mathematical problems and receive a reward in the form of digital currency in return.
Mining is usually done in two ways: solo mining and mining through a mining pool. In the solo method, a miner works alone and receives all the rewards, but in the pool method, the processing power of miners is pooled and the rewards are divided among participants. Today, due to the increasing difficulty of the network, the use of mining pools is a more common option.
Some cryptocurrencies such as Bitcoin use the Proof-of-Work (PoW) algorithm for mining, which requires energy and powerful hardware. Currencies such as Litecoin, Ethereum Classic, and Dogecoin are also capable of mining. Of course, many new cryptocurrencies are looking to replace energy-intensive methods like traditional mining with less energy-intensive algorithms.
Are cryptocurrencies legal?
The legal status of cryptocurrencies varies from country to country. Some countries, such as the United States, Canada, and the European Union, have mandated various laws, including anti-money laundering (AML) and know-your-customer (KYC) laws, and have a fairly clear legal framework.
On the other hand, some countries, such as China and India, have imposed many restrictions and prohibitions on cryptocurrencies. China initially banned cryptocurrency trading in the past and eventually virtually eradicated the crypto industry by banning mining. India also has strict laws on cryptocurrency trading and use.
Risks and Opportunities in the Cryptocurrency Market
The cryptocurrency market is one of the most volatile and profitable financial markets in the world. It offers many opportunities for investors, but it also comes with serious risks. Here are some of the important risks and opportunities in this market.
Opportunities
High Profit Potential: Due to its high volatility, the cryptocurrency market usually offers many opportunities to make profits. In fact, alert investors can take advantage of these rapid price changes and pocket significant profits.
Global Access: Since cryptocurrencies rely on blockchain networks, they can be accessed worldwide, simply by connecting to the internet. This feature allows users to carry out their financial transactions without depending on banking systems. In fact, this allows even people who do not have access to banking services to meet their needs with digital currencies.
Independence from traditional systems: Digital currencies are decentralized and do not depend on any institution or government. This can lead to financial freedom and greater control over their assets.
Protection against inflation: Some digital currencies, such as Bitcoin, are anti-inflationary in nature due to their limited supply and can be used to prevent currency depreciation.
Risks
Severe price fluctuations: One of the biggest risks of the cryptocurrency market is severe price fluctuations. The nature of the cryptocurrency market is volatile and acts like a double-edged sword. That is, as much as you can benefit from these fluctuations, there is a possibility of loss and loss of capital.
Scams and hacking attacks: Since the internet is an inseparable part of digital currencies, this market is heavily on the radar of scammers and hackers. Investors should always pay special attention to the security of the wallets and exchanges they use to stay safe from such scams.
Unclear regulations: Despite the efforts of regulators in some countries, there are still no clear regulations for cryptocurrencies, and the laws governing this industry can change suddenly at any time. These changes can have a serious impact on the market. For example, after the Chinese government banned Bitcoin and other cryptocurrencies, the cryptocurrency market experienced a massive drop.
Technical problems: Blockchain technology is still in development and may encounter various technical problems and bugs.
What will the future of cryptocurrencies be like?
Predicting the future of cryptocurrencies, like any other emerging phenomenon, is difficult and challenging and depends on a variety of factors. In recent years, we have seen a wider adoption of cryptocurrencies around the world, with major companies such as PayPal, Visa, and Tesla starting to accept these assets in exchange for their services. This trend could eventually help to legitimize and make these currencies more widely accepted.
However, legislation and the positions of politicians should not be overlooked. As the crypto industry grows in popularity, governments and regulators are seeking to formulate appropriate laws and regulations for this market. The introduction of such laws can greatly help reduce the risks of the crypto market, however, it can also limit the current freedoms.
Another factor that could affect the future of cryptocurrencies is the continued development of blockchain and the underlying technologies of cryptocurrencies. Currently, developers of various projects are constantly improving and introducing new features that can help increase the use of cryptocurrencies and their wider adoption.
While many believe that cryptocurrencies were created to replace traditional financial systems, it is likely that in the future we will see the crypto industry and these systems working together and merging with each other. It is unlikely that governments will allow cryptocurrencies to completely take power out of the hands of politicians, however, with the inevitable integration of cryptocurrencies into traditional financial systems, we will likely see major changes in the financial industry; this could lead to increased efficiency, greater transparency, and reduced transaction fees. In fact, the integration of cryptocurrencies with traditional systems creates a hybrid financial system that combines the advantages of both areas, contributing to greater growth and innovation.
The future of cryptocurrencies depends on many factors, but the great potential of this field makes it seem bright to everyone. Of course, if cryptocurrencies want to play a role in the future, they must gradually solve their current problems, from problems related to the scalability of blockchain networks to security issues.
How to buy and sell cryptocurrencies on an exchange
Buying and selling cryptocurrencies is done on exchanges. Cryptocurrency exchanges are trading platforms that allow you to buy and sell or trade cryptocurrencies and convert them into each other. The first step to buying and selling cryptocurrencies is choosing a reliable and secure exchange.
Cryptocurrency wallet
The crypto world is full of opportunities and risks, and therefore, the security and storage of cryptocurrencies is very important. The digital nature of cryptocurrencies and their connection to the Internet makes these assets vulnerable to cyberattacks and hacks; therefore, important points should be paid attention to when storing them.
One way to store cryptocurrencies is to use exchange wallets. Various cryptocurrency exchanges, including Nobitex, often offer their customers dedicated wallets, and these wallets are usually used by users who intend to trade or hold cryptocurrencies in the short term.
