Navigating the Cryptocurrency Market: A Beginner’s Guide to Bitcoin, Ethereum, and Altcoins
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- jaro education
- 25, June 2024
- 6:00 pm
Since Bitcoin’s inception, the cryptocurrency market has grown rapidly, marking a revolutionary financial domain. Cryptocurrencies, unlike traditional currencies, operate on a decentralised computer network using blockchain technology. This technology guarantees the immutability of transactions, security, and transparency, fundamentally changing the way everyone engages with money.Â
Cryptocurrencies are digital and virtual assets that use cryptography for security and function independently of a centralised authority, like a financial institution or the government. The most well-known cryptocurrency is Bitcoin which has unlocked the doors for other cryptocurrencies, each having its own unique features and use cases. You can follow this beginners’ guide to understand how the cryptocurrency market runs and the different cryptocurrencies.
Brief History of Cryptocurrencies: Introduction to Bitcoin
Cryptocurrencies were introduced in 2009, with the creation of Bitcoin by a person or group that used the pseudonym Satoshi Nakamoto. The introduction of Bitcoin marked the birth of the first decentralised cryptocurrency. It uses the concept of blockchain technology, which is a public ledger that records all transactions. Since then, the cryptocurrency market has seen significant growth, with numerous cryptocurrencies coming its way, also referred to as altcoins.
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How to Mine Bitcoin?
You can utilise different hardware and software to mine Bitcoin. Some suitable options are as follows:Â
- With your existing hardware setup and Bitcoin-compatible mining software, you can join a mining pool. Mining pools are groups of miners that pool their computing resources to compete with huge ASIC mining farms. You can pick a variety of mining programs and pools. The two well-known programs are BFGMiner and CGMiner. Some of the most prominent pools are Antpool, Foundry Digital, ViaBTC and F2Pool.Â
- You can buy an ASIC miner if you’re financially sound. A new miner can cost around $10,000. However, if you can’t afford one, using a second-hand one is a feasible option.Â
If you buy one or more ASICs, you will incur considerable fees for power and cooling. Keep in mind that employing one or two ASICs does not guarantee rewards because you will be competing with massive mining farms with hundreds, if not thousands, of ASICs.
How to Use Bitcoin?
Initially, Bitcoin was developed as a peer-to-peer payment system. However, its use cases are expanding due to its rising value, competition from other blockchains and cryptocurrencies and advancements in blockchains that process information for the Bitcoin blockchain.
As a Payment Method
Bitcoin is widely recognised as a form of payment for products and services by retailers, merchants and businesses.Â
To use Bitcoin, you need a cryptocurrency wallet. Wallets are your blockchain interface and can store your private keys, which you must enter during a transaction.Â
As an Investment
To use Bitcoin as an investment:
- Choose a Cryptocurrency Exchange: Select a reputable exchange like Coinbase, Kraken, or Binance.
- Establish an Account: Create an account, providing personal information and verifying your identity.
- Fund Your Account: Deposit fiat money to buy Bitcoin.
- Decide on the Amount to Invest: Determine how much to invest, considering budget, risk tolerance, and strategy.
- Store Your Bitcoin: Choose a digital wallet, such as a hot or cold wallet, to store your Bitcoin.
- Monitor and Manage Your Investment: Regularly review your portfolio to rebalance your holdings and manage risks.
- Consider Additional Options: Explore cryptocurrency funds, ETFs, or related companies for further diversification.
What is Ethereum?
In the cryptocurrency list, ether (ETH) is considered to be one of the biggest cryptocurrency altcoins after Bitcoins. To secure this cryptocurrency, a decentralised global software program known as Ethereum is used. This platform is known by investors and developers for its use in blockchain and decentralised financial application development.Â
Ethereum is supposed to be scalable, programmable, secure, and decentralised, allowing anybody to construct any safe digital technology. Its token is intended to pay for blockchain-related activity, but participants may use it to pay for physical products and services if approved.
How to Mine Ether (Ethereum)?
