I have been meaning to post some Crypto Currency Basics for a few weeks now, but kept putting it off. But what has recently happened with Bitcoin, Doge, and even Ethereum is pointing to me, that it's time for me to share a bit of knowledge. I would rather you know a little about it, then know nothing and get into the "game" and lose time and possibly money.
Crypto Currency Basics
So to start on Crypto Currency Basics, one of the things you might have heard is that it's an electronic currency, its on the Blockchain, or maybe even that crypto is a decentralized currency. Those are all true.
Technically speaking, the Yen, Yuan, Dollar, and Peso are electronic monies, they exist as money that can be sent digitally and owned by all, the same as Crypto currency. The difference is that those are backed by a government but still have a perceived value - versus crypto which is not backed by any government... yet. Crypto still has a perceived value, and in this way is a decentralized currency. There has been talk of Facebook, Amazon, and some small countries offering their own crypto currency. At this point, we haven't seen much movement there, but its something to be aware of.
A blockchain refers to the transactions, of which they are all appended to the transaction history of the currency. Even though it's all text, most cryptos use this method, and is completely readable. This means that if I use Bitcoin, and send it from my wallet to yours, then that transaction is readable by everyone in the world. But they would need to connect my Bitcoin wallet to me, and yours to you. If that were possible, then everyone could see the transaction. From the beginning of crypto, all transactions are on the blockchain. Currently, the blockchain for Bitcoin is around 45 gigabytes of data - again, all text.
There is another basic which is Very Important!!! If you store your crypto in an online wallet, and you do not own the private keys, then your money can be stolen by the owner of that wallet - which is NOT you. Whether they will or not, is another matter. The only way to keep your money safe from others is to use your own wallet, where you own the keys. This can be electronic in nature, or can be an offline storage, where the monies are kept on paper, etched in metal (recommended), or another physical form hidden safe from natural threats such as fire and water damage. A great place to hold crypto is in an electronic safe such as a USB with an electronic key like a password, or a physical key like a thumbprint - A Trezor, is the mostly widely used of this type.
Generally speaking a private key is a mix of letters and numbers, sometimes in a phrase or just several words that can be used to access your wallet. An example (but not an actual key) could be something like "The quick brown fox jumps over the lazy dog".
Buying Crypto Currency
Now we need to talk about where or how you can buy crypto currency in our Crypto Currency Basics. There are 3 ways, and each of them have limitations. The easiest method to purchase crypto is to use an exchange that allows you to buy with a credit or debit card. Every Crypto Exchange has positives and negatives which we will discuss below. Another way is to buy from a private seller which means you give cash to someone and they transfer the coins directly to your wallet. The third method is to use a Bitcoin ATM - these have been popping up more often. They allow you to insert cash and then get the money in a hard wallet (printed on paper), or transferred from their website. There is still another way to earn crypto, but again, that's a discussion for a bit later.
Choosing an exchange
Once you have funds in a wallet, you should be able to transfer them to an exchange. Some will allow you to earn interest on them such as my 4% that I earn on a small Bitcoin balance, or the 5% I am earning on an Ethereum balance on an exchange. These are given compound interest, which is to say that I get my interest paid daily, and then I earn interest on that balance as well as the previous balance combined. These add up, and can exponentially grow. With the way both Bitcoin and Ethereum is moving, these are both great investments right now.
Something else to look at, is if the exchange allows you to buy and sell directly to other alt coins (such as Shiba Inu, Doge, or Sprouts) or if they require that you first convert to their own coin, and then to a different coin. If they require converting to their own coin first, they could be hitting you with double fees (once to their coin, and once to a different coin). If you can transfer out of the exchange to another wallet, such as that private wallet or another exchange is something to consider.
It's at this point, that I am going to refer to you, a list of Crypto Exchanges. There are hundreds of them. These exchanges can be used to convert crypto to other crypto. So you can convert Bitcoin to Doge, and then to Ethereum or even to Sprouts or Validity. There are probably hundreds of alt coins, with an alt coin being anything that is not considered Bitcoin. There are also currencies such as TUSD (True USD) and Fiat, which are often tied to the value of the US Dollar.
I mentioned Fiat, because there are also Brokerages out there. These appear to be Exchanges, but are not in actuality. In fact there is a well known Brokerage called Robin Hood (RH). RH gets is a great place to start investing, and getting your feet wet with Crypto Currency. But you should not use it to trade, especially when there is a lot of activity in a given coin such as Doge in recent days. But it's the debacle with Gamestop which actually got them in the spotlight. Last year when Gamestop was breaking records, and major stock brokers were shorting it - expecting the price to go down, it did the opposite. Robin Hood stopped all trade. They did this for Doge, they did this for Game Stop.
Moving to an Exchange
If you use Robin Hood to invest into crypto, now would be a good idea to get off the brokerage and into an exchange. You can do this by converting all your coinage into Fiat, and then sending that to an exchange that accepts Fiat. Alternatively, you can cash out and then cash back in with another exchange. However then you need to worry about capital gains, or taxes on your profits - even if you lost money.
There are exchanges that aren't necessarily bad, but when the world trades in crypto, you can expect to see some huge amounts of traffic. When that happens, it might seem like your platform stopped, but it might just be overwhelmed with traffic. This happened to me, on the exchange I use, when I converted everything to Doge to ride the wave up, then dumped it, when it hit $.72 a share - before Musk made his appearance on Saturday Night Live (SNL). I wasn't seeing the trade, but it did go through.
