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A Beginners Guide to Cryptocurrency

Cryptocurrencies have entered the mainstream conversation and become steadily popular over the years. There are numerous cryptocurrencies in circulation, and the number is constantly growing. The growth and demand for cryptocurrency have also driven the demand for blockchain developers with a dedicated website for cryptocurrency jobs. 

You can look at cryptocurrency from a career perspective as a blockchain developer, or you can learn crypto trading to make the most of the thriving market. Regardless of your motive,

Here is your guide to crypto trading for beginners to get you started. 

A Revolutionary Payment Method

Online payments via banks also have their own limitations, 

  • Technical issues like the systems are down.
  • Vulnerable to hacks like a denial-of-service hack or identity theft. 
  • A limited number of transfers.

When talking of cryptocurrency, it aims to make transactions even easier with the apps asking for your confirmation about the transfer and processing the transaction in minutes. 

Cryptocurrency combats the problems of modern banking by removing the barrier of limited transactions, hacking, and a central point of failure, considering there is no central figure, to begin with.

There are over 18,000 cryptocurrencies in existence around the world as of March 2022, Bitcoin, Litecoin, Ethereum, etc., being the popular ones, with a new cryptocurrency popping up every day. With the amount of growth cryptocurrency is experiencing right now, there is good reason to believe that many more will come into being. 

Also read: What are the Main Objectives of the Cryptocurrency Trading Course

What is Cryptocurrency?

Cryptocurrency is a revolutionized form of payment; it is a digital or virtual currency. It is not tangible and uses cryptography to work. Since cryptocurrencies work independently and without a centralization like a bank or a central authority, to add new coins to the blockchain, some conditions have to be met. 

Let’s take Bitcoin, for example, the miner is rewarded with bitcoins only when a block has been added, and this is the only way to generate new bitcoins. But only 21 million bitcoins can be produced. 

Why Trade Cryptocurrency?

Cryptocurrency has lowered transaction costs, and you can trade any time of the day or night, with no limits on purchases or withdrawals. In addition, cryptocurrency is not limited to experts only, anyone can use cryptocurrency, and crypto trading for beginners does not require documentation and other paperwork like you do when setting up a bank account.

International cryptocurrency transactions are faster, only taking minutes or even seconds. 

What is Cryptography?

Cryptography uses encryption and decryption to secure communication from third parties aiming to steal your data. Cryptography uses computational algorithms such as SHA-256– the hashing algorithm that Bitcoin uses, a public key, which is a form of digital identity of the user shared with everyone and a private key, the digital signature of the user that is kept secure. 

Cryptography and Bitcoin Transactions

Typically bitcoin transactions start out with the transaction details, the receiver of the bitcoins, and the number of bitcoins you want to send. This information is then passed through a hashing algorithm, the SHA-256 algorithm for Bitcoin. The output is passed through a signature algorithm through the user’s private key. It is distributed across the network so others can verify using a sender’s public key.

The users who verify the transactions are miners. Once this is done, the transaction and many others are added to the blockchain.

Bitcoin vs. Ethereum

Bitcoin is a decentralized digital currency working on blockchain technology using a peer-to-peer network to make transactions. Ether is another such popular digital currency; it is accepted in the Ethereum network. Ethereum network uses blockchain technology to build an open-source platform for developing and deploying decentralized applications.

What Makes them Similar?

Bitcoin and ether both are the biggest and most valuable cryptocurrencies at the moment. Both use blockchain technology to add transactions to a container, a block, and a chain of blocks is created in which you cannot alter data. 

Both use the proof of work method to mine currency, where you have to solve a mathematical puzzle for a block to be added to the blockchain. 

Lastly, both are used widely around the world. 

What sets the two apart?

Bitcoin works similarly to real-life currency; you use it to send money to someone. Ether is used as a currency in the Ethereum network, but ether can be used for real-life transactions as well. 

Bitcoin transactions have to be carried out manually; you have to personally perform transactions as and when needed. Ether, on the other hand, gives you the option of making manual transactions or getting them done automatically. Ether transactions are programmable, meaning the transactions take place once you meet certain conditions. 

Ether is faster when it comes to transactions. Ether takes 20 seconds, while Bitcoin takes 10 minutes (the time taken to add a block to the blockchain) to perform a transaction. 

Bitcoin mining can only go up to 21 million bitcoins which is expected to be reached by the year 2140. Ether is limited to 100 million units and hence will be around for quite a while. 

Bitcoin is used to make transactions involving goods and services, and ether uses blockchain technology to form a ledger to trigger a transaction once certain conditions are met. And while Bitcoin uses the SHA-256 algorithm, ether uses the hash algorithm.

Also read: Can We See Our Future In Cryptocurrency

What Does the Future Hold for Cryptocurrency? 

The world is torn in two when it comes to cryptocurrencies. Virtual currency has supporters and haters both. 

With time, the conflict between regulation and anonymity will arise. Governments will want to regulate the workings of cryptocurrencies since several cryptocurrencies have been linked with terrorist attacks now. But the core of cryptocurrencies is the anonymity it offers to users.

By the year 2030, cryptocurrency is expected to occupy 25 percent of national currencies, according to futurists. This means that a considerable number of people will start believing in cryptocurrency as a means of exchange. It is also expected to enter the merchants and customers arena with its volatile nature with no change in the stability of the prices.

This sums up your guide to crypto trading for beginners.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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