Article was originally published at SurveySay.
What is a cryptocurrency?
A cryptocurrency is a digitally-encrypted and decentralized virtual currency that is secured by a public ledger called a blockchain. The cryptocurrency industry is not controlled by any government or form of a centralized institution like a bank.
Cryptocurrencies utilize cryptography to secure and complete or verify transactions on a given network, adding every completed record as a “block” to the database chain. The cryptographic technology behind cryptocurrencies helps to control the way new coins are generated and at what rate.
Why is everyone talking about cryptocurrency?
The whole world has been bitten by the cryptocurrency bug. There’s attention from the mainstream media, bankers and fund managers to social forums, homes and from governments around the world.
Word on the street is that cryptocurrencies (especially Bitcoin) are creating millionaires all around us. People are making money from crypto-investments in a manner that no one ever dreamt of a few years ago. For instance, if you had invested $100 in Bitcoin in 2010 when one BTC was valued at just $0.39 and sold off your coins in November 2017, when the value hit over $15,000, then you would have made several millions of dollars. So, it is easy to see why everyone is talking about cryptocurrency.
But that’s not all. Cryptocurrencies are inspiring projects that leverage the blockchain technology and when implemented, could change international financial relations, medical research and the internet itself.
The fact that cryptocurrency has managed to make transactions trustless by removing the role of the third parties, makes Bitcoin and the other 1360+ altcoins an attractive proposition for future world transactions. And what’s more, some of these crypto coins offer a genuine investment opportunity, albeit with additional risk (though every business venture is a risk in itself).
Volatility and FUDs aside, Bitcoin has somehow become too expensive for a beginner. But do not let FOMO (fear of missing out) get to you; there are still numerous opportunities to make money from cryptocurrencies. And that’s precisely why we need to know the different types of cryptocurrency.
What are the various types of cryptocurrency?
The cryptocurrency world is splashed with over 1360 different types of cryptocurrencies. While it is easier to just list the different types of cryptocurrencies out there, it is important to also understand what sets them apart.
- Crypto tokens
- Consensus mechanism or blockchain platform
i) Token types
- Currency tokens– these tokens primarily function as a payment system; allowing for storage and transfer of value. Here we have cryptocurrencies like Bitcoin, Litecoin, Ethereum, and Monero. Value depends on supply and demand.
- Utility tokens- these are crypto tokens that offer a platform for powering other applications like smart contracts and Dapps. Examples are Ethereum and Ripple. They have potential to be very valuable.
- Equity tokens- this type of cryptocurrency allows you to take some sort of ownership or control in an organization. It operates more like a stock. (E.g. Atlant and Prosperiprop) They are not common.
- Asset tokens- an asset token represents an actual product or item. It allows you access to that item. A good example is Ethereum’s Link token.
ii) Consensus mechanism or blockchain platform
Cryptocurrencies can also be grouped according to the consensus mechanism or protocol.
- Proof-of Work– Bitcoin, Bitcoin Cash, Litecoin, Ethereum, Monero
- Proof-of-Stake– Peercoin, Ethereum, NEM
- Internet of Things– IOTA
- Privacy-centric– Monero, Zcash, Dash, Bytrecoin
- Smart contracts– Ethereum, EOS, Stratis, Lisk
- Banking system– Ripple, Stellar
- Blockchain-as-a-service– NXT, Ardor, Stratis
These represent the few cryptocurrencies that are actually popular with investors. If you want to make some money from cryptocurrency, then the top crypto coins above would be a good place to start.
How to acquire cryptocurrency
There are several ways in which you can acquire cryptocurrency. The only unfortunate thing is that there is no such thing as free bitcoins. Even when they seem to be so, there’s always something you give in return. Examine the methods below and see which one is likely to reward you with a precious crypto.
Mining involves securing the cryptocurrency network by completing difficult algorithmic problems. Every successful transaction is called a block and in the case of bitcoin, will pay you 12.5 BTC. There are several cryptocurrencies whose mining difficulty is still low and therefore good for beginners. Some like Bitcoin require powerful ASICS to mine and are therefore too expensive. For beginners, go for GPU and even CPU mining. You can try out Zcash or Monero.
- Buy and trade in cryptocurrency
Simple and straightforward! If you have a fiat currency, the best thing is to register at an exchange and simply purchase your cryptocurrency. You can, for instance, buy Bitcoin at Coinbase and then exchange it with ETH if you wish to have Ethereum. Remember, buy low and hold to sell high. Once you have your Bitcoin or Ethereum, you can then engage in cryptocurrency trading. There are several options to explore including day trading, CfD, and binary trading. While these options can give you high returns, it is paramount that you have some expertise in the market. Find out as much as you can before you commit. Beware that market volatility is the norm in cryptocurrency trading.
- Offer online cryptocurrency services and get paid in Bitcoin
Cryptocurrency and its blockchain industry are still young and, therefore, there are so many services you can offer and get paid in crypto. If you are an expert, join Cryptocurrency forums and offer your expertise. Soon you will be earning from web design, mining expertise, graphic design, and programmer fields.
Micro-earnings may seem the easiest method to earn cryptocurrency, but the downside is the pay is always almost negligible. You can complete small tasks online and get paid in Satoshis. Alternatively, you can register for a PTC site and get paid by clicking on ads or viewing sites. PTC sites like Ads4BTC are popular for this. Another site is Coinworker which gives you very small tasks to complete and pays you in BTC. There is also Steem that will give you a way to earn some cryptocurrency. Related to paid-to-click sites is Bitcoin Faucet. It is a way of earning Bitcoin by visiting specific sites.
Can you make money from cryptocurrencies?
Yes, you can. Remember what we said about why people are crazy about cryptocurrency? It’s because there is a large earning potential from investing in cryptocurrency. You can trade altcoins just as you’d do with company stocks. What’s important here is to educate yourself and learn market dynamics before you plunge into trading. Maybe you are still wondering whether investing in cryptocurrency is a wise move or it is only meant to be used as a currency. The cryptocurrency industry has created millionaires around the world and therefore investing in the virtual coins is definitely not a bad move.
Cryptocurrency is here with us and it can only grow to become better. Within 2-3 short years, currencies like Bitcoin or any of the altcoins could become main stream. That means acceptance and usage will be the norm. Learning about it now prepares you to become a savvy investor.