Cryptocurrency Mastery A-Z: Complete Guide To AltCoins
September 19, 2018
Introduction To Cryptocurrencies
Have you heard about cryptocurrencies, but not exactly sure on what they are?
Have you seen everyone else get involved, but you’re confused on how to join in?
Maybe you’re interested in the economic and technological impact of cryptocurrencies?
Well, worry no more! In this cryptocurrency mastery guide, I’m going to help you alleviate all of those questions you have around cryptocurrencies, and then more! Discussing the ecosystem more concisely than any other guide, so by the end you’ll be an educated cryptocurrency user!
Just so you’re aware this guide was written by me - Ravinder, I’ve created some of the bestselling cryptocurrency & blockchain courses. Teaching 100,000+ learners, in over 190 countries. Which is pretty incredible, it just proves the scale of cryptocurrency & blockchain adoption globally.
This guide has a pure and simple goal! I’m going to help you understand cryptocurrencies with no fluff so you can become an educated user, following which you can use this new gained knowledge to potentially profit from it. That’s the pure and simple goal, but that entails touching upon every element of this ecosystem which I’m sure you’re going to find fascinating.
Before we dive into the depths of this guide, let me give you a brief introduction to a term that you more than likely know as just ‘cryptocurrency’ right now.
So cryptocurrencies are often referred to as a form of digital currency. However more recently, the likes of bitcoin being cited as digital gold. It’s created and held digitally, and on top of that not one single person, organisation, or group controls the entire network of cryptocurrencies collectively.
If the term ‘cryptocurrency’ isn’t one you’ve come across before, let me just say there are thousands of cryptocurrencies out there today, the majority of them have little or no value along with purpose. At this moment in time, bitcoin is the most valuable cryptocurrency out there by far. Bitcoin started the cryptocurrency movement we see today, with the plethora of cryptocurrencies.
Let me break that term ‘cryptocurrency’ down for you while you’re here, and focus on the term ‘currency’. Many cryptocurrencies such as bitcoin can be used as a currency, to go and buy things at digital and physical retailers, just as you would do with the fiat currency in your pocket. Bitcoin is the same as other currencies in the sense that it can be exchanged for goods.
But one of the key differentiating characteristics of cryptocurrencies is that they are decentralised, they don’t have a centralised structure. Not one single person, organisation, or group controls the entire network of cryptocurrencies.
As you should be aware, banks control the flow of money. But not with cryptocurrencies, these are often what we call community based currencies. The fact of the matter is that banks produce more money to cover the national debt, but in-turn that devalues their currency. So printing more money, and putting it into circulation hurts the purchasing power of the currency in question.
Cryptocurrencies aren’t like that though, they aren’t created behind closed doors by bankers. They’re open source so anybody can get involved with the process, and theoretically anyone can start creating a chosen cryptocurrency, through a process known as mining. As long as they have the resources at hand, which would be the mining hardware.
As you’ll start to grasp by now, cryptocurrencies are very unique in their nature. So let me share three characteristics of Cryptocurrencies with you, which make them so irresistible to many.
The Cryptocurrency network isn’t controlled by one single person, organisation, or group. So no one single party can cause a meltdown of the network.
Ease Of Use
Think about the plethora of information banks require from you just to setup an account, setting up a cryptocurrency wallet is far simpler.
Cryptocurrencies are as anonymous as you want them to be. Every single transaction is shown in the blockchain of the cryptocurrency in question, but those transactions don’t link to your name, or any other sort of identifiable information.
So that’s everything for the initial section in this cryptocurrency mastery guide. We’ve laid the fundamental groundwork, so lets now commence with diving further into cryptocurrencies, helping to grasp it and the wider ecosystem fully, ensuring you become a proficient user!
How Cryptocurrencies Came To Be
There’s no denying that cryptocurrencies have the potential to impact the status-quo. However, this is all still very new, if not experimental. What always fascinates me, is that we never could’ve imagined such a thriving cryptocurrency ecosystem at bitcoins inception, and bitcoins inception is what it always comes back to when we discuss how cryptocurrencies came to be.
So to truly understand how cryptocurrencies came to be, let me dive into bitcoins starting point with you, its origins. By understanding this, it’ll help you see how this ecosystem came to be.
Let me take you back to 2008 when the bitcoin whitepaper was released, under the name of Satoshi Nakamoto. This is allegedly the name of the founder of bitcoin, but it has never been confirmed. Following which the first version of the bitcoin software client was released in 2009.
Then in 2010 as bitcoin started to slowly rise in popularity, the mysterious founder started to fade away from the bitcoin community. Satoshi worked with an open source team, however he was careful to never release too much information about himself to them. Then the last anybody heard of him was in 2011, when it was said he mentioned he’d moved onto other things.
Many assume that Satoshi Nakamoto is Japanese, but it’s best not to assume. The name, Satoshi Nakamoto in itself is a cryptic clue.
Satoshi generally means wise.
Naka means relationship.
Moto means origin.
It’s a very clever name! Many assume it’s a single person, but has it ever crossed your mind it could be a group of people operating under one name. We just don’t know!
Over the years there have been a flurry of people who many have thought is Satoshi Nakamoto. But when its gone further into looking into them, it turned out they actually weren’t Satoshi.
All the people thought to have been Satoshi Nakamoto had a common background in cryptography, hence they were accused. They all had deep interest and interaction in the world of cryptography. One was a cryptography graduate, others were entrepreneurs in the truest sense.
At its core bitcoin is a successful product of the cypherpunks movement from the late 80’s, and early 90’s. That’s around about the time the cypherpunks movement really started to push forward, with working on methods to achieve complete privacy through the use of cryptography.
