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What is cryptocurrency?

Cryptocurrency is a digital currency that is created and managed through advanced encryption techniques called cryptography. A cryptocurrency uses decentralized control as opposed to centralized electronic money and central banking systems.

The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, functioning as a distributed ledger. Let us explain what cryptocurrency is, and get to some of the basics of that you need to know.

History of cryptocurrency

Lets start with the history of cryptocurrency, this will help you understand how everything started out.

Was bitcoin the first cryptocurrency?

Bitcoin was not the first cryptocurrency to be created, that honour goes to Namecoin which was launched in 2011

Who started cryptocurrency?

The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto.

When was cryptocurrency invented?

The answer to the question what year did cryptocurrency start is quite easy to find, all you need to do is look at the history of cryptocurrency. It was back in 2009 that crypto started, Satoshi Nakamoto is now known as the founder of cryptocurrencies.

How cryptocurrency started out first

Cryptocurrency has been in existence since the internet started and the darknet was where it all began. People were trading items like drugs, guns and pornography using cryptocurrency because it is anonymous and relatively untraceable. The Silk Road was one of the first online marketplaces to trade everything from guns to drugs using Bitcoin as payment back in 2011.

Different types of cryptocurrency

Cryptocurrencies can be divided into three categories:

  1. Cryptocurrencies where transactions are verified by a central authority. These cryptocurrencies have been extremely volatile and have seen exchange rates fall below their peak levels within hours of market trades.
  2. Cryptocurrencies that are based on a decentralized blockchain, which is supported by a cryptocurrency exchange service. Here transactions are typically irreversible once the market trade has been executed and there is no central authority to reverse it. The nature of this block chain means that the success or failure of cryptocurrencies being traded on them have seen sharp falls in market value when traders attempt to sell at a time of market weakness.
  3. Cryptocurrencies such as Bitcoin and Ether (which is the currency used in Ethereum) are examples of cryptocurrencies that do not fit into either of these categories.

How is cryptocurrency created?

Cryptocurrency is basically computer code that can be used as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency at a fixed rate. The code for each cryptocurrency was written by their developers, and each one varies slightly from the others

How cryptocurrency transactions work

Another answer to the question what does cryptocurrency do is to explain the transaction process. Once the trader has decided which cryptocoin he wants to buy, he needs to transfer funds to the central exchange, making use of either a bank transfer or credit card.

Some exchanges do not accept payment using just one of these options, so you will have to look at their terms before deciding how to fund your account. The trader then needs to place his order on the exchange by entering an “order” for an agreed number of coins.

What is the purpose of cryptocurrency

Cryptocurrencies which use a consensus mechanism to verify transactions without a central authority or banking institution. The first cryptocurrencies in this category were Peercoin and Nxt, who both launched in 2012.

What is the best cryptocurrency?

The best cryptocurrency for you depends on what you want to do with it. For example, you might want to get the latest news and price data or convert one type of cryptocurrency into another. Or perhaps you’d like to buy products and services with it. Want to start learning? Then read our top 100 best cryptocurrency guide.

How can i buy cryptocurrency?

The easiest way to buy cryptocurrency is to use an online exchange or broker. There are a lot of these services out there so it’s best to search for one that is the easiest to use, has the cryptocurrency you want and accepts your preferred payment method. If you are planning on buying altcoins read this guide.

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Table of Contents

BAMagazine authors

Rebecca Nunes
Rebecca Nunes

Rebecca has a passion for cryptocurrencies and is happy to tell you more about them

Freddy Agard
Freddy Agard

Freddy writes a lot about the stock & equity market and its various options

Josh Harrison
Josh Harrison

Josh has been running in the world of cryptocurrencies since the early days.

Stephen Johnson
Stephen Johnson

Stephen knows a lot about financial products, he writes on several topics

Best rated cryptocurrencies

What can cryptocurrency be used for?

There are a number of possible uses for cryptocurrencies in the future, including:

Online transactions

Money transfer involving no banks or authorities, so that the sender can be sure of who they are sending money to. Here cryptocurrency offers the ability to carry out cheap and quick transactions around the world with no need for either bank fees or international currency exchange rates.

Property registration

As a means of securing property ownership and proving identity without having to give up one’s right to personal privacy.

Voting systems

Tokens can be created on top if Ethereum blockchain that can be used to represent shares of a company. This can potentially open up Initial Public Offerings (IPOs) and allow for more efficient crowdfunding campaigns

Cryptocurrency mining

The process used in the verification of transactions on the blockchain is known as mining. Mining involves either verifying or generating new blocks on the block chain and receiving rewards for doing so. The miners are given a fee which is paid in the cryptocurrency they have mined.

There is a lot of discussion about mining and how it works online, with some sites suggesting that it can be done by anyone using standard computer hardware. However, this is not the case as only those who have invested money into large server farms based on

What is the goal of cryptocurrency?

