Have you heard of cryptocurrencies and want to invest in cryptocurrencies but would like to know more? After reading this guide you will know the concept, the concepts of vocabularies, the main cryptocurrencies, the various exchange platforms, the wallets but also the mining of cryptocurrencies. Let’s dive together into the underside of the next great technological revolution!
The concept of cryptocurrency
A cryptocurrency is an electronic currency used to perform transactions through a cryptographic validation. These cryptocurrencies can then be exchanged on exchange platforms, they also make it possible to remunerate the nodes of the network which validate the transactions on the network, which makes it possible to free oneself from trusted third parties: Banks, financial institutions, States, companies. Where there is a trusted third party that enables transactions, there is also an opportunity for a cryptocurrency and a blockchain network.
In 2008, Bitcoin ushered in the cryptocurrency era, with one goal: to optimize international transactions by freeing yourself from existing trusted third parties. Today, there are thousands of cryptocurrencies, if each one has its particular advantages we can nevertheless cite a few advantages that make most cryptocurrencies, a way to revolutionize transactions whether monetary or not:
Disintermediation: The technology and transparent operation of the Blockchain produce the confidence necessary for user agents to carry out exchanges (monetary, property, etc.) without requiring the control of a trusted third party (bank, notary).
Security : The decentralized architecture and the block code guarantee the inviolability of information. Security is ensured by 2 mechanisms:
- A cryptographic process: the code of each block is linked to the code of the one preceding it, the modification of a block would thus entail the modification of the whole chain;
- A decentralized aspect which involves a replica of all the blocks in each node of the network, this avoids the risk of data loss.
Autonomy: The creation of a cryptocurrency pays for infrastructure costs. Indeed, the computing power and the hosting space are provided by the nodes of the network.
The “miners” who operate Blockchain transactions, provide the hardware, computing power and storage space, in exchange for which they receive cryptocurrencies.
Some notions of vocabulary to navigate in an ocean of cryptocurrencies
The world of cryptocurrencies uses many specific terms related to cryptocurrencies and the functioning of blockchains. Here are some notions of vocabulary with which you can refer in case of doubt.
Altcoin : an “alternative coin” is a cryptocurrency different from bitcoin.
Blockchain : it is a block suite operating without central authority thanks to the users of the system. This decentralized technology enables the storage and dissemination of information in a secure and inexpensive manner. In the case of a public blockchain, everyone is free to consult the blockchain and verify its transactions. We can define a public blockchain as a public, anonymous and inviolable accounting register.
Encryption : this is a cryptographic process which makes it impossible for people who do not have the key to decrypt a message or document to understand it.
Initial coin offering (ICO) : This is a fundraiser that works in the form of a pre-sale of a cryptocurrency to launch a new network. Once the network is launched, the newly created cryptocurrency will operate the network and can be traded on the markets.
Mining : We are talking here about using the computing power of a mining computer to check the consistency of transactions against pre-established rules in the software, and to validate new blocks added to the blockchain. for more information visit our guide How to mine Bitcoin?
Minor : Refers to the individual who connects one or more mining machines (mining pools) to the network. Minors are paid according to the computing power they make available to the network. In the case of the Bitcoin blockchain, miners are paid in bitcoins.
Wallet : Means the application that stores the cryptocurrencies you have online and is only accessible using the user’s private key. There are virtual but also physical wallets.
Proof of work : Users must execute and solve calculations, algorithms and mathematical puzzles to validate electronic transactions in the blockchain. The difficulty of this work varies to keep the validation time constant.
Smart contract : These autonomous smart contracts are executed automatically by the blockchain without human intervention once the conditions necessary for their realization are met. For example, a smart contract will open the lock of a rented apartment once the amount owed has been paid by the tenant.
The main cryptocurrencies
Here are the three main cryptocurrencies, they represent the main capitalizations of the cryptocurrency market. Investing in these 3 cryptocurrencies is a good start to build a portfolio. Thereafter, you will also be able to study promising cryptocurrencies like EOS, Litecoin, Binance coin. If you want to become a cryptocurrency trading pro, you will then seek out to observe niche cryptocurrencies, with smaller capitalization but which can present prices having much higher growth rates. A percentage increase in the 3- or 4-digit price is not uncommon in the world of cryptocurrencies.
Bitcoin is the first cryptocurrency, it was created and validated following the white paper by Satoshi Nakamoto published in 2008: ” Bitcoin, a Peer to Peer Electronic Cash System ” Bitcoin is a decentralized cryptocurrency based on blockchain technology to manage transactions and issue digital coins without resorting to a central authority. The Bitcoin price is represented by the letters BTC on trading platforms.
The Ethereum network project was presented in a white paper published in 2013 by its founder, Vitalik Buterin. The Ethereum network was designed with the aim of offering an open and decentralized blockchain platform that will allow all developers to create applications using in particular the concept of “Smart Contract”. The Ethereum network issues a cryptocurrency to reward the nodes of the network, which is called Ether and is symbolized by the three letters ETH on exchange platforms.
Originally introduced in 2012, it is a real-time payment system. This aims to replace the current international SWIFT payment system, itself in place since the 1970s. Unlike Bitcoin, Ripple does not wish to revolutionize the international monetary system but to offer a platform to facilitate international banking exchanges .
Ripple is a cryptocurrency issued by the company of the same name and which appears under the name “XRP” X designating a non-national currency and RP designating Ripple.
Exchange platforms to buy cryptocurrencies
Now that you know a little more about the world of cryptocurrencies, you’re probably wondering how to get it? The easiest way is to go to an exchange platform specializing in cryptocurrency exchanges.
You can in particular go to:
Coinbase: it is the essential platform in the world of cryptocurrencies. The Coinbase site was created in 2012 and allows you to make purchases and sales of cryptocurrencies very easily and quickly. The platform also has an integrated wallet to store your cryptocurrencies.
Binance: The Binance platform created in 2017 through an ICO is one of the platforms that will give you access to hundreds of cryptocurrencies. You can buy them directly with your bank card. In addition, if you buy the cryptocurrency associated with the Binance coin (bnb) platform, this will give you access to advantages in terms of transaction fees and sponsorship fees.
Finally, platforms like Bitbay, Coinmama, and BitPanda offer easy-to-use cryptocurrency purchasing services for neophytes. Thus, by going through the sites that we have just mentioned, you will be able to enter with confidence on the cryptocurrency market.
Once you are on one of these platforms you will have a few steps to complete before being finally in possession of your cryptocurrencies:
- Register and verify your identity
- Make a deposit in euros
- Buy cryptocurrencies
- Secure them in a wallet
Wallets of cryptocurrencies
Trading platforms are the best way to invest in cryptocurrencies when you first get started. However, they present a security problem for your cryptocurrencies if you leave them on the platform. Indeed, although blockchain technology is secure by nature, platforms are not and it is for this reason that it is recommended to transfer your bitcoins to a secure wallet. There are thus several types of wallets to achieve this. Most platforms like Coinbase allow you to easily transfer your cryptocurrencies to an external wallet:
Digital wallets on computer : you can for example opt for the Armory, Multibit or Ciphrex wallets.
Digital wallets on mobile : The Breadwallet and Mycelium brands offer this type of wallet.
Physical portfolios : These are the most secure, they are like safes for your cryptocurrencies. The Ledger and Trezor companies offer several types of physical portfolios that are easy to use.
Guillaume has been passionate about Blockchain technologies and cryptocurrencies for 2 years now. He firmly believes in the massive adoption of these in the years to come. Eager for crisp news and always on the lookout for the latest trends in the cryptocurrency market, he enjoys sharing with you all their secrets!