Bitcoin has really strengthened the entire cypherpunk movement, by enabling organisations such as WikiLeaks to continue operating via bitcoin donations, even after the traditional financial system had cut them off.
Which is in fact a true statement as the US government pushed Visa, MasterCard, Payal, AmEx, and other payment processors to erect an illegal banking blockade against WikiLeaks in 2010. It resulted in WikiLeaks accepting bitcoin. Bitcoin helps bank the unbanked!
Just to round this section off, many will ask isn’t a bad thing that the founder of bitcoin is anonymous? I like to look at that on the flip side, and say it’s a great thing. Reason being the voice of that person, or persons can’t heavily change the value of bitcoin.
For example when the CEO of a FTSE 100 company speaks out in public, that has the power to increase or decrease its share price. Bitcoin doesn’t have that problem with a public founder.
Bitcoin is controlled by all of those connected to the network, any decision that will effect bitcoin has to be decided by the network of people connected to it. A consensus must be made between all parties, one party can’t decide on a decision for the whole network.
That’s everything for this section of ‘How Cryptocurrencies Came To Be’, in a condensed format.
To date the original founder, or founders of bitcoin have not been found. We may never find out who it really is, but that’s the allure of bitcoin. Just so you’re assured bitcoin is backed by an amazing team of developers, miners, users, and businesses helping to push it forward.
How Are Cryptocurrencies Created?
Many of those entering the ecosystem wish to understand how cryptocurrencies are created, following which they want to know whether it’s possible for them to get started with mining.
In this section I’m going to talk about how cryptocurrencies are created, ensuring you understand how the process works. I’m not going to give you a deep dive into cryptocurrency mining, I just want you to be aware of how the actual creation process works.
In order to give you a concrete example of how a cryptocurrency is created, I’m going to focus down on one, that one being bitcoin. Once you understand how this works, you’ll have a solid understanding of how the others are created, of course with their slight differences.
So bitcoin is compared to gold for many reasons, the main comparison being made between them is that they’re both a store of value. Albeit, bitcoin being a digital store of value.
However the similarities go further than that, it starts back in the creation process. Both assets are created through a process known as mining, however that mining process couldn’t be any more different. Gold mining is more physical, and bitcoin mining is more digital in its approach.
This mining process is a decentralised one which will be explained in more detail later in this guide, it’s a very competitive task for which dedicated hardware is needed. The more miners that join the network, the more difficult it becomes for each to mine a block hence profit from their operations. The bitcoin protocol was constructed in such a way where new bitcoins are created at a fixed rate, hence why the mining process is so competitive.
Lets now dive a little deeper. So approximately every ten minutes these mining machines collate the pending transactions in the network, and work on solving the mathematical puzzle presented.
The first miner to find the solution to the mathematical puzzle presented then broadcasts it out to the network, from where other miners verify whether the mathematical solution has been correctly solved. If approved, that block is then added onto the blockchain, and the miner is granted the freshly minted bitcoins as a reward which currently stands at 12.5 Bitcoins, and halves approximately every four years. On top of that, they are granted all the transaction fees.
By the way, the mathematical puzzle mentioned is by no means easy to solve for the mining hardware, it takes billions if not trillions of guesses for the hardware to find a match. Which naturally makes it resource intensive.
But as you’ll be able to tell now the creation of new Bitcoins, and in general cryptocurrencies is incentivised. In order for fresh bitcoins to be minted and distributed into the ecosystem via miners, they must process transactions in the network in order to do so.
Max Supply Of Cryptocurrencies
I now want to touch upon the max supply of cryptocurrencies. It’s important to remember not all cryptocurrencies are similar in their supply, each coin has its own cap if it has one at all!
- Bitcoin: 21 Million Cap
- Litecoin: 84 Million Cap
- NEO: 100 Million Cap
Once the max supply is reached, no more of that specific cryptocurrency can be created.
The protocols are constructed in such a way where new coins are created at a fixed rate, hence all coins can’t be created in a short space of time. The protocol in question can’t be altered, this is especially true in the case of Bitcoin.
Touching upon the case of bitcoin again, it’s estimated that all bitcoins would’ve been created by the year 2140. Long after our time!
Remember that most cryptocurrencies follow a decentralised structure. No central authority stipulates control over the network, rather those connected to the network via the peer-to-peer network have control.
Compare a decentralised system such as bitcoin to a centralised one, the federal reserve system in the United States being a perfect example. Overtime the purchasing power of your dollar will lose value, quantitative easing has been one the key monetary policies behind this. It’s a process whereby a central bank for example the federal reserve system, purchases government securities or other securities from the market in order to lower interest rates and increase the money supply.
As you’ll be able tell, there are two very different approaches between a decentralised monetary system i.e. cryptocurrencies, and a centralised monetary system i.e. the federal reserve system
But lets hone in on the max supply of 21 million bitcoins. Naturally, it’s not as black and white as we would like, heck we don’t even know who the founder of bitcoin is. One distinct question around the max supply that comes up time and time again is, why this limit was imposed?
At its core, it was introduced to create an element of scarcity which the creator or creators of bitcoin would’ve hoped would be a strong reason for people to buy. Hence that scarcity would increase the value of bitcoin as the ecosystem grew. Many argue the fact you simply don’t have that scarcity their with cryptocurrencies where their supplies are one billion and over.
Innovation Of The Blockchain
What is the blockchain? That’s actually a good question!
In this section I’ll be explaining more about what the blockchain is, as well as why it’s so revolutionary ensuring you understand it clearly.
Once you understand how the bitcoin blockchain works, you’ll be able to understand how other blockchains work. However other blockchains do have there own differences as well, but the fundamentals are similar.
