Cryptocurrency what it is - User Information
In the past few years, the term cryptocurrency has often been mentioned on the Internet and beyond, and ways of making money related to it have been discussed. If you are a person far from the financial industry and new technologies, this review material will certainly be useful in which we talk about the essence of crypto, blockchain and the opportunities they provide in terms of making profit.
Cryptocurrency what is it in simple words
Cryptocurrency is a digital currency built on the principles of decentralization, anonymity and cryptographic encryption, which works only on the Internet. In fact, this is a completely new kind of money that has its own exchange rate in relation to another currency, but does not have a material form. The first project of this kind was Bitcoin, authored by a certain Satoshi Nakamoto. Bitcoin was conceived as an alternative to the modern financial concept, which is ineffective and unfair. The first year, people did not pay much attention to this new concept, but over time this situation has changed a lot. Due to its ease of use, every year a new settlement system is becoming more popular and trust in it is increasing, and the number of companies and projects that accept Bitcoin as payment is growing every day.
Everyone can generate cryptographic currency using the computing potential of their computer. You just need to run a special script, the source code is publicly available on the Internet. New bitcoins and some other altcoins (alternative coins - other cryptocurrencies) arise as a result of computer calculations, and, with the increase in the number of cryptographic currencies in the world, the complexity of calculations also increases. However, at the moment, there are practically no free methods for obtaining cryptocurrency. Due to the growth of the cryptocurrency exchange rate, services with the possibility of receiving free electronic monetary units gradually began to die out. Until recently, “cranes” remained the only absolutely free way to receive cryptocurrency. But this method required a lot of time and brought meager dividends,
Advantages and disadvantages of cryptocurrency
Cryptocurrency what it is - in general terms figured out. Now let's analyze the essence of this payment instrument in more detail. Cryptocurrency transactions resemble cashless transactions, but have several advantages. The main one is the anonymity and absence of various financial organizations in intermediaries, for example, such ubiquitous ones as banks that charge a fee for each transaction made. Also, the commission is practically absent even when making international payments, which makes cryptocurrency even more attractive. The transfer speed is also pleasing, tokens (also called coins, monetary units) are received on the necessary account in minutes after processing the payment by the network.
The most important feature of the crypto that distinguishes this payment instrument from all other money is decentralization. No government organization in the world controls cryptocurrency, and the coin database does not even have a main server - its encrypted copies are stored by all participants in the system, which ensures its reliability and helps protect against theft. Since any new entry in the database is synchronized with all copies stored by its participants in order to steal something, the thief will have to replace the data with the lion's share of the project users, and because of their huge number - hundreds of thousands and even millions, do this almost impossible. The indisputable advantage of the cryptographic currency is that it is relatively resistant to political processes, as it is not tied to a particular state.
People can send bitcoins and altcoins using a program on a computer or a variety of mobile applications. Cryptographic currency is stored in a digital wallet, which acts as an analogue of a bank account. It allows you to perform operations with cryptocurrency: receive bitcoins and pay with them. There are hardware wallets, more reliable means of storing and transporting virtual coins, usually equipped with additional protection.
However, do not forget about the shortcomings. The main one is the risk of losing your savings when you infect the computer on which the wallet is located with a virus. It should also be understood that no one can guarantee the stability of the coin rate, since the cryptographic currency is not provided with anything physical, this is pure mathematics. The value of this currency is determined only by the trust of people and their willingness to conclude transactions using this payment tool, and each user in the world can, without leaving his computer, affect the cryptographic currency rate. All this is very similar to the financial pyramid and is one of the main negative features of the cryptographic currency.
Another drawback is that after the cryptocurrency is sent to the recipient, it cannot be returned if the addressee does not do this. Each transaction between wallets is recorded in a common journal, and anyone can see the transaction history. However, only wallet identifiers are visible in the journal, not the names of buyers and sellers. Therefore, all cryptocurrency transactions are anonymous. And, precisely for this reason, crypto is often used in the market for illicit goods and is attacked by the governments of some states. Due to the fact that no bank controls crypto transactions, as well as the inability to receive any tax deductions from them, the government is very concerned about the problem of new generation currencies. One of the main risks is that Bitcoin and its analogues can be banned at the state level. At present, in Russia there are no restrictions on the use of cryptographic currency, however, the Central Bank and law enforcement officials have repeatedly emphasized their wary attitude to anonymous payment systems. At the beginning of 2018, a Bitcoin bill was introduced, according to which it is allowed in Russia, but it can not be used as a payment instrument.
