Even enough info to get started investing in both!
By R. Kenner French
Years ago when I started investing in cryptocurrency I had seemingly millions of questions about it. Back then, there was nobody to turn to. It was the wild, wild west. People thought I was crazy for investing in virtual money that probably was going to go away like a ridiculous fad. Well, here we are years later and the same people who ridiculed me back then are asking me questions as they start to invest in crypto, NFTs, and the blockchain. Funny how things change. Anyway, I have compiled this list of questions and answers to make it easier to get started in such investments (by the way, no guarantees but I bet you will be happy if you invest in crypto, etc). Here goes…
What is the “Blockchain?”
Blockchain is a relatively new technology that has the potential to change the way we do business. It’s taking over in some areas, like finance and government services, but what is it? Blockchain can be defined as an online ledger of transactions that are secured by cryptography. It’s essentially a decentralized database with records organized into “blocks” which cannot be altered without changing all subsequent blocks. If you do a transaction, it is recorded forever and can not be redone.
Is blockchain technology growing?
Blockchain technology is growing at an exponential rate. It’s projected that blockchain will be worth $60 billion by 2024. That’s a huge jump from about $1 billion in 2017! If you’re not familiar with blockchain, it can be daunting to try and wrap your head around what blockchain is — let alone why it matters for the future of our society. Don’t worry, in the not too distant future, your everyday life will be somewhat based upon the blockchain. You will see.
Are blockchain and cryptocurrency the same thing?
Blockchain is a type of database that can store digital data in a way that makes it difficult for people to tamper with it. Cryptocurrency is money created by encryption techniques as opposed to being printed or minted like regular currency. For example, Bitcoin was the first blockchain-based cryptocurrency ever made. Crypto uses the blockchain as a foundation. Without the blockchain, there is no cryptocurrency, generally speaking.
Can I get rich by investing in blockchain domains?
Just like getting into real estate can get you rich, buying blockchain domains are a great way to get rich.
Blockchain domains are the newest form of asset available on the blockchain. Not only do blockchain domains potentially provide high financial returns, but they also provide high utility returns for blockchain application developers, blockchain service providers and blockchain project owners. The number of blockchain projects is expected to grow dramatically in 2022 with an expected increase of more than $9 trillion market capitalization in 2022. Blockchain domain investors will benefit from this massive growth in blockchain services because it creates demand for blockchain domain names much the same way that internet domains were all the rage in the 1990s. The result was that some investors made tremendous amounts of money. It is not too late to be before the crowd.
Do I have to worry about taxes as it relates to cryptocurrency, blockchain, etc?
As an investor, one of the most important things you can do is to plan for your taxes especially when it comes to cryptocurrency, NFTs, etc. It’s not something that should be overlooked or ignored. With Tax Day coming up this spring, now is the time to start thinking about how you will approach this year’s tax season and what strategies may work best for you as a new blockchain-based company. It is time to:
1) Partner with an accountant — A qualified accountant can help ensure all of your bases are covered and make sure that no loopholes go unnoticed. When it comes to taxes, it pays off to have someone who knows what they’re doing!
2) Understand how blockchain/cryptocurrency is taxed — Each country has its own specific set of tax laws, so it’s important to familiarize yourself with the taxation of blockchain technology in your region.
– In some cases, cryptocurrency transactions may be subject to capital gains taxes.
– Income generated from blockchain activities may also be taxable.
– Businesses that accept cryptocurrencies as payment for goods or services must report the fair market value of those currencies on their income statements.
How do I get started in Cryptocurrency investing?
There are many different ways that you can do it. Luckily, cryptocurrency is so new that there are no rules or best practices yet.
You can just jump right in!
One such place to get started is by opening an account at Coinbase.com or a similar “crypto brokerage” firm.
Coinbase is a place to purchase cryptocurrency and non-fungible tokens (NFT). It is one of the easiest methods of purchasing cryptocurrency.
Coinbase was founded in 2012, Coinbase has since grown at an exponential rate to become one of the most popular places to buy cryptocurrencies online. Coinbase currently lists Bitcoin, Ethereum, Litecoin, Bitcoin Cash or your local currency as available payment methods.
In recent years coinbase has been pushing towards allowing more crypto currencies on their platform. Not too long ago, Coinbase announced they would be listing Ethereum Classic as a crypto currency on coinbase which soon after helped increase the price of ethereum classic 5%. By all accounts Coinbase has been constantly trying to improve their services and attract new users by announcing new initiatives. By the way, look at a Coinbase Pro account. The benefits may be intriguing.
What do they mean by crypto wallets?
A cryptocurrency wallet is a software program where coins are stored (it may be “physical” like in the form of a USB drive). The only way to access coins in the cryptocurrency wallet is through encryption keys — two keys, one public and one private key. The cryptocurrency transactions will be communicated to the blockchain (the cryptocurrency’s ledger).
There are three main categories of cryptocurrency wallets: 1) software, 2) hardware, and 3) paper. The best cryptocurrency wallet depends on the security level that you require — do you want to store everything yourself or would rather let someone else handle it?
