What is Cryptocurrency: All You Need to Know About Digital Assets

HitBTC Team -

According to some surveys, 89% of Americans have heard of Bitcoin. Yet, many still do not fully understand the mechanics behind digital assets and tend to think of them as some magical internet money.

Moreover, there are still all kinds of myths surrounding cryptocurrency that hinder adoption. This piece will explain what cryptocurrency is all about and address common misconceptions.

Crypto Basics

Cryptocurrency is digital money that has no physical form like cash. Fiat money performs three main functions: a medium of exchange, a unit of account, and a store of value. All three are applicable to crypto but also serve as a counterpoint to cryptosceptics. With a growing number of merchants accepting crypto as a form of payment every year, cryptocurrencies start to serve as a medium of exchange, but skeptics point out to a low volume of such transactions. The other two functions of fiat money are also applicable to crypto since more people allocate a portion of their wealth in crypto and certain online merchants may price their services in cryptocurrencies. The skeptics argue that due to high volatility of crypto, this trend will not become widespread.

The most common way to get cryptocurrency is to buy it on an exchange. Centralized exchanges (CEXs) allow users to purchase hundreds of crypto assets with credit and debit cards, as well as via other payment methods. Decentralized exchanges (DEXs) do not interact with fiat money. DEXs provide a faster and cheaper way to trade crypto than CEXs, although they are a bit more complicated for newbies. In addition to exchanges, people use P2P services, where fiat money is exchanged to digital coins.

Now, where does one store their crypto? A cryptocurrency wallet is the first thing you need before you buy or receive digital assets. They allow you to keep your assets safe and come in different forms and shapes as mobile apps, web platforms, browser extensions, USB devices, or even a piece of paper.




Types of Cryptocurrencies

Cryptocurrencies can exist in the form of coins and tokens. Coin is a base currency of a certain blockchain. BTC and ETH, the most famous of all cryptocurrencies, are coins.

Each coin has a unique blockchain technology and a team behind it. While some teams aim to serve a good cause, like global financial inclusivity or fast and cheap global transactions, others are more interested in earning profits by selling their coins to crypto investors..

Tokens are created by platforms and applications on existing blockchains to serve specific projects. Tokens are typically required to access services provided by such projects. Some types of tokens, like NFTs, represent digital art.

There are also stablecoins – digital assets pegged to fiat currencies or other assets. They come in handy when a person does not want to deal with price spikes, but wants to save the value in crypto. USDT is currently one of the leading stablecoins on the market that runs on several blockchains and holds third place in the crypto market cap chart.

How to Make Money With Crypto

Although cryptocurrency has emerged as a powerful technology, most people tend to use it as a money-making tool.

Here are the three most popular activities that let you earn on crypto:

  • Investing
  • Trading
  • Staking and lending

Investing in crypto

Investing in crypto involves buying and holding, preferably long-term, various tokens and coins in hopes that their price will increase. It may sound overwhelming, but over ten years, the price of bitcoin has increased by over 540,000%.

Nevertheless, investing in crypto is still considered high-risk as countless tokens and coins fell into oblivion. Diversifying your portfolio and investing only the amounts you can afford to lose are the two golden rules that may help mitigate the risks.

Crypto trading

Crypto trading is another well-known path to gaining profit through digital assets. To give you a heads up: an average crypto trader in the US makes $113,230 a year, yet it surely requires experience, discipline, and dedication. Newcomers might not make the high numbers straight away, but practice makes everything perfect. Besides, exchanges like HitBTC offer free Demo modes to educate and train new traders.

Demo HitBTC allows users to use test funds and try different trading strategies without the risk of making real investments. Users can trade manually or via the API – the test mode is as responsive as the regular exchange platform. Once you feel confident to try the real deal, you can benefit from HitBTC's 800+ trading pairs and competitive fees.

Staking

Recently, staking has gained more popularity as it proves to be more profitable than plain holding. Anyone can earn extra income and generate yields on top of long-term investments without active trade. The idea is to lock up your funds for a certain period of time and get a reward. Market interest rates may range from 1% to over 100% depending on the asset but generally come down to 10% annually.

Many crypto exchanges currently support staking, and almost all require locking up funds for a while, except for a few exchanges that feature liquid staking. In liquid staking, you can access your funds at any time, and the rewards are accrued on a minimum daily balance of the asset you are holding.

Crypto trading platform HitBTC offers the best liquid staking option on the market with 10+ coins to choose from and APY up to 40%. Available coins include CVX, STETH, EMC, MINA, SMART, HYDRA, AXS, and others.

The Bottom Line

Revolutionary technology and an affordable tool to make money, cryptocurrency is a symbol of modern rapid tech development. Financial freedom has been a long time coming, and crypto is on a mission to spread it globally.

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