Crypto just keeps getting bigger and bigger, with more and more people getting involved all the time. If for whatever reason you’ve chosen to avoid crypto until now, perhaps it’s time you joined the revolution!
With that said, if you’re a complete novice, with all the techy jargon and unfamiliar concepts, crypto can be a confusing landscape to navigate.
If you’re new to the world of crypto or you’re looking to brush up your knowledge, fear not as we’ve put together this list of ten frequently asked questions. Here you’ll learn the basics including what crypto is, how it’s used and why it’s helping to reshape the financial landscape.
What Is Crypto?
Cryptocurrency, or crypto for short, is a digital form of currency that operates independently from any centralised authority, such as a government or bank.
These currencies utilise cryptography for security and operate on decentralised networks that are known as blockchains. They also enable secure peer-to-peer transactions, eliminating the need for intermediaries like banks or payment processors to offer more autonomy to the holder.
Bitcoin, Ethereum and Solana are some of the most well-known examples of cryptocurrencies, each with its unique features and applications.
How Does Crypto Work?
Crypto transactions occur on a blockchain. When someone initiates a transaction, it has to be verified by network participants and is added to a block. Each block contains a cryptographic hash of the previous block, so a chain of blocks is created – hence the name!
This process ensures transparency, security transactions. Miners, individuals or entities who validate transactions play a crucial role in maintaining the integrity of the blockchain by solving complex mathematical puzzles to add new blocks to the chain.
What Is The Blockchain?
The blockchain is a decentralised ledger that records transactions across a network of computers. As touched on above, it’s made up of blocks of data that are linked together in chronological order, forming a chain.
Each block contains a cryptographic hash of the previous block, making it resistant to tampering and fraud which enhances security.
Blockchain technology ensures transparency by allowing anyone to view the transaction data while maintaining privacy through cryptographic techniques..
What Uses Does Crypto Have?
Crypto has many different applications, including online purchases, investment and cross-border transactions.
Additionally, in some cases, it offers faster and cheaper alternatives to traditional financial systems, particularly in regions with limited access to banking services.
So while many people see crypto as an investment vehicle, there are plenty of alternative utilities for these digital currencies.
What Is A Crypto Wallet?
A crypto wallet is a digital wallet that allows users to store, send and receive cryptocurrencies.
Any crypto holder who wants to keep their assets safe, secure and away from a third-party exchange will need a wallet.
What Are Public And Private Keys?
Public and private keys are cryptographic keys that are used in cryptocurrency transactions and wallet security.
Think of the public key as a bank account number that’s shared with others to receive funds. This serves as your address for your transactions.
The private key is similar to a PIN or password which allows you to access your wallet. This must be kept confidential as it’s used to access the funds and authorise transactions from your wallet.
Public and private keys are crucial as they ensure security and facilitate cryptocurrency transactions on the blockchain.
Where Can You Buy Crypto?
Speaking of exchanges, this is where you’ll usually purchase your crypto from as these allow the buying, selling and trading of digital currencies.
These exchanges will usually offer a wide range of cryptocurrencies and payment methods, including fiat currencies and other cryptocurrencies which can be swapped for a specified rate.
Popular cryptocurrency exchanges include Coinbase, Binance, and Kraken, and each of these has its own unique features and security measures.
Why Is Crypto So Popular These Days?
Crypto’s popularity stems from a number of benefits.
Arguably the most attractive of those has been its potential for high returns on investment, although its decentralised nature, greater control and privacy to users and its ability to facilitate innovative applications such as decentralised finance and non-fungible tokens have also fuelled its ascendancy.
In addition, growing mainstream acceptance and institutional adoption due to the recent Securities and Exchange Commission spot exchange-traded funds approvals have significantly boosted confidence in cryptocurrencies, attracting more investors and users across the globe.
Can You Make Money From Crypto?
The short answer to this one is yes, absolutely. Many people have made money from crypto through trading, investing or mining crypto, although the latter requires a substantial investment as the hardware doesn’t come cheap.
That would make investing or trading the better options. If you have enough disposable cash and you’re prepared to wait, some of the biggest cryptocurrencies are all but certain to grow over the coming years.
For those looking to trade, crypto can be extremely volatile, offering plenty of opportunities to buy low and sell high.
Having said all that, it’s essential to understand that crypto investments carry risks. So before investing, individuals should conduct thorough research, diversify their investment portfolio and consider their risk tolerance and financial goals.
You’re also advised to keep up to date with market trends, news and regulatory developments as this will help you make informed investment decisions.
What Are The Risks With Crypto?
Like all investments, there are several risks that investors should be aware of. Firstly, as mentioned already, the cryptocurrency market is highly volatile, with prices fluctuating dramatically in short periods. While this can be a positive if you make the right trades, volatility can also result in losses.
Additionally, the regulatory landscape is changing all the time, leading to uncertainties about legal and regulatory compliance. While this is becoming less of a concern with more mainstream acceptance, it’s still something to bear in mind.
Furthermore, the security of cryptocurrency exchanges and wallets is a concern, as they are often targeted by hackers. So if you’re holding assets then you’ll need to ensure your wallet is fully protected at all times.
What Other Uses Does Blockchain Have?
Beyond cryptocurrencies, blockchain technology has the potential for use in a broad range of applications. These include but are not limited to supply chain management, healthcare, voting systems, identity verification and intellectual property protection.
The fact that blockchain is decentralised and transparent enables secure and efficient data management, as well as reducing fraud, errors, and administrative costs, all of which are huge benefits for businesses and individuals alike.
Crypto Cards
So hopefully you now have a good idea what crypto is, what it does and how it works. In truth, crypto can be a complex and confusing topic, but with this basic info, hopefully, your understanding is a little clearer.
Before we round off, first we’ll explain another clever innovation that’s revolutionising this space – crypto cards. These are much like regular debit or credit cards and they can be used to pay for goods and services, but rather than being linked to your bank account, they’re linked to your crypto wallet.
When a transaction is made, the crypto is converted into fiat currency. So even though you’ve paid in crypto, the business you’re paying for your goods still receives their usual currency.
In the past, one major drawback of crypto was the difficulty holders had in spending it. These assets were viewed primarily as something to invest in, rather than a currency for making everyday purchases.
But while many still prefer to hang onto their assets, others prefer to spend them as they go and thanks to crypto cards this is now possible.So if you’re keen to try out crypto cards, speak to us about our XRPayNet card now!