Want to know more about Bitcoin? Looking to learn more about Litecoin? Unsure about where to start with Ethereum? You’ve come to the right place. Education is crucial in the cryptocurrency space, so we’re on hand to help you become more knowledgeable through our handy guides.
Delving deep into many of the major (and maybe even a few minor) cryptocurrencies, we’ll give you the where’s, what’s, how’s, and why’s, along with so much more. Whether you’re completely new to the scene or a cryptocurrency professional, there’s always room to learn, something FullyCrypto’s crypto guides can certainly help with.
What is Cryptocurrency?
Cryptocurrency is the newest means of exchange within our global economy. All crypto is completely digital and decentralized, meaning it is not issued by a state government or banking authority. For transactions, crypto can be used much like fiat money so that you can buy, sell, or trade goods. The biggest difference between cryptocurrencies and fiat money is blockchain technology.
What is a blockchain?
Blockchain is used for every crypto transaction. It works as a digital ledger and contains encrypted digital assets that are linked together. Any changes made to the digital assets add another link to the chain. Blockchain technology is managed through a peer-to-peer network and ensures your digital assets remain secure.
The History of Cryptocurrency
Top Cryptocurrencies
| Crypto Name | Description |
|---|---|
| Bitcoin (BTC) | The first and most valuable crypto. |
| Ethereum (ETH) | Second only to BTC, commonly used for more complex financial transactions |
| Binance (BNB) | Works with two specific blockchain platforms, the Binance Chain and the Binance Smart |
| Cardano (ADA) | A proof-of-stake blockchain platform, the first to be founded on peer-reviewed research and developed through evidence-based methods. |
| Litecoin (LTC) | The second-oldest crypto, created from a fork in BTC, but has a faster transaction time. |
| Solana (SOL) | The world’s fastest blockchain with low fees and near instant confirmations, designed to work like Ethereum. |
| Dogecoin (DOGE) | Originally created as a joke, but has much lower value than other crypto due to there being no cap on the number of coins that can be created by mining. |
| Tether (USDT) | Designed to facilitate the use of fiat currencies in a digital manner. |
| Avalanche (AVAX) | Created to rival ETH, but promises to combine scaling capabilities and quick confirmation times through its Avalanche Consensus Protocol. |
What is the Best Cryptocurrency?
At the time of this writing, there are nearly 10,000 different cryptocurrencies around the world. Having such a large number can make the idea of investing overwhelming for many. To find the best of the bunch, you’ll need to do some market research on the current top cryptos.
How do I Analyze Crypto Markets?
To properly research crypto markets, you’ll first need to compare the current value of top cryptos. Then, take a look at both their market histories and analyst predictions. Ask yourself some of the following questions.
- Do current trends or predictions give the crypto room to grow?
- How are people most likely to use this cryptocurrency?
- What are the long-term goals for the company behind the crypto?
- Does this particular cryptocurrency bring new ideas to the table?
Remember, markets will always fluctuate, but when investing in crypto, one must always think about the long-term sustainability of the currency.
How Do I Invest in Crypto?
Once you have decided on the type of cryptocurrency you want to invest in, you’re ready to hit the crypto exchange. You can think of exchanges as third parties who oversee crypto transactions so that investors can safely and confidently trade crypto at market rates. Some of the most popular exchanges include CoinBase, BitForex, Bitfinex, and BitShares.
A good rule of thumb when investing in anything is to diversify your portfolio. What this means is that it is best to invest in multiple types of cryptocurrencies rather than tying all your money into one crypto. By diversifying your portfolio, you can better ensure the safety of your investments as markets fluctuate.
Choose the Best Crypto Wallet for You
After you have successfully purchased your cryptocurrency, you’ll want to keep it stored somewhere safe. This means you will need a crypto wallet. There are various types of wallets where you can safely secure your crypto, so it’s important to know the difference and choose the best wallet for you.
Exchange Wallets
Your exchange wallet is where your crypto is stored within the crypto exchange itself. These are managed by the third-party site and can be seen as convenient since there are no keys needed. However, exchange wallets are the least secure type of wallet. This is why you should only keep the amount of coins you want to trade within your exchange wallet. You will want to keep the majority of your crypto in either a hard or soft wallet.
Hardware Wallets / Cold Wallets
A cold wallet is seen as the most secure type of crypto wallet. These are also sometimes referred to as hardware wallets, as they are completely external to the internet. Because they are not connected to the internet, you will need a physical key to access your wallet. The most common type of cold wallet is a USB drive. The Ledger Nano S is an excellent example of a cold wallet.
