How to Buy Cryptocurrency in 2020
Among all cryptocurrencies, Bitcoin is probably the most famous one. Although the idea of cryptocurrencies goes way back to 1983, Bitcoin was the one that made them popular. Invented in 2008 by a man named Satoshi Nakamoto, by this day nobody knows who exactly was the real person behind this name.
As of 2020, Bitcoin and Etherium are the ones that are mostly referred to when speaking about well-known cryptocurrencies. All other cryptocurrencies gain momentum from time to time, but they are still collectively called altcoins – an alternative to the Bitcoin.
The price of the Bitcoin is very speculative and fluctuates a lot. This cryptocurrency probably wouldn’t even be in use today if it wasn’t for the Silk Road. Silk Road was an online black market selling platform. In 2011, when Silk Road began accepting Bitcoin as payment, its value was $0.30 per one Bitcoin. The highest ever price of the Bitcoin was in 2017 when it was selling for $19,783.
HOW TO BUY CRYPTOCURRENCY
Today, it is easier than ever to buy not only Bitcoins but also other cryptocurrencies as well. Numerous websites and apps offer their services in buying, selling, and holding your cryptocurrency. Those platforms are called cryptocurrency exchanges. The most popular exchanges are Binance, Coinbase, Kraken, and so on.
When using a cryptocurrency exchange, usually the first step before buying the actual currency is to verify your identity. Different exchanges use different verification methods but most of the time, they will require a photo of your state-issued ID.
There are two types of cryptocurrency exchanges – the ones that exchange your fiat money for cryptocurrency and the ones that only exchange crypto for crypto.
An important thing to understand is that when you buy cryptocurrency from an exchange, it will remain on that platform. If you would like to move it somewhere else, you will have to create a wallet. Think about it this way: the crypto exchange is like a bank, so when you buy currency and you leave it there, it is like leaving it in your bank account. When you move your cryptocurrency off the exchange and put it in your personal digital wallet, it is like taking the money from the bank and holding it in your own wallet. Exchanges have been hacked before, so it is wise to move your cryptocurrency to your personal wallet.
Cryptocurrency exchanges charge fees for currency transfers, just like any bank would do.
After verifying your identity, it is usually very simple to buy the cryptocurrency. You will have to either link your bank account to the crypto exchange account, and some exchanges even let you buy cryptocurrency with Paypal money.
HOW DO WALLETS WORKS
Every wallet has a public address. Once you buy the cryptocurrency from the crypto exchange, you can send it to your wallet using that public address. Without going too much into the technical details, you can think about the wallet as your email. You will have a private key, or in other words your password, that will let you control the cryptocurrency in your wallet.
There is also another type of wallet called the hardware wallet. It is considered more secure than the software wallets. They are the safest way to store your private key offline. Hardware wallets can connect to the internet to allow a transaction.
HOW TO MINE BITCOINS
It is getting more and more difficult to mine Bitcoins without investing a lot into hardware. Eight or seven years ago it was still possible to mine Bitcoins on your home computer. The powerful computer you had, the better chanced you had to mine Bitcoins. Today, there are special devices called ASIC miners (application-specific integrated circuit) that are manufactured only with one goal – to mine Bitcoins.
The way the system is developed, the more miners are mining, the harder it is to solve the problem that will award you a Bitcoin. The fewer miners are out there – the easier it is to mine.
Even though mining Bitcoins is not viable anymore on a PC, there are alternative cryptocurrencies that are easier to mine.
Another solution for mining Bitcoins is joining a Mining Pool. Pools are communities people who join forces to mine together. Awarded Bitcoins are divided according to their processing power everyone has. Although mining pools can be an option if you don’t have enough processing power, you should not forget that there is a fee to join a Mining Pool.
Another thing to consider in 2020 is the price of the Bitcoin compared to how hard it is to mine one. The number of Bitcoins awarded per block is halved every 210 000 blocks mined. In 2009 it used to be 50, but the current number is 12,5. Another halving of the Bitcoin blocks will happen in May 2020.