Cryptocurrency has inspired passionate opinions from some who believe it’s a revolution, while others worry it’s just a fad. But one thing everyone agrees on is that it’s complicated.
The first and most well-known cryptocurrency is Bitcoin, but there are thousands of others that explore new ways to process transactions and add features to the blockchain. Many are designed to solve specific problems or to work in a particular way with the blockchain, like making payments faster, running apps more securely, and creating contracts and other forms of digital ownership.
You can buy cryptocurrencies on online exchanges. The best place to start is by asking yourself what you hope to do with your crypto and choosing a coin that can help you achieve that goal. For example, if you’re looking to spend or trade crypto for goods and services, then Bitcoin is a popular choice because it’s widely accepted. On the other hand, if you’re interested in playing a digital card game, Ethereum may be better because it supports that particular type of gameplay.
Another option is to invest in stablecoins, which are designed to provide a more stable form of value than other cryptos. These coins often peg their values to existing currencies, like the US dollar, and they’re often audited by reputable third parties. However, even though they’re supposed to be less volatile than other cryptos, their prices can still fluctuate and lose value over time.
The newest and most exciting use case for crypto is the development of decentralized apps (dApps). These are programs that run on the blockchain, a distributed ledger that records all transactions in chronological order. The developers behind these apps are incentivizing users by giving them a share of the blockchain’s rewards, known as tokens, in return for their work. The development of these dApps has opened the door for new innovations, including smart contracts, non-fungible tokens (NFTs) and decentralized finance.
It’s important to understand how crypto works before investing in it, especially because the market can be very volatile. As a general rule, high-risk investments should make up only a small percentage of your portfolio. For some investors, that’s as low as 10%, but it depends on your goals and risk tolerance. If you’re planning to make a significant investment in crypto, it’s also wise to diversify your holdings, so that you’re not overly exposed to any one price movement. For this reason, some investors choose to hold their crypto in a wallet that’s isolated from the rest of their computer, or they purchase an app that makes it easy to split up and store smaller amounts of different kinds of coins. A secure wallet is essential for keeping your private keys safe, so do your research to find the best solution for you.