The blockchain is the public ledger of all the bitcoin transactions that have ever taken place, right back to the very first transaction. Hence the blockchain is an ever evolving piece of technology, it’s constantly growing as new blocks are added. Look at it as a distributed ledger.
It’s important to know that the transactions which are being added onto the blockchain are being processed by computers connected to the network, these computers are often referred to as nodes. These nodes are located around the globe, hence being a decentralised technology. On top of that it’s important to note that as each block is added onto the chain it’s done so chronologically, and anything that happens on the network happens as a whole.
Remember that the blockchain is designed with longevity and durability in mind. It’s not controlled by any single entity, all the nodes that are apart of the network form part of that community, hence it has no single point of failure. One node can’t manage all others!
The blockchain in general has been referred to being apart of web 3.0, so the evolution of the web to the third stage in its cycle. The areas web 3.0 refers to specifically are: connective intelligence, connecting data, concepts, applications and ultimately it’s down to people.
You might be thinking, well you didn’t mention the blockchain?
But it’s the blockchain which helps achieve all this, hence being apart of the web 3.0 era.
Let me highlight three distinguishing factors of the blockchain with you:
No Central Point Of Failure
With blockchain technology there is no central point of failure, due to fact it is a decentralised piece of technology which is connected to nodes around the world. No central server is present.
No Third Party Involvement
Blockchain technology provides a safe and secure way to interact with the person or company on the other end, without having to trust a middle-man third party.
Speed Of Transactions
The blockchain allows for transactions to get completed much quicker. Take bitcoin as an example, you can send one bitcoin to someone anywhere in the world within 10 minutes, as long as the network doesn’t have a backlog of unconfirmed transactions. Even then, it would still be quicker than a traditional bank transfer which can take days.
As mentioned earlier once you understand how the bitcoin blockchain works, it’ll help you grasp how other blockchains operate far quicker.
Take Ethereum for example, instead of aiming to revolutionise the financial system, it is aiming to revolutionise the applications system allowing individuals to create decentralised applications.
So that’s everything for this section, remember those three key points. As they are universal in most cases when it comes to other blockchains.
The Economic Impact Of Cryptocurrencies
Cryptocurrencies have impacted the global economy in a way which no one predicted. Let me detail three ways in which cryptocurrencies have impacted the economy. This will help you understand the wider impact!
Cryptocurrencies have opened up a whole new market, allowing people to buy and sell anonymously. You may ask, why do people want to hide what they’re transacting?
They may just want more privacy over their transactions in this ever-growing world of everything being shared online, and essentially being public knowledge to the likes of google. Which we know when it is, opens you up to advertisers hyper-targeting you endlessly!
On the other hand, we have people who use cryptocurrencies to purchase items through the dark web. Cryptocurrencies help keep their identity private, as they may be purchasing items which are illegal in their country
Regardless of all that cryptocurrencies have empowered commerce, allowing transactions to take place around the world with no middle-man involved!
Investing Is Now Accessible
You may start questioning this one, but how easy is it for the average person to hop online and start investing. It’s not that easy, especially if you’re new to investing in the traditional sense.
However cryptocurrencies can be purchased within a few clicks, making it accessible to all!
Many say they’re just buying to speculate on the value. But isn’t that what individuals are doing when they pour money into stocks? This is just a different asset class to invest in.
Of course there are downsides with having the ease of getting involved in this ecosystem. One being people will get involved with no real knowledge of what they’re buying into, hence in the process loosing a considerable amount of money.
It Has Removed Middle Men
We’re talking the likes of central banks, lawyers, and platforms here. The time-consuming, expensive, and often unnecessary people we have to go through to get stuff done.
Blockchain technology which underpins cryptocurrencies has created a way for us to do business with anybody in the world, regardless of if we know them or not.
Because we can remove the middleman, cryptocurrencies allows us to be our own bank. Naturally, we have to level-up our security measures to ensure our funds aren’t hacked. But now we have control with cryptocurrencies no central bank can artificially stimulate our economy, hence decreasing the purchasing power of our hard earned money.
To summarise the economic impact of cryptocurrencies, it has allowed us individuals to have more control of our current and future finances! This has never been possible in history before. Governments and central banks love control, but now they don’t have it as much.
In fact, never in history have we ever had a viable alternative to the complex, overpriced, and corrupt monetary systems which we experienced during the 2008 financial crash.
Just to end on this section, remember that cryptocurrencies are quiet possibly one of the biggest wealth generators of this century. It’s an amazing time!
Which Cryptocurrency Wallet To Choose
If you’re not aware of what cryptocurrency wallets are, the easiest way to look upon them is as bank accounts in the cryptocurrency ecosystem. But one which you have more control over, and isn’t riddled with endless paperwork in regards to setting one up.
If you’ve gone forth and ever searched for the term “cryptocurrency wallet”, you’ll more than likely have been inundated with options. From which you can’t distinguish which the best wallet is.
“This wallet is the best!”
“This is the safest wallet!”
“This wallet is the newest!”
Having options is great, but for those of you getting started in this ecosystem it just adds to the confusion. As if grasping the concept of cryptocurrencies wasn’t difficult enough for newbies!
What I want do in this section is clearly distinguish the two different types of wallets with you, hence going forward you’ll be able to understand which wallet is best suited for your needs.
These types of wallets are connected to the internet one way or another. In my experience with being involved in this ecosystem for many years now, hot wallets generally are:
- Easier to setup.
- More convenient to access.
- Accept a larger variety of tokens.
However due to hot wallets being connected to the internet, this makes them a more open target for hackers. There’ve been many cases where hot wallets have been compromised.
Examples of hot wallets include:
These types of wallets are not constantly connected to the internet. In my opinion, cold wallets are far more secure than hot wallets. So if you’re storing large amounts of cryptocurrency, this would be my go-to type of wallet. Remember this about cold wallets:
- They generally cost to purchase.
