Cryptocurrency for Beginners

In the first days of its launch in thousands of bitcoins were used to purchase a pizza. Ever since then, the cryptocurrency's meteoric rise to US$65,000 in April 2021, after its heart-stopping drop in mid- by about 70 percent to around US$6,000, boggles your brain of numerous people - cyptocurrency investors, traders or perhaps the plain curious who missed the boat.

How all of it began

Keep in mind that dissatisfaction with the existing financial system gave rise to the development of the digital currency. The development of this cryptocurrency is dependant on blockchain technology by Satoshi Nakamoto, a pseudonym apparently employed by a developer or band of developers.

Notwithstanding the numerous opinions predicting the death of cryptocurrency, bitcoin's performance has inspired a great many other digital currencies, especially in recent years. The success with crowdfunding attributable to the blockchain fever also attracted those out to scam the unsuspecting public and it has arrived at the interest of regulators.

Beyond bitcoin

Bitcoin has inspired the launching of many other digital currencies, There are currently more than 1,000 versions of digital coins or tokens. Not these are exactly the same and their values vary greatly, as do their liquidity.

Coins, altcoins and tokens

It'd suffice now to express there are fine distinctions between coins, altcoins and tokens. Altcoins or alternative coins generally describes other compared to pioneering bitcoin, although altcoins like ethereum, litecoin, ripple, dogecoin and dash are regarded as in the 'main' sounding coins, meaning they are traded in more cryptocurrency exchanges.

Coins serve as a currency or store of value 

whereas tokens offer asset or utility uses, an illustration being truly a blockchain service for supply chain management to validate and track wine products from winery to the consumer.

A point to note is that tokens or coins with low value offer upside opportunities but don't expect similar meteoric increases like bitcoin. Put simply, the lesser known tokens may be easy to purchase but may be difficult to sell.

Before stepping into a cryptocurrency, start with studying the worth proposition and technological considerations viz-a-viz the commercial strategies outlined in the white paper accompanying each initial coin offering or ICO.

For anyone familiar with stocks and shares, it's not unlike initial public offering or IPO. However, IPOs are issued by companies with tangible assets and a business track record. It's all done in just a regulated environment. On another hand, an ICO is based purely on an idea proposed in a white paper by a company - yet to stay operation and without assets - that's searching for funds to begin up.

Unregulated, so buyers beware

'One cannot regulated what is unknown' probably sums up the specific situation with digital currency. Regulators and regulations are still wanting to catch up with cryptocurrencies which are continuously evolving. The golden rule in the crypto space is 'caveat emptor', let the buyer beware.

Some countries are keeping an open mind adopting a hands-off policy for cryptocurrencies and blockchain applications, while keeping an eye on outright scams. Yet you will find regulators in other countries more focused on the cons than pros of digital money. Regulators generally realise the necessity to strike a balance and some are looking at existing laws on securities to try to have a handle on the numerous flavours of cryptocurrencies globally.