Software Wallets / Hot Wallets
Hot wallets are software that can be downloaded to your computer, mobile phones, and other devices and allow you to securely store your cryptocurrency. These are the most common type of wallets due to their convenience and security, but it is important to note that they are connected to the internet and, as such, are still less secure than cold wallets.
Popular hot wallets include:
I Invested in Crypto; What Now?
Now that you have your cryptocurrency, what can you do with it? Honestly, the possibilities are endless.
Cryptocurrency is currency. It can be used to buy and sell things, and many businesses are now accepting crypto as a form of payment. Here are just a handful of places where you can enjoy your cryptocurrency.
- Crypto Casinos – BitStarz
- Coffee Shops – Starbucks
- Grocery Stores – Whole Foods
- Car dealerships – Tesla
- Cell phone carriers – AT&T
What are NFTs?
NFT stands for non-fungible token and can be thought of as a crypto asset rather than a cryptocurrency. What does this mean? An asset is something a person owns and generally cannot be traded for goods or services, unlike currency. There are all types of NFTs in the world (photos, audio, videos), with some being valued in the millions of dollars.
Since the start of the 2022 Crypto Winter, many NFTs have lost their value, and, as such, we have seen the popularity of NFTs decrease. However, just as with crypto values, this will change as markets fluctuate.
What is Crypto Mining?
Mining is the most common way to create new crypto coins. Mining systems mostly consist of vast computer networks that work to solve complex algorithmic puzzles. Once the puzzle is successfully solved, a new coin is created. Miners are then rewarded with a portion of the new coin. Because mining requires so much hardware and large amounts of electricity, the average person usually cannot successfully mine crypto.
Cryptocurrencies, Legal Issues, and Taxation
Because cryptocurrency is decentralized and unregulated, its legality and taxation of it vary across the globe. For example, in 2021, El Salvador became the first country to adopt BTC as legal tender. Whereas in China, cryptocurrency transactions have been completely banned. For the sake of simplicity, this section will be discussing the legal issues and taxation of cryptocurrency in the United States.
Is Crypto Legal in the USA?
Cryptocurrency has increasingly become the focus of US regulatory agencies, but there are no federal regulations on the books yet. Instead, several states have passed laws that directly impact cryptocurrency, so it is important to know how state laws in the US vary.
Some of the most recent state legislative moves include:
- Wyoming – passed legislation allowing for the creation of new crypto-focused banks
- Colorado – cryptocurrencies are exempt from state securities regulations
- Ohio – accepts taxes in crypto
- New York – approved a two-year, limited moratorium on digital currency mining at fossil fuel power plants in 2022.
Can the US Government Tax My Cryptocurrency?
The IRS uses the term “virtual currency” when referring to crypto. Currently, the agency considers trading cryptocurrency to be an asset and taxes it similarly to stocks or gold. However, trading crypto and purchasing crypto are not viewed as the same thing.
If your only crypto transaction is that you used USD for purchase, you do not need to report that to the IRS. It isn’t until you sell your crypto or exchange it for another crypto, goods, or services that you will need to begin filing such transactions with the IRS.
Are NFTs taxed?
Yes, an NFT is viewed as an investment or asset, so you will have to declare it and pay capital gains taxes on it. You will also need to pay taxes on any NFT sell or trade deal you engage in. If the value of your NFT greatly decreases, you can declare it as a loss.
Final Thoughts – The Pros & Cons of Cryptocurrency
| Pros | Cons |
|---|---|
|
Decentralized digital currency
|
Very volatile market
|
|
Uses secure blockchain technology
|
Mining seen as negative environmental impact
|
|
Gives users anonymity
|
Some government bans in place
|
|
Public transparency
|
Still a relatively new market
|
Like any investment, there will always be positives and negatives. Cryptocurrency has proven that with high risk can come high rewards. But, 2022 has also shown exactly how volatile the markets can be. The main thing to stress in the world of crypto is that while it is a new market, the goal has always been to view the investment with long-term objectives in mind. As more industries and nations begin to accept cryptocurrency, your investment has the potential to payout big dividends.
FAQ
Is crypto a good investment?
While cryptocurrency has seen a huge decrease in its recent value, most analysts believe that it is still a good investment at this stage. Remember, any investment comes with an element of risk. In all markets, what goes up, must eventually come down, and vice versa.
Is cryptocurrency real money?
Think of crypto as a digital asset that can be used for transactions. This means that you will need to use fiat money to purchase your crypto.
Does crypto have a future?
The answer to this question would be dependent upon the cryptocurrency you invest in. Some cryptocurrencies, like Bitcoin, are expected to see a huge rise in value, as the total number of coins is limited. Other cryptocurrencies, like Dogecoin, are never expected to reach the value of $1 USD.