So, you have heard all about this crypto stuff, and it sounds interesting...but where do you start? Hold on to your hat while I walk you through the amazing world of cryptocurrencies...
What is a Cryptocurrency?
A Cryptocurrency is software created by a software developer (or a team of developers) that has the ability to create and distribute pieces of itself to another computer user. These pieces are called tokens, or coins. The tokens (coins) can only be digitally transferred, and have no physical form.
Cryptocurrency is Bitcoins, right?
Bitcoins are a type of (and the first) cryptocurrency. As at January 2018 there were over 1400 different cryptocurrencies in circulation. For a full list of cryptocurrencies check out Coin Market Cap. This site contains a list of every cryptocurrency in circulation, the price it is currently valued at, along with where to find out more information.
Why Were Cryptos Created?
Cryptos were created in response to a global increase in government control over currency transactions. Digital currency was to create untraceable transactions by any party, including the government. Wikipedia describes the history of cryptocurrencies here.
What Can I Use Cryptocurrencies for?
Cryptocurrency is a rather misleading word. Cryptocurrencies can have many different functions, not just acting as a currency. Some are platforms (an online presence that allows others to run their own software, using the platform as a base), some are assets (that act as a store of value) and some are businesses that have a specific use case in mind.
From here on I will refer to Cryptocurrencies as Cryptos.
Find out more about the different types of cryptos in our article Cryptos Are Just Currencies, Right?
Can I Use Cryptos To Make Purchases?
Yes, there are many different cryptos that focus on currency as a feature, and are actively used now, mostly using crypto-enabled Debit Cards or online using a payment processor who accepts cryptos such as Shopify, Square or Stripe .
Can I Use Cryptos To Make Purchases in New Zealand?
99bitcoins.com has a running list of who currently accepts bitcoins internationally, but New Zealand is still to fully adopt the crypto ideals.
However, you can still spend bitcoin or other cryptos by using a third party debit card, such as Uquid. These cards allow you to spend your cryptos wherever major credit cards are accepted.
How do I buy Cryptos?
Purchasing cryptos can be completed in several different ways.
* Via a Brokerage
* Via an Exchange
* Through a Person-to-Person style exchange (similar to TradeMe).
You can find a list of these, and what they offer in New Zealand in our article Exchanges and Brokers in New Zealand.
Where Would I Store Cryptos?
There are six options for coin storage; A desktop wallet, a mobile wallet, an online wallet, a hardware wallet, a paper wallet or on an exchange .
Desktop Wallet: This is software that you install on your computer.
Mobile Wallet: A wallet that is run using a app on a smartphone.
Online Wallet: An online wallet is a web-based wallet which requires no software on your computer.
Hardware Wallet: This is hardware that is dedicated to hold and secure cryptos. These devices can be connected to the internet (usually via your computer) to make transactions, but can be taken offline for transportation and security.
Paper Wallet: Most cryptos will allow you to print out a QR code for both a public and private key. This option allows you to avoid storing digital data about your currency.
Exchange: When you create an account with an exchange, a wallet is automatically assigned to you for every crypto that they support. You don't own the wallet, just the contents and you have no control over the wallet other than to move cryptos in and out of it.
Find out more about storage in our article Where To Store Your Coins.
Should I Mine Cryptos?
Mining can be a rather technical venture, and the process for mining can vary widely from coin to coin. The number of coins you can generate from mining also varies widely from coin to coin, but sites like What To Mine provide some insight into what your earnings might be. In order to begin mining, you require some from of hardware such as a computer with a powerful Graphics card, a hardware rig with multiple graphics cards or a specialised mining rig developed specifically for mining only. As with any investment, the more you invest, the more rewards there are, and for a modest hardware rig you can expect your investment to be in the thousands of dollars.
Find more details about mining in our article What is Mining and Staking?
Are There Risks In Owning Cryptos?
Yes! So many risks! The cryptos is an emerging technology, an emerging industry and everyone in it are beginners! Yes, even the experts are beginners. Very little of this space is robust, because most of the technology has either had no or very little time in production. Wide scale adoption is a long way off yet for most cryptos, so none of the faults or gaps in the systems have been tested. To make things worse, this is a mostly unregulated industry, so the scammers have moved in, and its a very lucrative market for them!
Cryptos is a risky industry. Find out more about the risks you need to avoid in our article Keep Your Cryptos Safe.
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