You may have heard about people reaping great rewards from cryptocurrency investments for years but have never quite mustered the courage to take the plunge yourself. Well, it’s not too late to join the bandwagon. And it’s still not as saturated as you may think. You can begin to learn how cryptocurrencies can work for you today and reap high returns to help cushion your savings.
What Even is It?
In the technical sense of the term, cryptocurrency is a virtual currency based on a network of different computers that update a shared ledger known as a Blockchain. Blockchain is a systematic method of ensuring records of cryptocurrency transactions are up to date and synchronized across the network. “Virtual” means that cryptocurrency is intangible or has no physical form.
The “crypto” in cryptocurrency means that transactional messages passed over the network are secured using encryption to guarantee security. Because cryptocurrency operates on a network of computers spread across different locations worldwide, it is not regulated centrally by any authority. Lack of regulation breeds anonymity, which causes some to fear that cryptocurrencies are used for illegal transactions.
Is Crypto just Bitcoin?
Many cryptocurrencies are in use to invest and transact today. Bitcoin was the pioneer in this field and continues to be one of the most popular cryptocurrencies.
Bitcoin is the template all other cryptos model themselves after. These cryptocurrencies are referred to as Altcoin, and they currently number more than 2,000, with many others still in the pipeline.
So, what are these Altcoin currencies, and what features make them attractive to potential investors? Here are three of the most popular:
- Litecoin– This crypto is now nine years old and was one of the first to be created in the Bitcoin mold. Litecoin has grown to overshadow its master in some aspects during this time. It generates Blockchains faster than Bitcoin, for instance, meaning transactions in this currency are confirmed quicker than on Bitcoin. It is currently among the world’s six biggest cryptocurrencies based on per-token value.
- Bitcoin Cash (BCH)– Bitcoin Cash came into existence due to a tiff between developers and miners of Bitcoin. The disagreement was that some wanted to increase Bitcoin’s block size, which is restricted to 1 MB. The proponents of this argument thought that transaction times would be improved if blocks were larger. BCH, therefore, has a block size of 8 MB.
- Ethereum– The nucleus of this crypto is its platform-specific token, Ether. Ether is like a vehicle through which developers and investors navigate the decentralized software platform that is Ethereum. It is the second biggest crypto in terms of market capitalization after Bitcoin. The decentralized nature of Ethereum means that no government agency has regulatory powers over it. Once you set up a wallet on Ethereum, you can transfer, borrow, or lend digital money.
I Made Money, Now What?
You may reach a point where you want to cash out or convert your digital money into fiat currency (dollars, or any other conventional currency). There are many factors you’ll want to consider as you begin this process.
First will be how urgently you need hard cash. If you need it to sort out an emergency, you will want to use the fastest available means to convert your crypto. This might mean you will face higher transaction fees.
Perhaps more importantly, you will need to consider the safety of the transaction. Given the unregulated nature of crypto, there is no sure way of knowing the person offering you cash for crypto is not a scammer.
There are several apps you can use to ease the process of conversion. Metal Pay makes things easy by allowing you to sign up using your mobile number and then allowing you to transact in up to 24 cryptocurrencies. Localcryptos will enable you to transact in Bitcoins and Ether and cash out without being scammed, thanks to a reputation rating system and escrow service.
Bear in mind that there are tax consequences for crypto transactions as you cash out. For those who have invested in crypto and made a profit, cryptocurrency taxes will come in the form of a capital gains tax.
Riding the Crypto Wave
The cryptocurrency investment field is still ripe for harvest; it is just a little over 10 years old. Purchasing Bitcoins may be out of your reach, but there are many other cryptos in which you can invest. All you need is to do your homework well and remember to give the IRS what’s due when things go well.