What is Cryptocurrency? A Beginner's Guide
- By Localcoin
- July 3, 2023
With global interest in cryptocurrencies continuing to grow, it’s safe to say that this new type of financial product is here to stay. And with that newfound mainstream popularity comes a whole lot of questions for newcomers looking for basic knowledge of cryptocurrency.
This exciting new financial and technological space is worth exploring. And you know what? Here you will find all you need to know about what is cryptocurrency.
No matter how simply your friends or financial advisor try to break down the basics of cryptocurrency for you, it’s a technology that can be downright difficult to wrap your head around. But let’s try anyway!
Keep reading our beginner's guide for cryptocurrency because here we try to answer some of the most common and pressing questions surrounding this subject.
Browse This Content:
- What is Cryptocurrency?
- How Do I Buy and Sell Cryptocurrency?
- The Advantages and Disadvantages of Cryptocurrency
- What is the Current State of Cryptocurrency?
What is Cryptocurrency?
To put cryptocurrency meaning as simply as we can: Cryptocurrency is an all-digital form of decentralized currency. Cryptocurrencies are mediums of exchange unlike traditional fiat currencies we are familiar with; they are private currencies created, stored and processed outside of a central bank or government.
One of the first ways cryptocurrency was ever described to the public was as a “peer-to-peer electronic cash system”, as outlined by its creator(s).
Cryptocurrencies are secured by cryptography, which is the science of encoding and decoding information. When data is encrypted, it becomes less and less discernible to those without a “key” to decode the information. In the case of cryptocurrency, this makes it impossible to double-spend or counterfeit.
Because of the lack of centralized authority overseeing the buying and selling of this currency, encryption is essential to every step of the transaction process. It’s also key to the underlying philosophical aims of cryptocurrencies, which were to be secured, managed and regulated by the public, rather than by centralized authorities with their own aims and agendas.
Crypto coins (different types of digital currency) are not physical pieces of money you can see and hold. They may just exist as computer files stored in databases, but they are so much more than that.
How Do I Buy and Sell Cryptocurrency?
Okay, so what does it look like in practice? Let's check out our short guide for selling and buying cryptocurrency.
Buying your first crypto coins starts with obtaining a crypto wallet to “store” it in. Wallets for cryptocurrency don’t contain actual coins — they exist to keep track of ownership. Plus, they are necessary for the generation of public addresses which make it possible to send and receive coins.
Your wallet’s public address, balance and transactions can be viewed by anyone on the blockchain in a decentralized network, but they are not tied to your identity, and your coins are protected in your wallet by a private key.
Private keys are long sequences of letters and numbers unique to you that both act as a password for accessing your coins and as digital signatures that verify your transactions on the blockchain.
Once you have a wallet set up, you can buy and sell cryptocurrency using an exchange (a private business that allows users to exchange crypto for other coins or fiat currency), or even at a physical ATM!
Similarly to the stock market, participants will have to closely watch crypto markets in order to determine when they are comfortable buying and selling coins. Newcomers and even experts can find online crypto communities where members are discussing market forecasts, tips and tricks and more.
Buyers and sellers can find crypto ATMs in their local communities; these internet-enabled terminals help users buy and/or sell coins such as Bitcoin, Ethereum and Litecoin.
These ATMs are connected to the blockchain network, allowing customers to purchase cryptocurrency with cash or sell crypto from their wallets. Using a crypto ATM can be as simple as scanning a QR code and following the steps outlined on the machine.
The Advantages and Disadvantages of Cryptocurrency
Now that you understand the basics of crypto and the philosophy behind it, let’s dive into real-life implications of digital currency. While the reasons behind its existence can sound ideal, it may not be a suitable endeavor for everyone.
These properties vary based on coin, but generally, these are some of the most relevant advantages and disadvantages of crypto:
|Transparent, verifiable transactions
|Anonymity facilitates illegal activity
|Enhanced privacy through decentralization
|Irretrievable coins if private key lost
|Stronger security with encryption
|Flexibility to use various currencies
|Speculative nature and market volatility
|Low transaction fees and global accessibility
|High energy consumption
- Public digital ledgers used by most coins allow for transparent and verifiable transactions. This also reduces instances of manipulation.
- Decentralization simultaneously allows for more privacy as a mediary does not need to identify you.
- Encryption allows for stronger security compared to other electronic transactions.
- Many crypto coins can be purchased using any kind of currency. There are relatively low transaction fees and minimal barriers for international transactions, making it a rival to wire transfers.
- Anonymity can make illegal activity more difficult to trace. For example, when buying and selling on the dark web or laundering money.
- If one loses access to a wallet by forgetting their private key, any coins in that wallet are irretrievable.
- Crypto exchanges can be susceptible to hacks. These transactions are also irreversible.
- Cryptocurrency markets are not yet mature and are mostly driven by speculation, making them volatile.
- Bitcoin mining in particular requires large amounts of electricity, which can be harmful to the environment.
What is The Current State of Cryptocurrency?
By reading this blog you will be able to have a better understanding of what cryptocurrency is.
Cryptocurrencies are constantly evolving mediums of exchange with large implications in the world of finance. The global cryptocurrency observed its all-time high market capitalization in November 2021 when it stood at over $2.9 trillion but had a sharp decline in its value in the second half of the year 2022. As of July 2023, the market cap of the crypto market is $1.22 Trillion.
In the past few years, new altcoins are gaining popularity due in part to their greener energy consumption requirements, leading to more diverse, environmentally-friendly ways to buy and sell crypto. While the future of cryptocurrency is unknown, one thing you can count on is that it will be constantly evolving, whether that means continuous growth and expansion, or unpredictable highs and lows.
Whether you’re interested in cryptocurrency as an exciting hobby or as a more private and secure alternative to banking, crypto is being made accessible to anyone by Localcoin. Localcoin ATMs offer a simple, user-friendly way for anyone to buy and sell Bitcoin, Litecoin and Ethereum. This is especially meaningful for beginners who are seeking a hassle-free way to dive into the world of digital currency with confidence!
Newcomers and experts alike can easily access Localcoin ATMs when and where they need to. As one of North America’s largest Bitcoin ATM network, with more than 600 terminals across Canada and the U.S, we make buying and selling cryptocurrencies easy and accessible for crypto enthusiasts in their communities.
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