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The cryptocurrency circuit is one of the most popular trends in investing today. It's one that's known for heralding the introduction of the Initial Coin Offering, and for having one of the first currencies to top a value of $20,000 USD per unit.
Volatile and cool, it's one of the best potential investments you can make—at least, if you listen to some people. It's true; there is some serious gold out there. However, there are certain things you should know about cryptos before you begin investing.
Not knowing these things can cost you a lot of money, and can even make you go broke. Here's what everyone should know before they start investing in Bitcoin or buying Bitcoin mining hardware...
First, let's talk about the history of Bitcoin.
One of the things you should know about crypto before investing in it is the history of Bitcoin. Bitcoin was the first cryptocurrency to hit the market, and it was an experimental currency made in 2009 by a man known only as Satoshi Nakamoto.
Satoshi wanted to create a decentralized currency that would make transactions secure—and he did that using blockchain. Unlike regular fiat money, cryptocurrency isn't backed by gold or even made with tangible assets. It's created through a series of mathematical formulas and computer algorithms.
This made it the first digital currency of its time. Eventually, it became known as the new criminal currency, and then quickly evolved into an investment vehicle. Nowadays, other coins have been created that are similar to Bitcoin.
You can read more about Bitcoin's history in Nathaniel Popper's book, Digital Gold. This explains how Bitcoin got big, how it was developed, and the cultural shift that made it such a powerful moment in tech history.
You should also be aware that spending cryptocurrencies isn't going to be easy.
Unlike fiat money, you can't really spend cryptocurrencies very easily. There are some name brand name businesses that accept Bitcoin and other cryptos, but really, it's not really done at all. Most places don't accept cryptocurrencies at all due to the volatility they experience.
This is one of the more important things to know about cryptos before you begin investing. After all, if you're looking for liquidity, you might be disappointed here.
If you're looking to invest by buying coins, or if you want to mine stuff, you're going to need a crypto wallet.
Normal wallets cannot store cryptocurrencies—and that's something you should know about cryptos before you begin to invest in them. To store cryptocurrencies, you're going to need a cryptocurrency wallet that keeps your data secure like Xapo or Coinbase.
Crypto wallets are apps or specialized digital wallets that allow you to store each coin you buy in them. It's important to choose a popular and secure Bitcoin wallet if you're going to invest.
Most, if not all, cryptocurrency wallets allow you to trade currencies on linked exchanges and load up fiat money via a debit card. This makes it easy to invest and trade.
You don't have to be a millionaire to invest.
Without a doubt, one of the most uplifting things you should know about cryptos before you begin to invest in them is the "pay to play" minimum. Truthfully, you can actually buy slices of cryptocurrency on exchanges and wallets.
You don't need to have $11,000 to invest in Bitcoin. You can buy slices of it as small as 0.00000001 BTC. This means that you can easily do it for as little as $5 or less.
Fees can eat up your profits faster than you think.
This is one of the few things you should know about cryptos before you begin investing. Exchanges typically will carry fees whenever you want to trade cryptocurrencies on them. At a glance, this doesn't seem like a bad thing—until it is.
Because they are typically based on a percentage, the fees can vary greatly and often will eat up a significant amount of profit if you aren't careful. Traders are strongly encouraged to read the small print and do the math before they trade.
Converting your cryptocurrency isn't an instant deal.
Your cryptocurrency trades aren't going to be instant, no matter which currency you choose to invest in. Almost all cryptos will take time to process—particularly if they are "mineable" currencies that require proof of work.
It may take minutes, hours, or even days to convert cryptocurrencies. If you were expecting something else, be aware that you might need to rethink how trades work.
It's worth pointing out that there are other coins aside from Bitcoin that you might want to invest in.
Bitcoin may be the first cryptocurrency, but it's not the only one—not by a long shot! There are plenty of Bitcoin alternatives you can mine, invest in, and trade. They also have a lot more value than you'd expect them to have, including some that are poised to overtake Bitcoin within the year.
Some of the bigger names among altcoins, as they're known, include Litecoin, Ethereum, and Bitcoin Cash. However, there are literally hundreds to choose from. It's worth it to know how the Bitcoin vs Altcoins returns compare.
You should also be aware of all the cryptocurrency security issues that are about.
Cryptocurrency investing has a lot of risks, and one of the most important things you should know about cryptos before you begin investing is the risk of cybercrime. There have been a number of cases in which hackers have stolen millions of dollars' in Bitcoins from wallets.
Before you start investing, you should know how to spot a Bitcoin wallet scam, how to tell if an ICO is actually just a cash grab, and how to protect your investments.
Finally, you should be aware that cryptos don't have the same kind of backing as stocks, bonds, or fiat money.
One of the things people should know about cryptos before you begin to invest is the backing issue. Stocks are backed by businesses. Bonds can be backed by businesses, banks, or governments. Fiat money has a government guarantee.
Cryptos? Well, they're not backed by anything. Invest at your own risk.