In the past few years, cryptocurrencies have exploded in popularity. Bitcoin, in particular, has been getting a lot of attention.
In this article, I want to provide a comprehensive guide to bitcoin and other cryptocurrencies.
Selecting a Brokerage
After you’ve decided which cryptocurrencies you want to invest in and how much money you want to spend, you need to find an exchange or brokerage firm that facilitates trades.
There are many different cryptocurrency exchanges out there. Popular ones include Poloniex, Kraken, Bitfinex, Bittrex, Gemini and Coinbase. If you don’t want to use an exchange, then another option is to buy from an individual through a site like LocalBitcoins.com.
So what is it? Bitcoin, Ethereum, and other cryptocurrencies are digital “coins” that can be sent directly between two parties via the internet.
Unlike traditional currencies – like the U.S. dollar (USD) – there’s no central bank or a third party handling your transactions. Instead, they’re handled directly by computer networks that use blockchain technology to track coins and their transactions.
The blockchain is a public ledger of all bitcoin transactions that have ever been made. It contains every transaction ever processed, allowing a user’s computer to verify the validity of each transaction.
The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses therefore allowing all users to have full control over sending bitcoins from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in bitcoins for this service. This is often called “mining”.
By now, everyone and their dog are familiar with Bitcoin and cryptocurrency. Still, most people don’t have a full grasp of the concept. In fact, most people would have trouble explaining what makes Bitcoin valuable in layman’s terms.
Bitcoin is not a currency. It’s not something you can hold in your hand at all, which makes it very different from traditional money. In order to better understand why Bitcoin is valuable, let’s look at the different ways it is being used.
Bitcoin’s most obvious use case is as a digital currency. As such, it has numerous advantages over the traditional fiat currencies we’re all so familiar with.For example:
It is more secure than any credit card or bank account and doesn’t require any personal information to get started using it.
It can be sent to anyone around the world instantly and there are no transaction fees associated with its use.
The transactions are irreversible which means you won’t have to deal with chargebacks or refunds like you would if you were accepting credit card payments.
Bitcoin is a digital or virtual currency created in 2009 that uses peer-to-peer technology to facilitate instant payments. It follows the ideas set out in a white paper by the mysterious Satoshi Nakamoto, whose true identity has yet to be verified. Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government-issued currencies.
There are no physical bitcoins, only balances kept on a public ledger in the cloud, that – along with all Bitcoin transactions – is verified by a massive amount of computing power. Bitcoins are not issued or backed by any banks or governments, nor are individual bitcoins valuable as a commodity. Despite its not being legal tender, Bitcoin charts high on popularity, and has triggered the launch of other virtual currencies collectively referred to as Altcoins.
Bitcoin was the first cryptocurrency, and it was released as open-source software in 2009. The idea of the blockchain is at the core of all cryptocurrencies. It is the decentralised historical record of changes in the ownership of the asset, be it simply spending a bitcoin or executing a complex “smart contract” in one of the second-generation cryptocurrencies such as Ethereum.
Whilst bitcoin is currently trading at close to its all-time high, its dominance in terms of proportion of total cryptocurrency market cap is rapidly decreasing — ground largely given up to Ethereum. This trend looks set to continue, albeit for no particularly good reason.
The recent decline in price has been blamed, variously, on China banning initial coin offerings and on a widespread crackdown on cryptocurrencies more generally; on Jamie Dimon, CEO of JP Morgan Chase, calling Bitcoin a “fraud”; and on increasing difficulties in trading Bitcoin due to a lack of liquidity and skyrocketing transaction fees.
The most popular cryptocurrencies are currently Bitcoin, Ethereum, Bitcoin Cash, Ripple and Litecoin. While the list of these “top 5” will certainly change over time, it is significant that all of these coins have been around for several years and have built significant brand recognition. The top 5 are all supported by large communities, many of which have dedicated fanbases.
What makes a cryptocurrency popular? We can use market capitalization (the total value of the currency) and trading volume (the amount of the currency traded in the last 24 hours) as an important indicators for popularity.
The top 5 listed above have some other characteristics in common: they are all mineable currencies with their own independent blockchain (except Ripple). They also have at least one crypto exchange where you can buy or sell them for USD, EUR or other fiat currencies.
It is a time for investors to explore the cryptocurrency sector and possibly make a profit. But the question is: What are the most popular cryptocurrencies? The first and most popular cryptocurrency is Bitcoin. The other top cryptocurrencies include Ethereum, Ripple, Litecoin, Dash and Monero.
To give you an idea of how valuable Bitcoin was in 2017, we should mention that it grew from $900 in January 2017 to more than $20,000 at the end of the year. That is a rise of 2222%. This is actually why many investors have been exploring the cryptocurrency market and trying to make some profits.
The second most popular currency, Ethereum, has seen even more impressive growth over the past few years. It started with a value of less than $1 per coin in 2015 and by November 2017 it had reached over $400 per unit. This represents an increase of almost 48,000%.