Anyone who trades in crypto will tell you that there is an awful lot of misinformation out there. Not only that, but there are a surprising number of people who simply have no information about cryptocurrency at all. This is particularly surprising given that so much has changed in the last ten years; it feels like most of these myths and falsehoods should have been dispelled by this point. Back when Bitcoin first started making waves, it would perhaps be more understandable to be facing questions like “do you trade physical coins?” but these days, cryptocurrency has gone mainstream. Everyone from small business to big name banks are part of the crypto revolution, and yet many of the classic questions still get asked.
Of course, we should all try and remember that not everyone spends a huge amount of time online, nor indeed does everyone keep up with the latest financial news. And no one ever learned anything without asking the question first, so here are some of the most frequently asked questions about crypto to help you boost your knowledge and avoid having your expert friend roll their eyes at you next time you’re having a conversation about Bitcoin.
What Is Cryptocurrency?
OK, let’s start with the most basic one and give you a quick definition to get the ball rolling. Once you have a handle on what crypto is exactly, then everything else becomes much easier to understand.
Cryptocurrency is a decentralized form of currency that is entirely digital. Cryptocurrency is so secure because of that “crypto” part. Cryptographic functions keep it that way, and blockchain technology means that there is total transparency when it comes to any transactions (we’ll talk more about that later). It means that there is a complete and public record of every unit. Another word on the “decentralized” part: there is no one bank or government that controls cryptocurrencies such as Bitcoin.
Is Bitcoin The Same As Cryptocurrency?
No, Bitcoin is a form of cryptocurrency. Other cryptocurrencies are out there, and some are very popular (Ethereum is generally cited as the currency closest to Bitcoin in value), but the reason why this question gets asked so much is that Bitcoin is still the most widely used and widely discussed coin. As crypto continues to become more mainstream and more widely used, Bitcoin has generally led that charge.
However, it’s worth noting that some cryptocurrencies were created with different goals in mind. Ethereum, for example, was created as a currency for the platform of the same name to help tech develop without any oversight or interference, whereas Bitcoin is strictly a form of currency.
So, Is Blockchain A Cryptocurrency?
No, blockchain is the technology that allows transactions involving cryptocurrency to be recorded and to be available for anyone to look at. Blockchain technology has applications beyond crypto trading, and that’s partly why so many big tech companies invest so much in it.
How Do You Buy And Sell Cryptocurrency?
Most people trading crypto will do so on an online exchange. There are a lot of sites out there which allow crypto investors to buy and sell their digital currency as well as other financial assets. These sites are becoming more and more accessible with each passing year, and many of them offer a mobile site or app now. However, as with any exchange, it’s always worth doing your research to make sure that you’re getting the most for your coin. Some may charge very steep fees in exchange for high security, while others may be more suitable for experienced crypto traders who know exactly what they’re doing. You don’t have to use an exchange, but they do offer a lot more security than you would get otherwise.
If you want to get a feel for the different kinds of exchanges that are out there and get some bitcoin and cryptocurrency exchange advice, Traders of Crypto has put together a guide to the biggest and best ones out there.
Is Cryptocurrency Shady?
This is still one of the biggest myths out there and it’s certainly one of the most commonly asked questions that anyone trading in crypto faces on a regular basis. The short answer is no, the long answer is that this is a misconception that has come about because of the aforementioned decentralization.
Because cryptocurrencies are not overseen by any one bank or any one government, they were immediately perceived as something that was being used by people who didn’t want anyone to see what they were up to. The fact of the matter is that the lack of fees in peer-to-peer trading is probably more enticing to most crypto traders than the idea that this is somehow some kind of an underground activity, and as we mentioned, blockchain technology means that there is actually a very public record of how currency has been moved around. Any currency will have shady people using it, but is cryptocurrency inherently shady? Absolutely not.
But Cryptocurrency Is Risky, Right? As An Investment?
Well, any investment is risky. You wouldn’t be investing if you weren’t looking to take advantage of that, would you? But a better word for the way cryptocurrency behaves on the market would be volatile.
In the ten-plus years that Bitcoin and other cryptocurrencies have been on the market, there have been some wild fluctuations, and it’s certainly true that these fluctuations have continued in recent months. Dizzying highs are often followed by, well, the opposite of those, so it is fair to say that investing in and trading in cryptocurrency is certainly an occupation that keeps you on your toes. However, it’s worth noting that with crypto’s increasingly widespread acceptance, there should be an increase in stability.
What About Security? Isn’t Trading Crypto A Big Risk?
Again, this is one of those questions that comes up time and time again, and the fact of the matter is that if you are trading something valuable online then you are placing yourself at a certain amount of risk. Just look at the news reports about cybercrime statistics over the course of the pandemic, and you’ll see that anyone with a bank account and an email address has been a target for cybertheft over the course of the last twelve months.
However, given that crypto traders have a lot at stake, there are a lot of resources out there to help you protect yourself. For example, most people who buy and sell Bitcoin and other cryptocurrencies will use a “cold wallet” to store their coins. In laypersons’ terms, that means a USB device that they can download their currency onto and store offline to help drastically reduce the risk of theft.
Should I Start Trading Crypto?
Ah, the question that tends to come at the end of any conversation that has been spent batting away a lot of the misconceptions surrounding crypto. It is important to note that you should do your research ahead of time to make sure that you feel comfortable with it and that you should take your time before diving into any big investments, but the resources are out there to help you learn and crypto definitely isn’t going anywhere.