Have you heard a lot about cryptocurrency lately? And maybe that has led to a desire to invest in these digital currencies? If so, you need to know everything about cryptocurrencies before investing in them! Be it their benefits or any other detail – you need to know them to ensure you do not waste your money.
Fortunately, we have come up with three essential items that you have to know before investing. These items will help you get a basic idea about cryptocurrencies to ensure better investment and returns. So, let’s get started!
3 Essential Things That You Need To Know About Crypto
1.   What Are Cryptocurrency, And What Are Its Features?
First, let us talk about what cryptocurrency is. It refers to a digital asset or currency that uses blockchain technology and computer codes to work independently without having to depend on anyone. (Note: if you are wondering “how does blockchain work” read this guide and learn all there is to know about this topic.) No government, bank, company, or person manages the system – it works independently in every aspect.
Bitcoin was the first cryptocurrency to be created in the market. The purpose of this creation was to provide a method of online payment that would not be in the hands of any bank or government. The creator also wanted something without censorship, restraint, cheaper, and faster. In today’s world, hundreds of cryptocurrencies act as payment mechanisms. Some also use them as digital storage devices or for borrowing or lending.
Here are some of the features of cryptocurrency –
Cryptography
Cryptocurrencies use cryptography to secure communications and information. Under this system, there is a public and a private key that you share with people for crypto transactions, and the latter is to secure your cryptos.
Transparency
Crypto’s ethos is based entirely on transparency. These codes are freely available for modification and redistribution and are built on open source.
Incentives
There are a lot of incentives in the cryptocurrency market. It ensures that everyone keeps working hard to reap benefits. For example, Bitcoin miners will get cryptos for all their mine transactions. This form of incentive keeps them interested in the transactions for a long time.
2.  Difference Between Crypto Assets, Tokens, And Coins
Various terms in the crypto world can seem very confusing to a newcomer. So, here are three main categories of crypto that you should know about –
Crypto Assets
Crypto assets or digital assets refer to the entire range of digital assets that use cryptography and come under the blockchain revolution. Both crypto tokens and cryptocurrencies are a part of this category.
Cryptocurrency
Cryptocurrencies or crypto coins are the native currencies of blockchains. For example, bitcoin or BTC is the native cryptocurrency to the famed Bitcoin blockchain. On the other hand, the cryptocurrency known as ether falls as a native currency under the Ethereum blockchain. You can use these crypto coins to verify transactions, compensate crypto miners, or pay any transaction fee.
Crypto Tokens
Crypto tokens do not have their blockchain, but they run on top of any existing blockchain. Most people build crypto tokens on Ethereum, but other blockchains are too for making them. For example, the Ethereum blockchain recently had a famous crypto token – Beeple’s art NFT, which sold for an astounding $69 million.
3.  What To Look For Before You Invest
Now, you might be very interested in purchasing cryptocurrencies. But being a newbie, it isn’t easy to assess the crypto market. So here are some of the things you should look for before you invest in any cryptocurrency –
Data
The cryptocurrency industry produces a lot of data built on transparency. You can try finding out more about the currency’s market capitalization or the value of tokens or coins minted. It is a huge indicator of space and can help you understand how well the currency performs.
Use Cases
It would be very helpful to find out more about how many active users the network has. You can also try to learn what exactly they are doing on those networks.
Developer Activity
If a particular protocol has a bigger developer ecosystem, it is much more likely to succeed. This is because more people will be working and maintaining the codebase to make it better.
The Team
Lastly, if possible, try to find out as much as possible about the team behind the cryptocurrency. While it might be difficult to know about the developers, you can try to find out as much information as possible. This information can help you figure out whether you can trust the cryptocurrency or not.
Payment processors
The crypto payment processor you use to buy crypto can significantly affect your transaction cost and the privacy aspect. So whether you’re a trader, merchant, developer or just someone who loves crypto – everyone can benefit from using a trusted payment gateway for buying cryptocurrency.
Conclusion
Trading cryptocurrency is a great way to invest your money and get good returns. But only if you do it in the right way. You need to know everything about the currency you buy, learn about its trends, etc. We hope this article helps you understand cryptocurrency basics before you set off to trade with these digital currencies. All the best!
