Bitcoin was the first of all cryptocurrencies and has become a growing hype since 2009. While initially only IT professionals were at work, the more than 4,000 different crypto currencies are now accessible to the general population. It does not need highly complicated mechanisms and invoices to be able to participate in crypto currencies.
Nowadays, even normal savers invest their money in cryptocurrencies. Thus, investors and investors can participate in the development of the individual crypto currencies and benefit from it. How to immerse yourself in the world of cryptocurrencies and how to buy them can be found in this article.The most important in a nutshell
- Cryptocurrencies are digital and decentralized payment systems used for cashless and anonymous transactions.
- Cryptocurrencies can be purchased by depositing via PayPal or credit card. The value of a cryptocurrency depends on supply and demand. That is why the prices fluctuate very strongly.
- Through so-called blockchains, wallets and ledgers, transactions of crypto currencies are secured, anonymous and yet transparent. This makes the crypto currencies the hit of the time.
Background: What You Should Know About Buying Cryptocurrencies
Before you make the decision for a cryptocurrency, you should know a few points. Therefore, in the following sections, we will explain all the important information in this regard to support you in your decision. What are cryptocurrencies?
Cryptocurrency, also known as cryptocurrency, are digital means of payment based on so-called cryptographic tools such as blockchains and digital signatures. A cryptocurrency should serve as a payment system and be independently distributed securely.
Unlike traditional money, a cryptocurrency is only available digitally. The technical implementation of the cryptocurrency is based on the so-called blockchain. We will cover these in more detail below. The real purpose of a cryptocurrency is cashless payment transactions(1).
Cryptocurrencies have become a worldwide hype in the last 10 years. But not only professionals and investors rely on the digital currency. (Image source: WorldSpectrum / Pixabay)
In this way, no banks, authorities or other central bodies are required for transactions. They are traded purely over the Internet in different ways. Trade, i.e. supply and demand, also create value. For this reason, however, cryptocurrencies are very fluctuating(2).
The first and still best-known cryptocurrency is Bitcoin, which was publicly traded for the first time in 2009. By 2018, the number of different cryptocurrencies had already risen to over 4500. In the next paragraph, we will clarify the most important crypto currencies for you(4). Which cryptocurrencies are there?
In addition to the best-known and most important cryptocurrency Bitcoin, there are also countless other currencies. These are referred to as altcoins, as an alternative to Bitcoins so to speak. These altcoins developed in different categories.CategoryDescriptionMining based altcoinsThese altcoins are created by solving difficult computing tasks that are needed to release the blockchain. They are more similar to Bitcoin than other altcoins. Ethereum is currently the most well-known mining-based altcoin.StablecoinsStablecoins are like Bitcoins, except that they try to improve the fluctuation of value. For this, these altcoins bind to currencies or gold in order to keep the value as stable as possible. Facebook’s Libra is the most well-known stablecoin.Security TokensThese altcoins are often associated with companies and are offered in an “inicial coin offering” (ICO). Security tokens are similar to traditional stocks, and often promise some kind of dividend or stake in a company.Utility tokensThey represent a claim to services or a service, and are sometimes sold as part of an ICO. Filecoin is an excellent example of a utility token offered in an ICO. Filecoins are designed to be exchanged for decentralized data storage space(4).
Most of the cryptocurrencies we know and of which there is the most talk internationally are the mining-based coins. The best known are:
Although there are a thousand other cryptocurrencies, these are currently the best known(3). Ripple and Ethereum are among the most common alternatives to Bitcoin and have a particularly high market capitalization(4). How can cryptocurrencies be bought and traded?
Cryptocurrencies can be bought and traded in different ways. With CFD brokers, but also on the stock exchange, you can invest in crypto currencies. The purchase of actual cryptocurrencies also takes place online and is secured by blockchains and on wallets.
On so-called cryptocurrency marketplaces, various crypto currencies can be bought and traded online. Crypto fans and investors trade their respective cryptocurrencies there, so that a price is formed by supply and demand (9, 4, 5).
In this paragraph, you will learn how cryptocurrencies can now be bought:
- Buy cryptocurrency as a CFD: Investors and investors who want to participate in the performance of the cryptocurrency can buy and trade various crypto currencies via a CFD broker. A CFD is comparable to a security, where the investor or investor participates in the development of the cryptocurrency and profits. If the cryptocurrency increases, the value of the purchased CFD also increases (1, 4, 11).
- Cryptocurrency as a certificate: However, cryptocurrencies can not only be bought as CFDs, but also as certificates on exchanges. Thus, the investor or investor can participate in the development of the underlying asset of the cryptocurrency and profit. As a prerequisite, investors need a securities account, which can be created quite easily. Thus, it is easy to invest in the price development of one or more crypto currencies (1, 5).
- Buying a real cryptocurrency: When actually buying cryptocurrencies, regular money is also known as FIAT money, deposited and converted into cryptocurrency online. A special feature when buying cryptocurrencies is blockchain technology. This works like an electronic cash book, in which all purchases and sales are noted. Every crypto user owns this blockchain on his computer.
In order to buy individual cryptocurrencies digitally or as a file, the possession of a wallet is a basic requirement. This is comparable to a wallet or account. With a wallet, cryptocurrencies can be sent and received (4, 9, 11).
On digital marketplaces such as bitcoin.de, offers can be made to sell and buy cryptocurrencies in various FIAT currencies. As soon as an offer is accepted, a deal is made.How does a transaction work with cryptocurrencies?
Simply put, cryptocurrencies can actually be used to pay. So they can be transferred from one person to another. Neither banks nor state institutions are involved in these payment processes. Owners of cryptocurrencies manage their money on so-called wallets.