How to make money on cryptocurrency
After analyzing all of the above, it is safe to say that cryptocurrency has too many advantages so that several disadvantages could shake its position as a payment instrument. But this is not all the advantages - crypto assets are not only good in terms of settlements between Internet users, but also open up considerable prospects in terms of profit. Conventionally, the methods of earning in the new generation currencies can be divided into two categories - with and without investments. Let's look at each of them individually.
How to make money on cryptocurrencies without investments
- Bitcoin faucet is the easiest way to earn crypto coins. To do this, anyone can register for services that offer to receive a reward for performing simple tasks. For example, the introduction of captcha, viewing the pages of a site or video, etc. For performing such tasks, the performer receives satoshi or other crypto coins.
- Online games also provide an opportunity to earn cryptocurrency. The essence of the task is quite simple: for the gamer's achievements in virtual spaces, he receives tokens. For example, it opens a new level or wins a competition, fulfills the conditions of the competition. It sounds attractive, but this source of income is definitely not to be called the main one. Despite the fact that this method of earning allows you to relax, you will have to spend a lot of time on it, and the income will be extremely unstable.
- Bounty companies or ICOs. The user receives a reward in the form of crypto coins for advertising new ICO projects. You can advertise using posting, reposts, transfers, etc. The minus of this method is that this industry is almost not regulated in any way, which causes a large number of fraudsters in this area. Unscrupulous organizers can go into the sunset without having thanked the material rewards of the users who help them.
- Mining It is about getting cryptocurrency by solving various cryptographic tasks. However, there is a negative point, for this you will need a powerful PC with a good graphics card. The reward for solving these problems will be the receipt of crypto coins. In order for mining to be more productive, you should join the proven and reliable mining pool. And it is better to act not alone, but in a team with other miners. Income will depend entirely on how powerful the equipment is. If we are talking about making money on Ethereum or Bitcoin, then the implementation of the process will require equipment with high rates. This becomes the main disadvantage of mining. There is no exact guarantee that it will be possible to recoup the equipment in 1-2 months. In some cases, the process may stretch for a year, as it’s not known whether the coin will fall in price, which can be an additional difficulty for the miner. In addition, this method cannot be called an opportunity to earn completely without investments, if you do not get coins from an already used PC.
- Referral / affiliate programs. Many exchanges involved in electronic currency trading, various exchangers and other resources often use the affiliate program as a marketing tool. Users are given a unique referral link, which they must distribute on the Internet, in every possible way luring new customers into the project. For successful fulfillment of the conditions - whether it is registration, making a deposit or something else, the partner is credited with cryptocurrency to the internal account, from where it is easy to withdraw to the wallet.
How to make money on cryptocurrency with investments
If you want to invest real money in currency, then you can try to get income on this. The user himself determines the initial capital, sells and buys exactly those coins that he considers necessary, and then performs any profitable operations, in his opinion, with them. There are more than enough profit options here:
- Investment. Everything is quite simple here - a person invests his savings in any cryptocurrency that gives hope for a further increase in value, and then expects its growth in order to increase his capital as a result. The most striking example of this type of investment is the investment of many people in Bitcoin, while it still cost only a few dollars per coin. At one point, the value of the coin exceeded the mark of 20 thousand USD, and investors who sold their stocks on time became dollar millionaires. Now on the market there are many other promising coins, the cost of which is only a few cents, and which can grow in the near future.
- Cloud mining. A type of mining, in which currency miners do not use their own equipment, but rent computing power on special services. Yes, you will have to pay money for rent at the established tariffs, but the user gets rid of the need to configure all the electronics and software on his own, does not risk anything, since in the event of a hardware breakdown, the company that provides the cloud mining service takes all the costs. Features of the work and prices depend on the supplier - it is very important to choose a service that has been working for a long time and does not have negative reviews, because in this area many fraudsters have now divorced.