So what’s the point of cryptocurrency in the long run you might ask, as you know by now there are countless uses of cryptocurrency and the technology changes rapidly each year. Expections are that the market and technology will keep growing at exponential rate and that quite a few cryptocurrency projects will have a long term use.

Why is cryptocurrency on the rise?

The current cryptocurrency popularity is largely due to the fact that it is outside of government and bank control, thereby allowing people to do business with anyone in any part of the world without fear of either losing money or having their funds frozen. The blockchain technology behind cryptocurrency offers a layer of security and transparency with transactions not needing to be linked back to an individual, meaning

Is cryptocurrency an asset?

Cryptocurrencies are widely classed as money or assets, however they can be considered more of an asset than they are a currency. This is due to the fact that you need to pay for something using cryptocurrency before it can be spent on items such as food and clothes

Can you buy real goods with cryptocurrency

Yes, you can buy real goods using cryptocurrency. There are now many eCommerce sites accepting Bitcoin as payment, including major retailers such as AT&TMicrosoft and Expedia.

How to learn cryptocurrency?

Learning about cryptocurrency is very important, one of the most important rules in investing is that you actually know what you are investing in. Easier said than done, the technology of cryptocurrencies is changing daily, at the moment there are well over 10.000 cryptocurrencies, a lot of good ones, but a lot of shady coins aswell.

This is one of the main reasons why a lot of people dont know how to get started in cryptocurrency. This is a pity, because investing and learning about cryptocurrency does not have to be hard or time intensive like you can read here too.

How to get involved in cryptocurrency?

Obviously there is a difference between how cryptocurrency works for beginners and more advanced investors. Understanding cryptocurrency trading takes time because you need experience, do your due dilligence and you need a bit of capital to invest. 

Also think about how you want to invest. Brokers like eToro offer you the best solution in terms of flexibility, costs and regional use. There are a lot of other brokers that have great apps available, read more about this subject in our cryptocurrency apps guide.

If you are a beginner, we would not even advice you to think about trading yet. Start out with a beginners guide to cryptocurrency to learn about the technology. Take everything that you have learned to the next level by researching different coins to get a better understanding of the technology, advantages, and disadvantages of certain crypto projects.

Can I invest in cryptocurrency?

We get a lot of questions about this topic. A lot of folks ask us questions like, how to open a cryptocurrency account? How can i start investing in cryptocurrency, and what is needed? No worries, we got you covered. On BAMagazine you can learn how to invest on cryptocurrency, do research and analyze over 1000 popular cryptocurrencies and find the best exchanges and brokers.

Frequently asked questions

Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did. Cryptocurrencies are digital assets people use as investments and for online purchases. You exchange real currency, like dollars, to buy “coins” or “tokens” of a certain kind of cryptocurrency. You exchange your money for crypto and use it just like real money (at places that accept it as a type of payment)

The first thing that happens when you buy or transfer cryptocurrency, your money goes into your digital wallet (account) to fund the currency, or virtual tokens, via an exchange such as CoinBase or Binance. Once you have done this, all transactions are verified through a peer-to-peer network of computers that participate in the mining, or verification, process.

You deposit your cryptocurrency into an exchange such as WazirX, CoinDCX, CoinSwitch Kuber, Unocoin , and request a withdrawal in the currency of your choice. The withdrawal will be paid into your bank account.

Yes, you can lose more money than you invest in cryptocurrency. This is especially true if you are just starting out and trade with currencies that you do not understand or know much about.

At what day or week do you buy cryptocurrency? We have gotten asked this question numerous times, so we decided to take a look at our data to see if there was any discernible pattern. What we found is that the distribution is pretty even with no distinct trend.

There are a lot of factors that goes into determining which cryptocurrency project you will invest in. The most important factor is the technology behind the project and secondly, whether or not they can bring this technology to mass adoption.

Yes, you need to be 18 years old or older in order to buy cryptocurrency. Some countries require that people are at least 16 years old in order to make transactions with cryptocurrency, although this does not mean that young people cannot buy cryptocurrencies, but they will require parental consent.

Buy and HODL. This is the most common way of earning money from cryptocurrencies. Most investors buy coins such as Bitcoin, Litecoin, Ethereum, Ripple, and more and wait until their value rise. Once their market prices rise, they sell at a profit.

The cryptocurrency market is usually available to trade 24 hours a day, seven days a week because there is no centralised governance of the market. Cryptocurrency transactions take place directly between individuals, on cryptocurrency exchanges all over the world.

The reason is that the market cap of a cryptocurrency more or less reflects the popularity of a coin over a longer term. These coins are likely to be less volatile than other cryptocurrencies but still more volatile than traditional assets like stocks.

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