Pump and Dump
When we talk of Crypto Currency Basics, we need to cover Pump and Dumps. A Pump and Dump, is when a party hypes up a particular coin, it surges, and then suddenly loses its momentum and does a downward spiral. This recently happened with Gamestop and then again with Doge coin. Elon Musk (2nd richest man in the world) and several other celebrities hyped it up, and then likely sold when it hit a certain high.
A couple of years ago, you could get a single share of Doge for less than 1 cent. A few months ago, it was sitting around 3.5 cents each, and then Musk tweeted about it and it hit a high of 72 cents. Today (May 10, 2021) it's sitting at around 45 cents each. I had a friend invest in it, thinking it would keep going up. When I asked him if he sold, he told me he's in it for the long haul - using it as an investment. He'll be ok, he can afford to lose his investment.
If you picked up Doge when it was 4 cents, even if you sold it for 40 cents, you made out like a bandit. There's a problem with Doge though. It has no max supply. This means more and more coins are added to the market daily. It will go down, and continue to do down. Unlike Bitcoin which has a limited supply, Bitcoin will continue to rise. Coins are traded, some are lost, and some are simply held. Its not possible to mine a Bitcoin anymore and have it be profitable in most places. You would need free electricity to make a profit on it now.
The Market Cap of any particular coin, is the total amount of currency traded and the maximum value of that currency at the price of the time you are looking at it. To find the current Market Cap, we need to head on over to Coin Market Cap.
Obtaining Coins without paying for them
There are 2 methods which I need to mention now in this Crypto Currency Basics guide. They will allow you to obtain crypto coins, without paying for them. Essentially, you do pay for them, but not by buying them with cash. The first is called Mining and the second is called Faucets.
When we think about mining, we think of digging in the dirt to find valuable rocks, metals, and gems. Crypto Mining is a bit different. We use graphic card processing cycles to mine a coin. This is often in a pool of others also mining these coins, in the attempt to gain pieces of coins.
I mentioned that Bitcoin isn't profitable, unless you have free electricity. Bitcoin isn't profitable in this way, but Ethereum is profitable for Crypto Mining. At $4000 each (current rate), there are several people who have rigs mining and running 24/7 to gain these coins.
I will post more information in mining, including several mining softwares, in a later posting for our VIP Members. I do this, because there are many fakes, or miners that steal coins.
Faucets can be a profitable way to earn Crypto, and thus I have included it in this Crypto Currency Basics guide. The problem with faucets, is that right now, they aren't profitable, but if you get in on the right one, a couple of years from now, they might be worth a lot of money. A faucet drips a few portions of crypto currency into an online wallet for you. Today, they are worth less than pennies. Tomorrow, you might be able to retire on it - or maybe not. It's more of an investment of time. You earn this dust, by viewing ads and solving Captchas.
Bitcoin is expected to hit $100,000 by the end of the year. Whether this does or not, makes little difference to most people, not when Bitcoin is sitting around $60k each. But in a few years, if it gets to $1 million, then any small amount of crypto that you have, sometimes referred to as dust (ie gold dust), might be worth thousands. This is why, I collect small balances of coins from Faucets.
Faucets I use
Currently, I use 2 different faucets, FreeBitCo.in and BTCPop.co's faucets. However, there are many faucets out there. These are just a couple that I have had for several years. Some faucets will disappear along with the currency you had in them, should the price of the coin skyrocket. Neither of these 2 has disappeared over the years, so I stuck with them.
From BTCPop, I have gotten drips of Doge, Sproutscoin, Reddcoin, Validity, PKoin, LiteDoge, and some others. I started off with some which were worth nothing, and now have greatly improved. Doge is no longer given away on this faucet, but I did end up making some money with the faucet.
There is one more thing I want to mention in this Crypto Currency Basics guide. Coin Splits are when a developer wants to use a coin which is popular to get investors in on another coin. For example, Bitcoin a few years back, split into Bitcoin Cash and also Bitcoin Gold. If you had Bitcoin sitting on an exchange, then when those coins split, you might have equal shares of those coins as well. Of course the value would not be the same as bitcoin, as they are in fact alt coins. However in order to get these coin splits, your exchange needs to have supported the split.
One of the other reasons I like BTCPop.co, is that yes, I have both Bitcoin Cash and Bitcoin Gold, sitting in my wallet over at BTCPop. A couple of years back, I also had money sitting in a Gemini wallet. When the coin split, I expected to be compensated. I wasn't. They kept the coin, and traded on it, then when it went back down, they purchased it back, and gave it to the site's members. I lost out on some potential for money here. If you are planning on getting in on a coin split, I recommend moving your balance to BTCPop for the split.
Securities Exchange Committee
The Securities Exchange Committee (SEC) has recently dabbling in attacking Crypto Currencies. Apparently with the brokerage houses getting into the Crypto market, the US Government wants to ensure that Pump and Dumps aren't happening. But they also want to impose other regulations on these currencies stifling competition and the free market. We ask that you sign a petition, if you are US Citizen, so that the SEC butts out, and allows the free flow of a decentalized market.
Crypto Currency Basics Investing
With this Crypto Currency Basics guide, you might want some tips for the future. The best advice I can give you, is to diversify. Buy into Bitcoin, but also Ethereum, Doge, Bitcoin Cash, Bitcoin Gold, Validity, and even a little into the big movers and shakers such as Shiba Inu. Then, move your balances into savings accounts where you earn a percentage back, when these are available.
I would also suggest buying a small amount in dollars worth, of every small coin. Some of them will not move, some will shrink, and a few, will go up 20,000% of their value. If you can catch a few of those, you will more than make up an investment of a few dollars in each of the small coins.