A Complete Guide to Cryptocurrencies (2020)

A Complete Guide to Cryptocurrencies (2020)

If you haven't heard the terms 'cryptocurrency', 'bitcoin' or 'digital currency' lately, you may not have been paying attention. Cryptocurrencies are currently a FEATURED theme almost everywhere in the world. Its popularity has exploded in recent years and can undoubtedly be considered a fiercely topical phenomenon.

What are cryptocurrencies? How do they work? Where can you buy them and what can you use them for?

These are all very common questions. Despite the incredible boom cryptocurrencies have experienced, there are still plenty of people who know very little about them, which isn't really surprising.

They are still relatively new, and while their basic idea is fairly simple, they involve certain complexities.

Learning about cryptocurrencies can be confusing at best at first. The amount of information at your disposal can be really overwhelming, but you shouldn't let that put you off. If you want to take the step and get into it, we are here to help you.

We have been showing great interest in cryptocurrencies for a long time, perhaps because they are a very interesting phenomenon with true potential to change many aspects of our lives, which is partly due to the fact that some of them provide excellent opportunities for investment and trade.

However, the main reason for our interest is the fact that cryptocurrencies play an important role in online gaming and are likely to have an even MORE significant presence in the future.

In this guide, we provide detailed information on how to use cryptocurrencies for Internet gaming. It also includes much more data and advice on cryptocurrencies in general, how to buy and sell them, how to obtain them through mining and how to use them for investment and trade. Here is what we will cover:

Table of Contents

  1. What are cryptocurrencies?
  2. Bitcoin and other common cryptocurrencies
  3. How to buy cryptocurrencies
  4. Internet gaming with cryptocurrencies
  5. Cryptocurrency investment
  6. Useful resources on cryptocurrencies
  7. Frequently asked questions about cryptocurrencies

What are cryptocurrencies?

It is not an easy question to answer simply, although we will do our best. Let's start with the translation of a formal definition from the famous Merriam-Webster dictionary.

Any form of currency that only exists digitally and that normally does not have a central issuing or regulatory authority but uses a decentralized system to record transactions and manage the issuance of new monetary units and which is based on cryptography to prevent counterfeiting and fraudulent transactions.

Well, you know what cryptocurrencies are ... or maybe not. As precise as this definition is, it doesn't tell you exactly EVERYTHING you need to know. We will try to explain it more clearly through a breakdown.

There are three key points to look at in the definition above:

  1. Cryptocurrencies only exist digitally (or virtually).
  2. They are decentralized and are not issued or regulated by a single authority or organization.
  3. They use cryptography to protect transactions.

Let's look at each of these points in a little more detail.

1. Cryptocurrencies are digital currencies

A digital or virtual currency is one that does not exist in a tangible way. There are no physical notes or coins, so the currency exists only in digital form (it is, essentially, a string of numbers) and is stored in computer equipment.

This does not mean that a digital currency is not "real" since, although you cannot touch it, it is there. A good way to understand it is to think about the money stored in a PayPal account.

There is nothing physically in a PayPal account; it is just a RECORD of how much money is associated with the account.

Although this analogy can help you understand the basic concept of cryptocurrencies, it is important to recognize a crucial difference. The money in a PayPal account is always backed by some conventional currency, so it has real and inherent value. However, cryptocurrencies lack any endorsement.

Their value is based solely on what the open market believes they are worth and what people are willing to pay for them.

Please note that cryptocurrencies can be used as a 'medium of exchange', meaning that they can be used to purchase goods and services as long as the seller is willing to accept a cryptocurrency as a means of payment.

As such, they can legitimately be considered a currency in their own right, even if it is a different type of currency than we are used to.

2. Cryptocurrencies are decentralized

Most of us are familiar with conventional currencies, such as the euro, the US dollar, or the British pound. Known as "fiat currencies," they are backed by a government and are considered legal tender. Each of these currencies is directly managed by a government or its designated authority.

The corresponding authority is responsible for controlling the supply of currency and can act on its value by creating more or adjusting the interest rates associated with that currency.

The Bank of England, for example, can choose when to print more British pounds, which generally lowers the value of the currency, as more is on offer.

Cryptocurrencies are classified as decentralized because there is no authority linked to them.

No individual or organization has control over them and their supply is determined by the speed with which they are created. They are all created in slightly different ways, but in most cases their issuance is based on a process known as 'mining'. A little later we will explain this.

3. Cryptocurrencies use crypto

Cryptography is a form of digital encryption. It is used to protect cryptocurrencies and also to verify and record the corresponding transactions. This is where things start to get a bit technical, but you don't actually need to understand crypto to buy or use cryptocurrencies.