- As your coins are kept offline it provides greater security.
- It’s not as convenient as a web wallet.
Examples of cold wallets include:
Remember that the most secure forms of cold wallets such as those mentioned, come as physical devices. Hence making them not as convenient as web wallets, but far more secure.
Personally, I wouldn’t recommend anything other than a cold wallet for storing large amounts of cryptocurrencies. Cryptocurrencies allow you to be your own bank, so relevant security precautions need to be taken.
How To Setup A Cryptocurrency Wallet
In this section I’ll be guiding you through the process of setting up a wallet. You’ll be shown the process required for setting up a desktop wallet, which will be exodus. It’s the most user friendly wallet around. On top of that it’s a multi-asset wallet with shapeshift integrated, meaning you can store and exchange multiple cryptocurrencies within the wallet.
Let me now walk you through the steps required in setting up an exodus wallet.
1. Head Over To Exodus.io
2. Click Download
You’ll be presented with a few options, select the correction version for your system.
3. Launch The Setup Process
You’ll be taken through the process of creating a password, please ensure this is as secure as possible. Consider using a random password generator, for example lastpass.
4. Depositing Cryptocurrency
Once greeted with your new exodus wallet, you will need to deposit some cryptocurrency into the wallet before being able to claim your private key. To do this simply choose whichever cryptocurrency you wish to deposit, then click Receive. The address shown is the address you should send that cryptocurrency to, in order for it to show within your Exodus wallet.
5. Claiming Your Private Key
Once your cryptocurrency deposit has been received, you can head over to claim your private key within your exodus wallet. I can’t stress the importance of keeping your private key safe! Remember, if someone knows this they theoretically control your coins!
From there you can start customising the wallet as you deem fit. Whether it’s localising it, showing which cryptocurrencies to show, or even changing the skin. By the way under personalities, you will find my very own skin which exodus very graciously created for me.
Once you’ve completed those steps, your exodus Wallet is setup and ready to use. You can send, receive, and exchange cryptocurrencies directly from here. I’ll be explaining how to buy and sell cryptocurrencies later, so not to overwhelm you.
Where To Buy & Sell Cryptocurrencies
Buying and selling cryptocurrencies for those just getting started can feel overwhelming, so many options or depending on where you are in the world so few. In this section I’ll walk you through the main options you have when it comes to buying and selling cryptocurrencies, following which I’ll guide you through the buying and selling process using a specific service.
Exchanges are the most popular way in which people begin to acquire cryptocurrencies. However not all exchanges work on the same premise, they’re all created with differences. Whether it’s; user Experience, fee structure, security measures, and much more.
There are three different types of exchanges, from where you can buy cryptocurrencies.
These are exchanges where the site directly connects buyers and sellers, then takes a fee.
Direct Trading Exchanges
These are exchanges where the individuals deal with each other, and set their own exchange rate.
These types of exchanges are where the price is set by the broker, and anyone can buy.
Examples of three different types of exchange sites as mentioned are:
Now you’re aware of the different cryptocurrency exchanges, let me highlight the key areas you must be aware of when you consider using a specific exchange. This checklist is universal:
You want to use a trustworthy exchange, one which isn’t having technical issues and could effect your cryptocurrency holdings. Hence, research their reputation online using sites such as reddit.
Exchanges are a business, hence they charge fees for pretty much every action. Ensure you’re aware of the; deposit fees, withdrawal fees, transaction fees and so on. These aren’t universal between exchanges, they differ so be sure you’re aware of them.
Forms Of Payment
As we’ve mentioned, all exchanges are different. Hence, some may only allow you to deposit funds via bank transfer. Whereas others may allow you to deposit directly using a credit or debit card. This comes back to user experience, you’ll need to see which suits your needs before joining and going through their sign-up process.
In most cases exchanges require identity verification which many people don’t mind, but for the security conscious of you it may not be the best option. Hence you’ll want to know what you need to verify beforehand, this stops you getting imposed with specific limits on your account.
Exchanges don’t work in every single country, so be sure to select an exchange that operates within the country you live in. Of course, this is harder for some depending where they are in the world. Rest assured, there is an operating exchange where you are in the world!
Cryptocurrencies are decentralised, so the rates differ exchange by exchange. It’s not uncommon to notice prices differences of 10% between exchanges, producing the perfect arbitrage opportunity. But in general look into this, you’ll want to make sure you’re getting the best rate.
How To Buy & Sell Cryptocurrencies
In this section I want to walk you through how to use binance to purchase cryptocurrencies.
If you’re not aware of the binance Cryptocurrency exchange, let me give you a little background.
Binance has been around since 2017, and is the fastest growing cryptocurrency exchange. Three of the reasons cited for its tremendous growth rates are:
1. It’s Available In Multiple Languages.
2. A Simple User Experience.
3. They Process Orders At Lightening Speed.
Remember, binance is a cryptocurrency only exchange. No fiat currencies can be deposited!
Binance list many of the latest token, in some case gaining priority over poloniex and others.
Let me now show you how easy it is to get started!
1. Head Over To Binance
Remember to follow the correct link to binance (binance.com). I don’t want you to fall prey to the numerous phishing sites out there!
2. Register With Binance
Simply enter the information required for an account; email, password, agree to the terms, and click register! If you would like to help us out, please use our referral id: 21831759.
3. Deposit Cryptocurrency
This is a simple process! Hover over ‘funds’, and select ‘balance’. Then select ‘deposit’, on whichever cryptocurrency you wish to deposit. Then simply send it to the address shown.
That’s how easy it is to get started with Binance!
