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Many questions and answers about cryptocurrencies – a beginner’s guide

What are cryptocurrencies?
Digital currencies, digital money.
Examples are the bitcoin, litecoin, ethereum, etc.

That’s it?!
No, it is a little more complicated than that.

Well, then give me a full definition!
Ok, a cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank.

Stop it, this is too complicated!
I told you!

How many cryptocurrencies are there?
There are over 1300 cryptocurrencies and growing, but only a couple of them have potential. Cryptocurrencies other than the bitcoin are called altcoins. There are two types of cryptocurrencies: cryptocurrencies based on the blockchain principle and ones that are not. If you want to know more about it, I would recommend this guide.

To be honest, I don’t care about the technology. I just want to make money. You said, “Only a couple of them have potential”. What do you mean with “potential”?
Well, that they increase in value and probably will in the near future.

So you don’t mean with “potential” that they will replace money in the future?
No, I personally don’t believe that. Nevertheless, I do believe that the technology behind it will be used in the future for other purposes, like digital contracts.

Am I too late to invest in cryptocurrencies?
I invested 1.5 months ago $3000 and now it has the value of $23,785. You just have to bet on the right horse. I could make more or I could lose everything. You’ll never know!

I don’t care about losing. I’m an irresponsible person. Let’s go back to that horse. How do I bet on the right horse?
Invest in a popular cryptocurrency that has been growing for a while. Don’t look at their value, look at the percentage increase. Litecoin and Ethereum are doing great.

Should I invest in bitcoin?
If you want to invest and are not afraid to lose the money, I would suggest to invest in altcoins. Not in bitcoin.

Why?
The bitcoin value is around $18,000. If you invest $1, the bitcoin has to grow another $18,000 to make $2 of that one dollar. The ripple value is around $0.80. If you invest $1, the ripple only has to grow to $1.60 to make $2 of your dollar. So, if you start to invest, I would recommend an altcoin.

That sounds awesome! I’m going to invest in the cheapest altcoin there is!
No, that’s a bad idea. There are altcoins with a value of $0.000001, like the sprout. The chance that they will eventually grow with 1000% is possible, but you don’t have any guarantee that you can exchange them back into dollars. I would not invest in sprouts. Nobody likes sprouts.

But what if the sprout becomes popular? Today, I could buy thousands of sprouts for just a couple of bucks! Sprouts are going to make me a billionaire!
If you believe in sprouts, just invest a couple of dollars. It’s cheaper than a lottery ticket.

Okay, cut the crap, I want to buy crypto-money! How do I buy them?
First, you’ll need a wallet.

My grandmother bought me a nice leather one!
No, not that kind of wallet.

Okay, what is a “wallet”?
A wallet is like your online accessible bank acount. After logging in, you can see your crypto-money. Also, you can get paid. You can send crypto-money as well.

Do I have an account number, like my bank account number ?
Yes, you do. But they are longer than your bank account number. Also they contain upper and lower case leters.

They look like this:
1FfmfHfrprcjKFvyi1okTjJJusN455paPH

Are there differences between a wallet and a bank account?
A bunch, but it is not important now. A couple of them are:
– Banks are commercial, most cryptocurrencies aren’t.
– In the world of cryptocurrencies everything is transparent. You can look-up how much somebody owns and spends if you know their address.
– In contrast to a bank wire, a cryptocurrency wire from the USA to Europe doesn’t take days. It is way cheaper as well.

Okay, where do I get a wallet?
The easiest way is to download an app like Coinbase. You can buy 3 cryptocurrencies with this app. It is safe, especially if you have a very good password. It is also easy to buy cryptocurrencies using this app.

Cool, I’m going to invest $10,000! Ha ha!
No, don’t do that! I would not recommend Coinbase if you want to invest more than $500.

Why?
Because you could lose your phone. You are not directly controlling your cryptocurrencies. There are wallets that are more safe.

Like?
You can install a wallet on your computer, a software-wallet. That is more safe. If you want to be even more safe, you could buy a hardware wallet.

What is a hardware wallet?
It’s a USB device that you plugin on your computer. You can access your cryptocurrencies with this device.

So why is it more safe?
Because somebody who wants to steal your cryptocurrencies needs that USB device. Even if a hacker can see your screen, even if a hacker key-logs your keyboard input, he could never see your password. Also, if you want to transfer money, you’ll have to confirm it, by pressing on the button on your USB device.

But what if this hardware wallet breaks? I would lose everything!
When you install the hardware wallet, it will ask you to write down 24 given words. With those words you can restore everything.

What are good hardware wallets?
The brands Razor and Ledger have a very good reputation. Be sure to buy one that supports the cryptocurrency you invest in.

Ok, I have a wallet now. Where can I buy cryptocurrencies?
If you use Coinbase, you can buy using your app. If you have a software or hardware wallet, there are other places to buy cryptocurrencies.

It doesn’t work! I cannot convert $1000 into cryptocurrencies!
Well, you first need to verify your account. Then you can buy more. They may ask you to send a scan of your password and they may ask your address. You can trust the mentioned exchanges sites on Best Bitcoin Exchange.

Somebody told me that I can also mine cryptocurrencies!
It is possible. Just like you can search for gold ores in the real world, you can mine crypto-money using one ore more strong computers.

Why didn’t you tell me this earlier?
Because you need a bunch of computers, you need to gather with other miners to mine for a block. It takes long, it will probably cost you more than you will make. Last but not least, you are a beginner. This FAQ is for beginners!

Is the bitcoin a bubble?
It depends on your definition. A bubble is something that grows fast for a short time and bursts. The bitcoin keeps growing since 2009. It is unlikely that it keeps growing forever. When it stops or slows down growing it is likely that people trade their bitcoins into other cryptocurrencies or money. And when everybody tries to trade in their bitcoins at the same time, the value would decrease very fast.

Where can I see the value of cryptocurrencies?
There are many platforms. This is one of them.

Jo Luijten

Dutch-born editor and video maker.

http://www.thebaconpost.com
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