Bitcoin and other common cryptocurrencies

The cryptocurrency boom began in 2009, when the mysterious Satoshi Nakamoto launched bitcoin (or bitcoin, in its Castilianized form).

It wasn't exactly an instant hit, but it grew in importance over time, and it wasn't long before terms like "digital currency," "cryptocurrency," and "blockchain" would become part of the buzzword.

It also wasn't long before alternatives to bitcoin appeared. Namecoin was one of the first cryptocurrencies to follow bitcoin, but it never really took off .

Others followed in their wake, but without palpable success, since, in general, they did not bring any improvement to bitcoin. However, some of the first alternatives still exist today.

These alternatives to bitcoin became known as "altcoins" and new ones continue to appear. It is difficult, if not impossible, to know which ones will stand the test of time, but there seems to be room in the market for more than one cryptocurrency.

At the present time, the ones mentioned below are the most known and used altcoins. Any one of them could completely collapse at any time, but they are reasonably well established and certainly have potential for success.

Although bitcoin remains the top cryptocurrency at the moment, that could change at any time. If you plan to use cryptocurrencies at any level, we recommend you keep up to date with the main altcoins.

How to buy cryptocurrencies

Buying cryptocurrency is not as complicated as you might expect. It is no more difficult than acquiring a conventional currency; actually, it's just that the process is not the same.

The biggest difference is that you can't just go to a bank or exchange office and buy it instantly. All transactions are managed over the Internet and you will need the following to get started:

  • A cryptocurrency wallet
  • An account on a cryptocurrency exchange site
  • Don't worry if you have no idea what these things are, because we are about to explain it to you.

Cryptocurrency wallet

Cryptocurrencies may not exist in tangible form, but they still need to be stored somewhere. That's where the purses come in. Cryptocurrency wallets are basically a type of software that stores information and code related to any digital currency you own.

They interact with the public transaction registry to let you know your balance and send and receive digital coins and tokens.

Cryptocurrency exchanges

Cryptocurrency exchanges are platforms on the Internet where you can buy and sell cryptocurrencies. They are usually peer-to-peer (P2P) networks, which means you will be transacting directly with other people, rather than with the exchange site itself. The exchange is, in reality, a mere intermediary.

Exchanges usually allow you to buy or sell a cryptocurrency using conventional currencies or alternative cryptocurrencies. For example, you can buy bitcoins (or, according to their Spanish form, bitcoins) with euros and then sell them in exchange for ethereums.

Something you should know about cryptocurrencies is that buying them is not the ONLY way to get hold of them. You can also create them by following a process known as "mining."

This involves using the computing power to solve equations or log and verify transactions, in exchange for which you earn cryptocurrencies that you can sell, keep or use.

Internet gaming with cryptocurrencies

At the beginning of this page we mentioned that cryptocurrencies play an important role in online gaming. This is because more and more gambling sites on the Internet have begun to accept deposits in cryptocurrencies so that their users can bet.

This has HUGE implications for the Internet gaming industry. There are several reasons why this is so, but there is one in particular that is already making a big difference for players around the world.

Cryptocurrencies can make depositing and withdrawing funds from gambling sites MUCH faster and easier than with traditional banking options.

Cryptocurrency transactions can be processed instantly, without complications such as the need for confirmation from a payment provider or the approval of a bank. You can send any cryptocurrency you own to anyone anywhere with just a few keystrokes.

So, in theory at least, any internet gaming deposit you make using a cryptocurrency should be available for you to bet immediately. Perhaps most importantly, gambling sites can send you the funds you want to withdraw in cryptocurrency as soon as they are processed and approved.

The latter is really important in countries where Internet gambling is illegal or, at least, not explicitly legal. In the United States, for example, it can be difficult to make deposits with credit cards or bank cards.

Financial institutions are governed by legislation known as UIGEA that prohibits processing gaming transactions on the Internet, even though it is not technically illegal to gamble on the Internet. With no financial institutions involved in the transfer of cryptocurrencies, the UIGEA is irrelevant.

Cryptocurrency investment

One of the driving forces behind the growing popularity of cryptocurrencies is the fact that they offer the potential to make big bucks. There are people who claim to get incredible sums of money with their investments in bitcoins and many more around the world who have already made impressive profits with bitcoin and other cryptocurrencies.

Investing and trading in cryptocurrencies has gained interest in recent years for various reasons: it is very easy to start and you do not need large sums of money; you don't need to spend a lot of time on it either.

Attention:

It is important to know the risks involved in the use of cryptocurrencies with a view to investment and trade. Its price can drop VERY quickly and any cryptocurrency could be completely worthless at any time.

