What is cryptocurrency and how to buy it?

what is cryptocurrency

In 2022, there will probably be no people left who have never heard of cryptocurrencies. But what is it? In the article, we will analyze how cryptocurrencies differ from ordinary money, what types there are and what blockchain is.

Cryptocurrency – what is it?

Cryptocurrency is a kind of digital currency that does not have a physical embodiment and a single center that would control it. It works in the so-called “blockchain” or a chain of blocks with information.

Unlike servers, which are usually located in one place, data in a blockchain is stored on computers in different parts of the world. The accounting unit of a cryptocurrency is a “coin” or “token”, depending on the type of electronic money.

The lack of centralization also has some drawbacks – for example, a bank can freeze money if it suspects that a transfer was made by fraudsters. And transactions with cryptocurrency are irreversible – in which case you will not be able to cancel or dispute the transaction.

Cryptocurrencies have convenient peering functions that allow users to exchange transactions with each other directly, bypassing various intermediaries and their commissions (for example, banks).

Another important feature of cryptocurrencies is the increased security of storing and transferring coins. Information about the transaction is known only to its participants, and it will not be possible to withdraw the currency – this will require physical access to the owner’s wallet.

Where to buy cryptocurrency?

Before mining or buying cryptocurrency, it is important to understand that it is quite a risky investment. Firstly, the rate of bitcoin, ethereum and other alternative coins (altcoins) is quite volatile – the price can change by 10-30% per day, both in one direction and in the other. Secondly, not all countries of the world recognize cryptocurrency, which also creates certain risks.

The easiest way to buy cryptocurrency is through exchangers. You can pay for the purchase using a bank card, payment systems, by phone number or in cash. A commission of about 1-2% is provided for the purchase.

You can also purchase digital assets directly from the seller. For this, p2p platforms (person to person, or “from person to person”) were created. In this case, one user makes a deal with another user, and the service acts as a guarantor.

You can also buy cryptocurrency on the exchange. However, this method is considered less advantageous in comparison with the other two. Since marketplaces prefer not to sell directly to individuals, they set a fairly high commission – from 5% and above.

How to store cryptocurrency?

Exchange. Centralized cryptocurrency exchanges are called CEXs. These are Binance, Coinbase, etc. It is quite easy to buy and sell cryptocurrency on them, as well as deposit and withdraw regular money.

Wallets. They are of two types – cold and hot. The hot wallet is connected to the internet. Cold – not connected. The most secure option is a cold wallet.

Payment systems. The balance of electronic payment systems is also suitable for storing cryptocurrencies. These are PayPal, WebMoney, Advanced Cash, Payeer, etc.

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