When you wish to start executing trades, this is how that works.
Lets use the ‘ethereum/bitcoin' trading pair, buying at the market rate. Then enter the amount of ether you wish to purchase, and confirm the order.
This works in reverse to buying, lets use the same ethereum/buying trading pair selling at market rate again. Enter the amount of ether you want to sell, and confirm the order.
If you wish to see all transactions, these can be found under ‘funds’ then ‘transaction history’.
A word of advice on the security aspect, I encourage you to enable two factor authentication.
Before moving onto the next section, let me explain the purpose of binance coin. It’s something you may have noticed, certainly an interesting approach for an exchange creating their own token.
The three purposes of binance coin are:
1. Alternative Way To Pay Trading Fees.
2. Alternative Way To Pay Listing Fees.
3. Alternative Way To Pay Withdrawal Fees.
On top of that binance incentives the use of their coin, they offer discounts on fees from 50% to 6.25% decreasing over a 4 year period. You can use binance coin to get involved with initial coin offerings via binance, and binance is planning to use 20% of its profit to buy back tokens.
To summarise, binance is perhaps one of the most user friendly exchanges I have used!
Why Active Trading Should Be Left To The Experienced
Trading is something that so many people feel like their missing out on, by missing out I mean they feel they’re missing out on huge returns. However they couldn’t be further from the truth, and I’ll explain exactly why by highlighting three points in this section you, as to why trading in the traditional sense of the word should be left to those who are experienced in this profession.
It’s A 24/7 Market
Crypto markets don’t go to sleep at 6PM, heck they don’t even go to sleep on the weekends. Because of this the markets act in a manner which catches many newbies out, with huge price spikes occurring while they’re sleeping.
It’s Extremely Volatile
Cryptocurrencies as a whole, are an extremely volatile asset class. It’s not rare to see rises of 100% in a day, followed by drops of 40% and more.
Long-term I fundamentally believe in the value of bitcoin being a substantial amount, however we will experience short-term drops, or as I call them corrections along the way.
The reason it’s so volatile is because a lot of external factors have an impact upon the value, three examples of things which impact the value of bitcoin are:
1. New stories, whether they are fake or true.
2. Regulation on bitcoin around the world.
3. Sudden large buys or sells, part of a pump and dump scheme.
Those are just three examples of why cryptocurrencies are so volatile. It’s all so new and experimental in many ways, hence why this is another reason I tend to inform newbies to avoid day trading cryptocurrencies, as they will get caught out on the volatility.
Even Expert Traders Get Caught Out
Yes, it’s true! Even traders who have been trading on the likes of the forex exchange for years, have been caught off guard by the cryptocurrency market jumps i.e. the volatility.
So if you feel as a complete newbie jumping in you’re going to make a quick buck, I would bet you are more than likely to get caught out. I strongly advise you invest for the long-term.
Invest in valuable cryptocurrency projects for the long-term, don’t try to game the market for a quick buck. Because one, you’ll more than like get caught out. And two, it doesn’t help this ecosystem thrive and bring about this financial revolution long term.
Nope, it’s not a spelling mistake. Well, it initially was back in December 2013.
‘I Am HODLING’, which was intended to be ‘I Am HOLDING’.
So that’s right, ‘HODL’!
It’s a slang term that has been adopted by the cryptocurrency community, which at its core means holding cryptocurrency rather than selling it. It follows the principles and philosophy of the traditional buy and hold strategy.
The actual acronym ‘HODL’ has been referred to as meaning, ‘hold on for dear life’.
This HODL approach is perfect for avoiding that trap of thinking you can time the market, which often ends in many losing money. By HODL’ing, you’re likely to experience greater gains.
Looking at cryptocurrencies as an asset class, they’re extremely volatile! It can rise 200% within a week or month, following which falling by 100%. We’ve seen these extremely volatile market conditions throughout the history of cryptocurrencies, hence it’s not something I recommend trading daily. You will more than likely 9get caught out by the sharp swings of the market!
By following this HODL Mentality, you can avoid the two traps many fall into when they start out:
1. Fear Of Missing Out
2. Fear, Uncertainty & Doubt
The true HODL Investors out there truly believe that specific cryptocurrencies will have a strong future, hence they hold. Not just trading for quick profit!
Even though this strategy sounds simple, there are a few tips I recommend you keep in mind when setting out on your journey with investing in cryptocurrencies.
HODL…The Good Projects
When you begin diversifying your portfolio, don’t just throw your hard earned money into any project you hear of through a reddit comment. Do your research, and invest in valuable projects!
Never Invest More Than You Can Afford To Lose
Remember that this is a highly speculative market. If the market were to go to zero, not likely but if it did, would you struggle to put food on the table? Don’t over invest!
Don’t Get Caught In The Fear Of Missing Out
HODL helps cure this disease, otherwise known as FOMO (Fear Of Missing Out). Don’t invest just because everyone else is, make sure you understand what you’re investing in before you do.
Just to sum this section on the HODL Strategy up, let me summarise what it successfully enables you to do, when it comes to getting started with investing in cryptocurrencies:
1. The HODL strategy allows you to invest following a simple proven strategy.
2. If you don’t have the time to invest actively in the markets, HODL is perfect.
3. Being skilled in technical analysis isn’t a requirement for successfully HODL’ing.
All in all the HODL Strategy is perfect for the newbies of you, as well as the more experienced of you. Just keep in mind what I’ve shared in this section, and it’ll hold you in good stead.
Tools To Track Your Portfolio
Once you buy into cryptocurrencies, you’ll find that you will quickly become obsessed with the price movements. Constantly checking your phone, seeing if you’re in profit or in loss. The markets are so volatile, and move so much daily that this will become an addiction.