- Speculative operations with currency (trading). How to make money on cryptocurrency using trading? Simple enough. You need to create an account on the exchange, which allows you to exchange one asset for another, and start making profitable investments. The basic principle is not much different from classical trading on the foreign exchange market - you should buy assets with growth prospects, sold at a bargain price, and after a certain time, sell them, taking the difference in your pocket. It is very similar to the investment that we talked about earlier, but the difference is that traders usually operate on much shorter terms - they can even perform several purchase / sale operations of the same asset during the day. Fortunately, the high volatility of cryptocurrency assets allows you to do this.
Many will probably want to learn how to make money on the cryptocurrency exchange without putting their own deposit at particular risk. Everything is quite simple here - you need to master such a direction as arbitration. Its principle is to work with several exchanges at the same time, using for their own benefit the differences between the courses. The same digital asset can cost significantly more on one resource than on another. Accordingly, having several deposits on different exchanges, a competent trader can easily profit from the difference between the purchase and sale price. The only drawback is that you have to get a decent start-up capital. Operating with an amount less than $ 1000 in cryptocurrency equivalent, you will most likely trade without any tangible benefits due to commission fees.
Don't forget about the risks
We explained above how to make money with cryptocurrency in simple words. But you should not, drawing on all of the above, draw premature conclusions about the new gold mine - when you, like Emelya, are sitting on the stove, and voiced coins themselves fall into your wallet. This will not happen. Each of the described methods of earning has its own nuances and associated risks. For example, during mining, expensive computer hardware may fail due to long work at the peak of its power, plus significant damage to the profitability of this lesson will be caused by increased electricity bills (it is not for nothing that the largest mining farms are located in Asia, where in some regions mere pennies are paid for electricity).
They can tell you as much as you like in advertising on different sites how easy it is to make money on cryptocurrency, but in fact there are more than enough pitfalls:
- Uncertain legal status of new generation coins. In some countries, cryptocurrency deposits and the use of crypto as a means of calculation are legalized, in others - this tool has a gray status. Politicians can not decide whether Bitcoin and its analogues pose a threat to the economy and security of the state. But there are also regions where the use of cryptocurrencies is severely suppressed, for example, in Bolivia, Iceland, Venezuela and a dozen countries. You yourself understand how much a ban in any influential country — the USA, Germany, Russia, etc., can affect exchange rates.
- Exchange rate volatility. This is both a positive moment, which opens up great prospects in terms of profit, and a rather real threat. Many investors were greatly burned out when in 2018 Bitcoin, and with it other cryptocurrencies, collapsed badly. People were counting on further growth and made investments too late, and soon a decline began. Investors had to withdraw money in a hurry in order to somehow limit losses.
- Anonymity and decentralization, lack of legislative regulation. Yes, even these basic advantages can lead to negative consequences if the user is not vigilant and careful. Various exchanges were repeatedly hacked, followed by theft of funds from customer accounts, and they themselves often were fraudulent resources. And if in the case of bank cards and EPS there is still some illusory chance to withdraw your transfer or prove a scam, then in the case of crypto money will be impossible to return.
Therefore, we recommend that you first learn how to make money on cryptocurrency from scratch using methods like participating in giveaways, referral programs and investing small amounts in promising and high-tech assets, and only then move on to risky currency speculation on exchanges, arbitrage, or some other scheme, requiring a solid cash investment.
Summarizing. Does cryptocurrency have any prospects?
Nowadays, only the lazy did not hear about cryptocurrency. And if earlier the digital currency seemed to people something mysterious and deceiving, now now there is no such fear of it. On the contrary, electronic coins seem to be one of the sources of income and more and more network users want to learn how to start making money on cryptocurrency without leaving home. Blockchain technology definitely has prospects, since it allows you to solve many problems associated with cashless payments and accepting payments, including international ones. A crypto is much better suited for storing savings and paying for services than traditional payments in fiat currencies, where payment for translation and conversion is charged (and this is far from always at a favorable rate).
Based on the blockchain, projects related to tourism, air travel, online games and other popular industries are launched. The number of terminals and outlets that perceive Bitcoin and popular altcoins as a means of payment is growing every year. Even a smartphone with a unique operating system and the ability to quickly pay for services with a crypto was released. Of course, all of the above will develop more than one year, especially in the realities of the post-Soviet countries, where everything arrives late, but in the future, undoubtedly, there will be a place for cryptocurrencies and related services.