Unless you’ve been living under a rock, you’ve probably heard or even seen the crypto boom firsthand.
With cryptocurrencies such as Bitcoin (BTC), Bitcoin Cash (BCH), Ethereum (ETH), and Litecoin (LTC) seeing a surge in prices, there has naturally been an increase in interest for cryptos over the last few years.
Even the most conservative of investors have taken notice of how popular cryptos have become. Given the immense rates of return on investment, it is easy to see why.
But how much do we know about these digital assets?
For simplicity’s sake, Bitcoin will be our main frame of reference for the remainder of this article. Originally developed by the mysterious Satoshi Nakamoto in 2009, Bitcoin was first used as a medium of exchange on the deep web.
It was prized for its ability to facilitate pseudo anonymous transactions – something essential when transacting on the deep web.
Since then however, Bitcoin has become something of a mainstream investment. Given its unregulated nature and inflation proof characteristics, some investors have taken to calling it digital gold. As a reference to its perceived stable nature when compared to other assets.
But like all cryptocurrencies, Bitcoin is far from stable. Price fluctuations have resulted in people making fortunes or going destitute overnight. This is all part of the reason why Bitcoin and other cryptocurrencies have become rather popular investments.
So if you’re looking to get aboard the crypto wagon, here are some things that you need to know.
1. Cryptos are entirely digital
Despite its name, Bitcoin ironically does not exist in any physical form. Instead all traces of ownership and records of transactions are stored on the blockchain.
The blockchain is the digital ledger that powers Bitcoin. It is through the blockchain that transactions can be performed nearly instantly from anywhere around the world.
With Bitcoin, billions of dollars can theoretically be easily transferred from person to person without having to make use of banks. Because of this it can be said that cryptocurrencies have changed the way we fundamentally think about money.
The very concept of money has been changed forever as it opens the door for us to be fully independent of fiat currency. Discussing such concepts however, are way beyond the scope of today’s article.
2. You’ll need a wallet to store your cryptocurrencies
Crypto wallets are not made from leather or any other materials. In fact, they do not resemble traditional wallets in any sense of the word.
The first type of crypto wallet used is known as a hot wallet. It is a fully online digital service that stores your cryptocurrencies. They provide users with quick and easy access to their cryptocurrencies and favoured for their convenience.
Some types of hot wallets also allow for transfers between users. Thus making them into something of an online bank account.
However, hot wallets are particularly prone to hack attacks and scams. Making them unsuitable for storing large quantities of cryptocurrencies.
For security purposes, it’s better to switch to a cold wallet for the bulk of your assets. Cold wallets can be purpose-built devices or a simple hard drive that lets you store your cryptocurrencies.
While less convenient, cold wallets are resistant to hack attacks (as long as they are not plugged in) and can be physically secured for extra safety.
It is important to store the access/login details for your wallets in a safe place, as there have been plenty of stories in the media recently where people have lost their login details. If this happens, you will have to contact a wallet recovery service such as BruteBrothers, who call themselves a crypto locksmith.
3. Transactions with cryptocurrencies are not anonymous
As was mentioned previously, Bitcoins were previously favored for the pseudo anonymity that they offered.
However, since the arrest of Russ Ulbricht and the collapse of the Silk Road, law enforcement has begun paying closer attention to the crypto sector.
While the decentralized nature of cryptos allows for a greater degree of privacy, transactions are still very much traceable. Given that digital wallets are used to transfer funds, your data is still present in one way or another.
So if you intend to perform an illegal transaction, we first recommend that you do not commit a crime. And number 2; avoid using cryptocurrencies for illegal purposes as you could land yourself in serious trouble.
Cryptocurrencies are an exciting development but not without their fair share of risks. Remember to stay safe and use cryptos responsibly.