Hence in this section, I want to help you decide on the best tool to use when it comes to tracking your cryptocurrency portfolio. This will help you keep tabs on your new formed addiction, and ensure you don’t spend your days watching price charts go up and down. I want the tools to work for you to track your portfolio, and even setting alerts which is possible with some of them.
Now, lets go over five of the most popular tools to track your portfolio:
A great visually pleasing cryptocurrency portfolio tracker. This tracker actually has a social network aspect built in, so you can track others portfolios, if and only if they make it public.
On top of that, they apply the integration of your API keys from poloniex and bittrex. I can imagine they will add more as time goes by, updates are constantly rolling out on altpocket.
A very reputable company in the space, which has so much more to it than just being a portfolio tracker. It has details on coins, a social aspect, and all sorts of great features.
However, I definitely feel that this is best suited for those who want a web-based tracker.
This tracker is primarily mobile based, and as you should know pretty much everything is mobile in todays age. A lot of companies go mobile first, so blockfolio has a distinct advantage here.
If you have a simple portfolio, then having an app such as blockfolio just might be the perfect solution for you. Especially as it has live prices of pretty much all mainstream exchanges.
A personal favourite of many, which comes as both a desktop and mobile version. Allowing you to track your portfolio of pretty much all cryptocurrencies out there in the market.
So there we have it!
Five cryptocurrency portfolio trackers. They are pretty much all the same, with little differences here and there such as some having a social aspect. So it really does depend on personal preference which you feel most comfortable with to track your portfolio.
Safeguarding Your Portfolio
Safeguarding your cryptocurrency portfolio is one of the most important aspects of joining this ecosystem. Yet many ignore the most simple steps to ensuring there investments are safe.
In this section I’m going to discuss safeguarding your portfolio, regardless of whether you’re a security expert or not. These three safeguarding tips are applicable to everyone joining the cryptocurrency ecosystem, ensuring their cryptocurrencies remain as safe as possible.
Create A Strong Password
When you setup a wallet you’ll be asked to create a password. Just as you create a password for your email account, social media accounts and more. Ensure the password you create is strong!
Don’t use the same password you have for every other site. This is a hackers dream!
Rather, use a service like last-pass which will suggest a super secure password for you, on top of that it’ll keep the password secure within the last-pass website. I recommend it!
2FA stands for two factor authentication.
I highly recommend that you enable 2FA for your wallet, especially if you’re going down the route of using a hot wallet. Google authenticator is one of the most common, and widely used 2FA tools when it comes to verifying your log-in with websites.
Never Share Your Private Keys
To put it simply, if someone knows your private key they have as much control over your cryptocurrencies as you do. Pretty scary, right? Hence, you should make sure this is kept as secure as possible.
Your private key will come in the form of 12 to 24 random words, and these back-up your private key. Make sure you keep them safe. As should your computer crash, you have the comfort of knowing you can gain back control of all your coins using your private key on another computer.
Before I end on this section, I’d just like to share a good wallet flow with you. It’s particularly useful for those just getting started in the ecosystem, who are unsure about which wallet to choose due to the plethora of services out there.
As a newbie, this will more than likely be your first port of call when joining the cryptocurrency ecosystem. It’s perhaps the most recognised company in the cryptocurrency and blockchain ecosystem.
They offer users an extremely easy process in which to buy and sell bitcoin, litecoin, ethereum and more for which I recommend. However I don’t recommend storing large amounts with them.
Well coinbase is a web based wallet which is more vulnerable to hackers. On top of that, they don’t let you control your wallets private keys. Which means, you don’t control your coins!
If you’ve purchased bitcoin on coinbase, but now want to transfer to a wallet where you have full control, meaning a wallet where you control the private keys. I’d recommend Exodus, it’s an extremely user friendly wallet. Best of all, your control the private keys.
As with CoinBase, Exodus is free to use, in the sense that there is no up-front cost involved. Naturally, the wallets take a fee for each transaction you send out of your wallet, this fee varies, but that’s for another lecture.
Once you’ve started to accumulate a larger amount of cryptocurrencies, the only wallet I could then recommend is trezor. This is a hardware wallet, which keeps your cryptocurrencies offline.
Offline means not vulnerable to hackers, which is what we want to achieve as investors.
As trezor is a hardware wallet, there is an upfront cost which you can see by checking out the trezor website. It’s not a lot in the grand scheme of things, and is what I recommend for those holding larger amounts of cryptocurrencies.
But there we have it, a wallet flow for the newbies of you joining the cryptocurrency ecosystem. Naturally, there are many more wallets that you can choose from. But I wanted to highlight the three most user friendly wallets you can get started with, according to your varying security levels.
Will Cryptocurrencies Continue To Have Value?
A question so many people want the answer to; will cryptocurrencies continue to have value?
The reason this question comes up many times, is due to the fact that cryptocurrencies have no physical denominations what so ever. They only exist digitally, in between computer systems.
With some cryptocurrencies like bitcoin, we know their limited in creation to 21 million, so it creates an element of scarcity. As with many scare resources, the value is deemed to rise!
Economics teaches us that items have a certain economic value simply because, there are people who desire them hence are willing to part with their currency to have that item. It’s based purely on the premise of supply and demand.
The higher the demand and lower the supply, inevitably the more valuable something will become. That’s built into bitcoins fundamentals, by having that hard cap of 21 million bitcoins.
If you think back to previous societies where cattle was considered a medium of exchange, it was very hard to put a price upon that for which to trade with. Not everyone wanted to accept cattle in exchange for their product, hence why society gradually transitioned to gold. But it was only when gold became widely accepted was it referred to as a currency.