In Ethereum’s mining process, blockchains validate and confirm new transactions on the network. This procedure is linked to the proof-of-work (PoW) consensus. It helps eliminate vulnerability to double spending and associated attacks. By successfully mining a block, the miner verifies it on the blockchain and adds it to the network. Â
Depending on the complexity and competitiveness involved, Ethereum mining can be a capital-intensive process. To begin the mining process, you need to:
- A cryptocurrency wallet which will be Ethereum-based.
- You need a robust computer system to mine cryptocurrency, ETH.
- Choose a mining strategy which will suit your requirements, depending on your budget and investment. The main mining strategies for mining Ether are pool mining, cloud mining and solo mining.
- Integrate mining software after you’ve set up the rig.
- After you have mined a block, you can see the rewards in your synced crypto wallet.
How to Use Ethereum?
The most common Ethereum blockchain use cases are as follows:Â
Non-fungible Tokens and Digital Collectables
NFTs are digital assets unique to the entity they represent and cannot be reproduced or replaced by another asset. NFTs represent ownership of goods such as artworks, collectables, real estate, in-game features, and even precious metals like gold.Â
Ethereum is the most popular blockchain technology for creating and trading NFTs. This makes it simple to establish a safe and transparent market. It also makes it easier to transfer ownership of assets on the blockchain.
Decentralised Finance
Decentralised finance (DeFi) is the next invention to achieve widespread adoption and growth on Ethereum. DeFi platforms are reimagining traditional financial goods and services using programmable, decentralised, and censorship-resistant elements to produce new financial solutions.
Governance and DAOs
Governance is the process by which choices are made in an organisation, and the Ethereum blockchain plays an important role in developing more efficient governance systems than traditional methods.Â
Smart contracts operate Decentralised Autonomous Organisations (DAOs) on the blockchain, and the rules that govern such organisations cannot be modified since they are entrenched in code.Â
Supply Chain Management and Traceability
The Ethereum blockchain improves the supply chain and traceability in various ways. All transactions are open access because of the ledger’s transparent nature. It is also secure since it is difficult to tamper with, making it virtually impossible for counterfeit items to enter the supply chain. Furthermore, the Ethereum blockchain is efficient, as it can automate repetitive processes that waste time while saving money on physical labour.
What is the Future of Cryptocurrencies?
Cryptocurrency is driving the technological revolution, and governments are also promoting it. Companies are accepting payments in cryptocurrencies, allowing the sector to expand much further than necessary. Blockchain technology is ought to be incredibly secure because it has never been hacked. The only method to hack such technology is to use wallets tied to the system. However, it is projected to be one of the most secure networks in the world.
There are numerous forecasts for the future of cryptocurrency.
- Cryptocurrency price is predicted to reach $70,000 by the end of 2024.Â
- Commodity markets will also become digital. This would have made it easy to trade and invest.Â
- The exchanges will be entirely decentralised and digitalised. This is only possible with the use of cryptocurrencies.Â
- Companies prioritise liquidity over profits. Because of the liquidity problem, corporations are unable to satisfy their present liabilities.Â
- In the future, consumers will have easier access to financing, which will encourage the growth of microcredit. This also increases financial inclusion in several nations throughout the world.
Currently, cryptocurrencies do not have a definitive legal classification in India and are not recognised as legal tender. However, individuals are able to trade and hold crypto assets, though they cannot be used for everyday purchases or transactions.
The economy in India requires an effective regulatory agency that can swiftly adapt to digital networks and increase openness. Institutions like the Reserve Bank of India are cautious about introducing cryptocurrencies into the Indian money market. This is because the prices of the instruments are volatile. The government and other regulatory agencies have yet to decide on the future of cryptocurrencies in India.
Final Thoughts
As it can be observed, the cryptocurrency market is booming. From private companies to the government, every institution is promoting the advantages of cryptocurrencies. Since they can be accessible to every person across the globe, cryptocurrencies signify a sense of global financial exchange. If you’re interested in learning about the current financial trends and cryptocurrency advancements, IIM Nagpur offers a Post Graduate Certificate Programme in Financial Technologies (FinTech). In this course, you will get relevant insights into the modern technologies that have revolutionised the banking and financial landscape. From getting a deeper understanding of blockchain technology, Bitcoins and altcoins to learning about big data and machine learning, you can learn it all from this 12-month certification course.
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