A cryptocurrency wallet may look like any other software program you download and open (for example: Chrome or Word), but it is not. These cryptocurrency wallets store your private and public keys, as well as interact with blockchains.
The securirty of these cryptocurrency wallets partially depends on the strength of the password that you set up when creating the cryptocurrency wallet (which can be done manually or by randomly generating a strong password for you). The stronger the password, the safer your cryptocurrency funds will be! Private keys are stored in a file on your computer — this is how they have access to your coins. If another person gets access to your private keys, they too will be able to gain access and move cryptocurrency out of your cryptocurrency wallet.
A cryptocurrency hardware wallet is a physical device like a USB drive that holds your cryptocurrency private and public keys (and interacts with blockchains). Hardware wallets are user-friendly, as it eliminates the need for you to install any software — everything is done directly on the hardware wallet. They look like USB drives or external hard disks.
These cryptocurrency hardware wallets are super secure because all cryptocurrency transactions must be confirmed using the buttons on the cryptocurrency hardware wallet itself; this makes them really difficult to hack into. It also comes attached with a lanyard so that you can attach it around your neck (so not lose it!).
Maintaining cryptocurrency hardware wallets also keeps all cryptocurrency transactions super secure — you’ll need to manually enter your cryptocurrency wallet’s password every time that you want to access it.
Paper cryptocurrency wallets are nice because they hold everything that other cryptocurrency wallets do, except for one difference: paper cryptocurrency wallets don’t have any physical device attached to them! This makes them even more hacker-proof than cryptocurrency hardware wallets. The security of these cryptocurrency varieties depend on the strength of the password that you set up when creating the cryptocurrency wallet (just like cryptocurrency software and cryptocurrency hardware wallets).
Things to know BEFORE you get started in cryptocurrency trading!
#1: Cryptocurrency is still a developing market
One of the most important things to remember before buying cryptocurrency and thinking they will yield large returns overnight is that cryptocurrency is still in its ‘development stage’ as an industry. This means cryptocurrency is not necessarily there yet, but it is getting closer all the time. This means cryptocurrency has room for growth. However, cryptocurrency can also go down in value just as quickly — if not more so — than it can rise.
#2: Investing in cryptocurrency is risky
The next thing many people do not want to forget about cryptocurrency investing is that cryptocurrency itself continues to be a risk factor when it comes to investing and making money. Remember, cryptocurrency exists via technology (computers, the internet, software) and not necessarily through physical stuff (paper money, gold bars, etc.) cryptocurrency is not tangible.
#3: Make sure cryptocurrency trading is RIGHT for you
Before buying cryptocurrency it is important to realize cryptocurrency investing might not be right for you. This means cryptocurrency’s current level of risk — especially as compared to other types of investments like real estate or the stock market — is still too high for your comfort levels. Cryptocurrency can yield huge returns but this also means cryptocurrency has pretty much unlimited potential to go down in value. This is because cryptocurrency does not have any central governing agency regulating its flow or value like more traditional markets do (like the stock market). For this reason, cryptocurrency continues to carry a lot of risk with it.
#4: Beware cryptocurrency pump and dumps
Another important thing to remember about cryptocurrency is cryptocurrency pump and dump schemes. Cryptocurrency pump and dump schemes work in cryptocurrency trading when people group together to artificially drive up the price of a cryptocurrency for a short time before selling their shares all at once. This causes cryptocurrency prices to drop dramatically, which allows the group that did the initial ‘pump’ to then buy cryptocurrency at a low price point. Then they can sell off their cryptocurrency anytime after that for a profit. In essence, cryptocurrency’s relative lack of regulation makes it very easy for cryptocurrency pump and dump schemes to happen within the space — and these types of events have been happening quite often.
#5: Understand cryptocurrency trading strategies to use (and not to use)
Finally, many people do not want to forget cryptocurrency trading strategies. Make sure you understand cryptocurrency trading before buying cryptocurrency and hoping for large gains overnight. One important cryptocurrency trading strategy is dollar cost averaging (DCA). DCA works because it takes the guesswork out of cryptocurrency investing by making cryptocurrency investments affordable and easy — no matter what cryptocurrency’s value is at that current time. This means instead of thinking ‘I’m going to buy a ton today’ then hoping cryptocurrency prices go up soon after, DCA asks investors to split their money into smaller chunks instead. For example, say an investor wants to buy $1,000 worth of Bitcoin. Instead of buying $1,000 worth of Bitcoin all at once (and hoping cryptocurrency prices go up soon after), DCA asks the investor to instead buy $250 worth of cryptocurrency every month for 4 months. This way, the cryptocurrency investor is able to buy cryptocurrency regardless of cryptocurrency’s price at that time because what matters more is spreading cryptocurrency investments out over a longer period — not trying to guess when cryptocurrency will be ‘cheap’ again.
And there you have it! These are just some things to keep in mind before buying cryptocurrency. Cryptocurrency continues to be an industry still very much in development, so investing can carry both high risk and high reward depending on how it is approached. Make sure you understand cryptocurrency trading and do your homework. You will be glad you did.
I wish I had the answers to these questions when I got started. It was a long march to these answers but I hope they help you to get started in crypto, NFT, and/or the blockchain. Well, good luck.