Moving forward to todays society, many argue the fact the GBP or USD note you have in your pocket doesn’t have any intrinsic value, and they’d be right. Why you might ask? Well the dollar as example isn’t backed by the gold standard anymore, so there is nothing more than a promise backing the amount that note is said to be valued at.
Whereas before governments could only print as much gold as they held, once that gold standard was abolished the printing of money became limitless!
Hence certain cryptocurrencies are deemed to have sustained value because, they’re a scarce resource which many individuals deem to have value, which is accepted by many merchants!
So that’s everything on this section, you should now understand where the value exists!
Cryptocurrency Reference Guide
Before moving further I want to introduce you to our exclusive cryptocurrency reference guide, which will give you a snapshot of many cryptocurrencies out there in the ecosystem.
You can be sure this is a living and breathing resource, which you can viewed at anytime here; www.cryptocurrencyreferenceguide.com.
Moving forward I’ll be going deeper than a snapshot description of the cryptocurrencies listed in the reference guide. So as you work through the remainder of this guide you’ll see me detail cryptocurrencies further, helping you to understand them at more than just surface level.
Bitcoin is a form of digital currency, which is often referred to as a cryptocurrency. However, more recently being cited as digital gold. It’s created and held digitally, and on top of that not one single person, organisation, or group controls the entire bitcoin network.
You may have noticed I mentioned the term cryptocurrency, this is the category bitcoin falls into. There are thousands of cryptocurrencies out there today, the majority of them have little or no value along with purpose, but bitcoin is the most valuable cryptocurrency out there by far. It actually started the cryptocurrency movement we see today!
Let me break that term cryptocurrency down for you while you’re here, and focus on the term currency. Bitcoin can be used as a currency to go and buy things at digital and physical retailers, just as you would do with the currency in your pocket. Whether it’s the great british pound, or US dollar. Bitcoin is the same as other currencies in the sense that it can be exchanged for goods.
One of the key differentiating characteristics of bitcoin is that it’s decentralised, it doesn’t have a centralised structure. This links back to the point where I mentioned, not one single person, organisation, or group controls the entire bitcoin network.
As you should be aware, banks control the flow of money. But not with bitcoin, this is what we call a community based currency. The fact of the matter is that banks produce more money to cover the national debt, but in-turn that devalues the currency in question. So printing more money, and putting it into circulation does hurt the purchasing power of the currency in question.
Bitcoin isn’t like that though, it isn’t created behind closed doors by bankers. It’s open source so anybody can get involved with the process, and theoretically anyone can start creating bitcoins through a process known as mining. As long as they have the resources at hand of course!
An important point to remember is that only 21 million bitcoins can ever be created! It’s a rule that is enforced by the bitcoin protocol, which is best looked upon as the rule book for bitcoin.
However, don’t think a bitcoin can only be spent as a whole. In fact one bitcoin, can be broken down into one hundred millionth of a bitcoin. It works in much the same way where dollars can be broken down into cents, bitcoin can be broken down into satoshis.
As you’ll start to grasp by now bitcoin is very unique in its nature. So let me share three characteristics of bitcoin with you, which make it so irresistible to those getting involved.
Bitcoin Is Decentralised
The Bitcoin network isn’t controlled by one single person, organisation, or group. So no one single party can cause a meltdown of the network.
Bitcoin Is Easy To Get Started With
Think about all the plethora of information banks require from you just to setup an account, setting up a bitcoin wallet is far easier.
Bitcoin Is As Anonymous As You Want It To Be
Every single transaction is shown in the bitcoin blockchain, but those transactions don’t link to your name or any other sort of identifiable information.
A question many people will want answering is the following, what exactly is ethereum? This is especially true of the matter if you’ve just come across the term. Let me now break down ethereum for you, so you understand it as its core.
At the most high level basic point, ethereum is an open source software platform based upon blockchain technology. What that then empowers others to do is build and deploy decentralised applications upon it. I’ll get into some of the apps that can be built upon it later in this guide.
Naturally will now come the question especially if you’re looking at this as an investment, how similar is ethereum to bitcoin. Let me explain as many still don’t understand the key difference between the two, other than that they can be traded on exchanges.
To begin with both have very different technological approaches, when it comes to how they utilise their respective distributed public blockchain networks.
Starting with bitcoin. Bitcoin offers one key role with the use of its blockchain technology, it’s peer to peer payments using bitcoin. Often within ten minutes, and with minimal transaction fees attached. However the network has been known to have scaling issues, hence historically at certain points it has taken longer consequently costing more.
Just so you’re aware there are two parties with bitcoin. One that consider it a store of value, and the other which sees it as a fiat currency replacement.
Ethereum is inherently different in its approach. The ethereum blockchain focuses on running the programming code of any decentralised application. On top of that, it has its own cryptocurrency (ether) which is used to fuel the network of transactions that get processed. Of course you can still trade the cryptocurrency, but the main purpose for its creation was so that decentralised blockchain app developers could pay for transaction fees on the ethereum network.
This leads me nicely onto my next point, what ethereum can be used for. As mentioned, ethereum focuses on running the programming code of any decentralised application. Just think of all the ‘middle-men’ you have to go through when generally going through a services process, developers, with the help of ethereum can remove all that, and decentralise centralised services which aren’t controlled by any single entity.
You might ask what the benefit of that, and in general the ethereum platform is. Well let me go over four key advantages with you, here goes:
Decentralised applications built upon ethereum have no central point of failure, which makes it almost impossible for hackers to corrupt.
Due to the way the dapps which is short for decentralised applications are created, a third party can’t just come in and make any changes they wish. It’s all programmed in, hence changes can’t be made by third parties.
All the decentralised applications built upon Ethereum as based around the distinct fact that they follow principles of a consensus - hence as mentioned, making it virtually impossible to corrupt.