There is no doubt that buying and selling cryptocurrencies can be profitable if you know what you do. The risk involved is ultimately no different than investing in other financial instruments, though you should be aware that cryptocurrency trading is generally MUCH more volatile.

It is precisely this volatility that is responsible for cryptocurrencies being so profitable, but they can also lead to rapid and significant losses.

Useful resources on cryptocurrencies

We have made sure that our guide to cryptocurrencies is a comprehensive resource that covers everything you HAVE to know to get started. We will update it regularly and expand it to make it even better. However, it is not the ONLY cryptocurrency resource you should use.

There are many other resources that can help you in different ways and also several tools that can be useful to you. Here are some examples:

  1. General information sites
  2. News sites
  3. Mining tools
  4. Currency conversion tables
  5. Analysis and other investment tools
  6. Security tools
  7. books
  8. Training courses
  9. Applications for mobile devices

Frequently Asked Questions

What was the first cryptocurrency?

The creation of a true digital currency had been attempted long before the appearance of bitcoin . However, none of them was successful and it is bitcoin that has been widely recognized as the first cryptocurrency. Launched in 2009 and still in circulation today, bitcoin marked the beginning of cryptocurrencies as we know them today.

How many cryptocurrencies are there?

Answering this question is a somewhat sterile effort. Counting how many cryptocurrencies are out there now would take a long time and ultimately be useless.

Currently there are more than a thousand and that number continues to grow. New cryptocurrencies appear almost daily, making it nearly impossible to keep track of the specific number.

Are cryptocurrencies legal?

That depends on where you live. Many countries have yet to enact legislation that addresses the use of cryptocurrencies, so they are often in a gray zone. They may not be explicitly legal, but they are also not illegal.

In such a case, you will likely be able to use the cryptocurrencies without fear of possible repercussions. However, do not take this as legal advice, as we do not have the necessary qualification for it.

Some countries have APPROVED laws that clarify the legality of cryptocurrencies, so if you live in one of them, there will be defined rules on what you can and cannot do. However, we could not quote the corresponding legislation of each and every country, so the best advice we can give you is to check the legislation of your country in this regard.

Are cryptocurrencies safe?

Cryptocurrencies are secure in the sense that you can take steps to protect anyone you own. If you use reputable wallets and exchanges and protect your computer and mobile devices from intruders, there is no reason why your currency is not secure.

If it is a safe INVESTMENT it is another completely different question and, in addition, it is not one to which we can answer. In fact, we believe that NO ONE can answer it for you. No one knows for sure what will happen to the value of cryptocurrencies in the future, just as no one knows for sure what will happen to the value of traditional investments, such as stocks, gold or real estate.

It's fair to say that some cryptocurrencies can be considered safer than others, but there is always the risk of loss. As we have said before, this is something you MUST consider when buying or investing in digital currencies.

Are cryptocurrency transactions anonymous?

Cryptocurrency transactions are widely recognized as anonymous, but a better description would be to say they are PSEUDOANONYMOUS. In a way, making cheap transactions with cryptocurrencies is comparable to an author who writes under a pseudonym (a false name).

All transactions made by a person or organization are technically traceable, but only up to the digital address used by that person or organization. This digital address is private and there is no obvious or simple way to determine which person or organization is behind it.

There is no personal information directly associated with a digital address used to send and receive cryptocurrencies.

However, in theory, it could always be discovered by some other method.

How is the value of cryptocurrencies determined?

Basically, it is established by the market itself. If there is demand for a cryptocurrency and people buy it, its price is likely to rise. If not, its value will most likely decrease.

That is the simple answer, but there ARE other factors that can also affect the price. The publicity surrounding a coin, how easy it is to obtain it through mining, its underlying structure, and its practical uses can become part of the equation.

Are cryptocurrencies here to stay?

Although we cannot affirm it with total certainty, we are quite sure that this is the case. It remains to be seen how important they will end up being in the world economy, but it seems extremely unlikely at the moment that they will disappear. However, we will probably end up with only some of the most important and that there will not be hundreds, as we have now.

Will cryptocurrencies replace conventional currencies?

Again, it cannot be stated for sure. However, we seriously doubt that this will happen in the short term and will probably not happen for several generations, if at all. It is hard to imagine that governments are willing to lose the monetary control they currently have.

Will it ever happen? It is possible that yes. We live in the digital age and that will not change. It makes some sense that the currencies we end up using are digital.

 

Author

Selena is a blogger and a guest contributor for a well-known brand that includes MESHEBLE. In her leisure time, she plays tennis.

Publication date: 
05/04/2020 - 14:15
Disclaimer

The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.