Another way to store cryptocurrencies is to use cryptocurrency wallets. A cryptocurrency wallet is a software or hardware space that contains your cryptocurrencies. How wallets work is beyond the scope of this article, however, there are different types of cryptocurrency wallets, each with their own advantages and disadvantages. Storing cryptocurrency in a wallet is usually considered a safer option, however, not following a few simple security tips can put your assets in the hands of hackers or fraudsters.
In general, to store cryptocurrency, you only need to follow the following two steps:
1- Choosing the right wallet: In the first step, you need to choose the right wallet according to your needs, the amount of capital you have invested in the market, and your trading strategy.
2- Transferring cryptocurrency to the wallet: At this stage, you can transfer the cryptocurrency purchased on the Nobitex exchange to your wallet address.
Although the steps mentioned are simple, there are some points that can cause you harm and rob you of your assets. We recommend that you follow these guidelines when storing your digital currencies:
Choosing a reputable wallet: Before choosing a wallet, be sure to research it and finally download the wallet you want from its official website. Never download your digital currency wallet from unknown sites or messengers such as Telegram, as there is a possibility that the wallet file may be tampered with and infected with malicious code.
Using a strong password: It is recommended that you choose a strong and complex password for your wallet.
Keeping your private key and recovery phrases in a safe place: Your private key, or wallet recovery phrase, is the equivalent of your bank card password (even more sensitive), and anyone with them can access your digital assets. It is recommended that you keep this phrase in a safe place that is inaccessible to others. The best way is to write down several copies of it physically on paper.
Methods of earning money from digital currencies
The world of cryptocurrencies offers numerous opportunities for earning money, depending on the amount of capital, experience, and risk tolerance of individuals. One common method is trading, in which people use the price fluctuations of cryptocurrencies to buy low and sell high. This method requires technical and fundamental analysis and may be risky for beginners.
Another method is holding or long-term storage of cryptocurrencies. In this method, investors buy cryptocurrencies with high growth potential and hold them for a long time to sell at a higher price in the future. Many people who have bought and held Bitcoin in the past years have made huge profits from this method.
In addition, staking allows users to receive rewards by locking their digital assets on a blockchain network. This method is similar to making a bank deposit and is available for Proof of Stake (PoS) cryptocurrencies such as Ethereum, Cardano, and Polkadot. Other methods such as yield farming, receiving airdrops, and participating in initial coin offerings (ICOs) are also common ways to earn money in this area.
Is cryptocurrency good for investment?
Investing in cryptocurrencies is one of the most controversial topics in the financial world. Many people consider this market to be a great opportunity to make a profit due to the significant growth in the prices of some cryptocurrencies such as Bitcoin and Ethereum. On the other hand, severe price fluctuations and legal instability in some countries have made this investment associated with certain risks.
One of the main advantages of investing in cryptocurrencies is the high growth potential and independence from traditional financial systems. Unlike corporate stocks, which are affected by economic conditions and government policies, many cryptocurrencies operate independently due to their decentralized nature. Also, the high diversity of blockchain projects has allowed investors to invest in different areas such as the metaverse, DeFi, and NFT.
However, the risks associated with this market should not be ignored. Extreme volatility, the possibility of losing capital, security problems such as wallet hacking, and the lack of specific laws in some countries are among the challenges of investing in digital currencies. For this reason, risk management, having a proper strategy, and not investing all your assets in this area are key points for entering the digital currency market.
Final Words
It would not be an exaggeration to say that it all started with Bitcoin. With the introduction of Bitcoin in 2009 by Satoshi Nakamoto, a new concept of money and financial transactions emerged that gradually attracted the attention of the public and investors. The essence of digital currencies lies in the three words blockchain, decentralization, and encryption, and Bitcoin, by providing all of them, founded the cryptocurrency revolution.
The world of digital currencies is a world full of innovation, dynamism, opportunities, and of course, many challenges. In this article, we tried to answer the question “What is digital currency?” in simple and familiar language. Let’s answer in all aspects and get acquainted with its key concepts.
Despite their short life, digital currencies have come a long way and have established their position. However, these currencies are still in their early stages and there is still room for further growth. The future of these currencies depends on several factors, including technological advances, acceptance, regulations, and public awareness. Although there are currently various challenges, including high volatility and unclear digital currency laws, the potential of these assets can integrate them more and more into our daily lives.
The requirement for entering the world of cryptocurrencies is to gain knowledge and awareness about these assets. Digital currency trading acts like a double-edged sword and can be as profitable as it is profitable. Therefore, it is recommended that you step on this adventurous path with full awareness, patience, and patience.
Frequently Asked Questions
What is digital currency?
Cryptocurrency is a type of virtual asset built on blockchain technology. Unlike fiat currencies, this asset is decentralized and not controlled by any institution or government. Cryptocurrencies can be used to quickly transfer money to anywhere in the world.
How do cryptocurrencies work?
The basis of cryptocurrencies lies in blockchain technology. Blockchains are chains of information and, like central banks, store various information related to transactions.
What is a cryptocurrency exchange?
A cryptocurrency exchange is an online platform that allows users to buy, sell, and trade cryptocurrencies.
What is the first cryptocurrency on the market?
The first cryptocurrency to be launched on the market was Bitcoin. Bitcoin was introduced in 2009 by Satoshi Nakamoto and has since become the most popular and valuable cryptocurrency.
What is a cryptocurrency wallet?
A cryptocurrency wallet is software or hardware used to store cryptocurrencies.
What is the best cryptocurrency to invest in?
There are currently thousands of cryptocurrencies on the market, each offering unique features. As a result, choosing the best cryptocurrency to invest in can be a bit of a challenge. However, some of the most popular cryptocurrencies include Bitcoin, Ethereum, Solana, Cardano, and Toncoin.