Zero Down Time
Dapps can’t just go down. It’s a 24/7 365 network. Definitely a key selling point when it comes to this ecosystem.
So I’ve mentioned ethereum is super secure and so on. But there is a downside, well it’s more human error than anything. If say a decentralised application or smart contract built upon ethereum has huge flaws in its code, this is where someone with not so good intentions can exploit it. Then the only way to stop that exploitation is to re-write the underlying code! Hence human error is a potential downside here.
Due to the open source nature of ethereum, you can read the code and make sure everything looks good from your end before maybe pledging funds.
To end on this section with ethereum, let me touch upon some ethereum decentralised applications you can view right now.
One of the most popular is Augur, which is an open source predictions and forecasting market. With Augur anybody can forecast events, and if correct get rewarded with the augur token.
That’s just one of the big projects being built upon ethereum, there are a while host of others. If you want to view other projects that are being built upon this amazing technology, view the following page: http://dapps.ethercasts.com.
Binance coin is the token of the binance cryptocurrency exchange, of which only 200 million binance coins can be created.
Upon launch of binance the coins were distributed as follows:
1. 50% Of The Coins Were Sold In The ICO
2. 40% Of The Coins Went To The Team
3. 10% Of The Coins Went To Angel Investors
The one thing that really interests me with binance coin, is how they’ve incentivised the use of their token rather than it just being another token in the marketplace with no use case.
By using binance coin, it enables you to gain discounts when paying fees for transacting on the exchange. Those fees range from 50%, down to 6.75%. That will steadily decrease annually, from the first year to the fourth. In my opinion, it’s a smart way to increase their coins trading volume!
If you’re keen on using binance, without a question of a doubt I would personally go ahead with buying some binance coin to help cut those fees pretty drastically.
Of course we have the incentive of binance offering essentially discounts for using their coin, but they’ve also publicly mentioned they would be implementing a buy back plan. Buying back 100 million binance coins. This would of course benefit investors as it offers liquidity.
There are four really strong distinct factors for binance coin, which have made it pretty successful in the short space of time it has been around. Let me highlight them for you now:
Binance is led by Changpeng Zhao, with a strong team of experts onboard.
It’s a well polished exchange, which supports multiple devices and more importantly languages.
Binance is one the fastest exchanges around, with millions of orders processing every second.
Due to the strong founding team, Binance has access to some of the most respected leaders.
All of those four points combined hold binance is good stead as an exchange, and cryptocurrency with binance coin. It’s hard to argue the facts with it growing so fast!
If you’re looking at buying binance coin to speculate on the price, but don’t want to store on an exchange It’s possible to store it on your trezor wallet safely, reason being binance coin is an ERC-20 token. On top of that, it’s now possible to store binance coin on exodus as well.
As with bitcoin, litecoin is an open source peer-to-peer cryptocurrency. In fact it was bitcoin that inspired the creation of litecoin, and technically it’s very identical to it with differences as well.
The origins of litecoin started back in 2011, when the project went live. It was one the first cryptocurrencies to take what bitcoin had created, and modify it to create a new coin.
The actual founder of litecoin isn’t anonymous as is the case with bitcoin. Litecoin was founded by Charles Lee a former google employee, and more recently director of engineering at coinbase. So a force to be reckoned with in this ecosystem! He has recently turned his focus back onto the litecoin project, leaving coinbase in the process.
In fact, Charles Lee is so devoted to Litecoin he declared he sold the majority of his litecoin holdings. Reason being he wanted to avoid any conflict of interest that could’ve occurred from his influence, and position as the founding father of Litecoin.
A little fact I want to share with you! Charles Lee as you’ll be able to grasp is very well connected in the cryptocurrency space, but did you know his brother is Bobby Lee, CEO of BTCC.
As mentioned litecoin is similar to bitcoin in many ways, but let me cover the three distinct differences litecoin has over bitcoin, that’ll help you understand its unique proposition:
1. Litecoin processes blocks every 2.5 minutes, over bitcoins approximately 10 minutes. Which means that transactions get processed quicker through the litecoin network.
2. Litecoin uses a scrypt algorithm over bitcoins SHA-256. It’s known that scrypt favours large amounts of high-speed RAM, rather than just raw processing power. Hence, there isn’t as much of a race to mine litecoin with the most powerful machines as there is with Bitcoin.
3. Litecoin also has a max supply cap, but it’s 84 million litecoins. Whereas bitcoins has a max supply cap of 21 million bitcoins. The reason for the cap being four times larger, is to take into effect the four times faster rate of transaction confirmations.
If you’re considering buying litecoin it’s a very simple process, and follows the same process as buying bitcoin via coinbase. As litecoin is a trustworthy and reputable cryptocurrency, it has the backing of the most established and trustworthy sites in the ecosystem.
If you’re looking to store your litecoin safely, as you’ll know by now I never recommend storing on coinbase. Simply because you don’t control the private keys. The safest option by far is storing on trezor, and they have an option to store litecoin with them. Which is fantastic!
Congratulations on getting through this cryptocurrency mastery guide!
We’ve now guided you through the process of understanding cryptocurrencies on a theoretical, and practical level. Helping you to get involved in this ecosystem as a knowledgeable individual. We are thrilled to have helped you achieve that goal!
On another note, if you haven’t shared this already we’d appreciate you taking a moment of your time to share it with someone who will find value in this. As it’s important to learners just like yourself, as well as us.
We’ve worked tirelessly to make the best guide for you, please message us with any feedback.
Other than that we hope you are enjoyed the guide and will continue to enjoy our forthcoming guides, all designed to help you move further into the cryptocurrency & blockchain ecosystem! Start by joining our 7 Day Free Trial.