Okay, another one for the absolute newcomers, here's the first of Crypto 101, a series of articles focused on the absolute beginner in the Crypto space. I'm talking people who haven't even bought their first crypto, this one's for you! Sorry everybody else :P I'll have something for you guys soon

So you're thinking about getting into cryptocurrency, and you're curious, you've seen people invest into crypto, but why? 

What is the point?

What can it do?

The short answer? Just about anything. You can partake in mining, lending, staking, or farming to increase your position in a cryptocurrency by fulfilling certain duties, such as governance, transactions, swaps, and conversions, as well as validating new blocks of information and data. You can use your cryptocurrency as an increasingly more accessible form of currency, buying things like, at one point, a Tesla car. Heck, the first purchase with Bitcoin was a pizza, if I remember correctly. This flip flops back and forth between becoming more accepted, and losing accessibility so it is not currently the primary focus, however it is one of the end goals of many crypto. 

You can even create checking accounts and debit cards that utilize crypto! You can use them for credit cards, as collateral for loans and investments, the world is your oyster.

The goal of many cryptocurrencies is to restore financial power to the people, and to provide a non-regulated, self-governed currency that is not subject to the whims of a government. The goal is to create additional financial resources and opportunities for people of all classes, social status, etc. and to serve as a financial equalizer. Many also strive to become a universal currency, seeking to eliminate some of the confusion in having so many types of currency (which is ironic given the hundreds, thousands of competitors attempting to do the same thing and further complicating it, but it is a noble cause nonetheless).

So what can you do? well of course, you can invest in it, and you can also use it to purchase goods and services. But these are only the basics of really any commodity or currency, and as such, we should talk about the things unique, or somewhat unique to Crypto:

Staking: Staking currency is relatively easy, generally speaking you either hold it in your wallet, or you deposit it into a special 'staked currency' and receive something back, for instance, if you stake ETH on Binance, you receive BETH. Now, the reasons for staking and their values all vary by currency, some are staked for transactions, some are staked for additional 'access' into their blockchain, and others are staked to open up new, more powerful networks with greater computing power. The point is though, that your currency is sort of like a power source, and by allowing them to harness it, they are rewarding currency back to you. This is generally a monthly reward, and the APY can be anywhere from 2-10+%, which is pretty good for simple interest. Always DYOR though, as some currencies have created this staking option to combat inflation, and others actually allow for growth. Keep this in mind. 

This is most easily compared to putting money into a savings account.

Some of the easiest currencies to stake are things like VET, Algo, and Tezos, which will be staked simply for being in your wallet on Binance and many other places, allowing you to earn interest simply by holding, with little, if any risk to your currencies! Other examples of currency you can stake include WAX, ETH, and others like it, which will 'lock' that currency from use.

There is risk here. Keep this in mind, at anytime that you are earning anything there is an obvious risk and value that you are creating. Do not treat anything as entirely risk free, except maybe treasury bonds and savings accounts, which of course, don't actually earn you enough for it to be considering creating value. 

Mining: Mining currency also varies, but generally speaking, you need a decent piece of hardware which will essentially validate and direct transactions, in exchange for a portion of 'gas fees'. You are utilizing your computer or hardware's capabilities to create value and validate transactions and you are rewarded for this. This of course, comes with risks and wear and tear on your hardware, but is generally risk free otherwise, unless you are working through another user's network or node. 

The biggest downside to mining is that you need to either have a large amount of the currency you're mining to authenticate, for instance, ETH requires 32. OR You need to split your pool with other people and rely on somebody else to make sure the node is being actively managed.

You can also 'mine' on your phone, however keep in mind that many of these are not actually mining they are basically just selling your information. Anything you can make money from for 'free' costs something, either time, data, or security, usually. Remember this, especially with any of my articles about free earning opportunities. Always DYOR.

I actually have a few articles about these mobile mining applications that you could check out, if you're interested!

Farming: Farming is a bit different from the other two, and is more like creating a liquidity pool for swaps. Then, whenever a swap happens, you receive a portion of those transaction fees. There are relatively low risks overall, and because it is relatively new comparatively, it has a really decent return, but I imagine this will drop off soon to a more sustainable level. I have not really messed with this area myself, but I know many people who have. (As an investor, I am a little cautious and don't tend to jump on things that are new as quickly as I should in some cases)

I believe that farming, and liquidity pools are a really great way to passively earn income on non-staking coins, and even some staking coins, just be careful of impermanent loss. Normally, I would describe Impermanent loss, but as it is a rather long explanation, and I do not have an already existing impermanent loss article, I will link to this one, which I think explains it very thoroughly.

Lending: You can also lend your currency, almost exactly like a bank would. A lendee will put up collateral for a loan, and then you will receive interest on your loaned amount. Very simple, but of course, risky, as those interest rates may go unpaid depending on the lendee, and it depends entirely on how well the lending service is at rooting out unreliable lendees. This is a pretty simple concept, with multiple examples within typical finance so I won't really go into it in detail, but this is the closest to how money 'typically' works and will be most familiar to newcomers.

Swapping: You can swap your currency for others. Many exchanges offer tiny transaction fees, or none at all to swap a currency. This is useful if say, you saw VET dip from .25 down to .18, and you had $50 in, idk, DOGE, and you switched 25 over to VET, and then VET jumps back to .25, you just made 9 bucks that can be switched back to DOGE (Assuming DOGE hadn't crashed already). This is great for slowly building up values over time, but requires a LOT of research into what's going on and a little bit of luck and good timing. 

This swapping is powered by the Farming I mentioned earlier, by providing liquidity pools, currency can be easily swapped in and out. 

It's very important to remember that each time you swap, you are creating a taxable event. Each time you sell, trade, swap, etc. This might not be as profitable as Staking or Lending depending on how you go about it, and could make your taxes much more complicated.

Now you've learned a bit about what you can do with Crypto and maybe you're on your first steps towards considering cryptocurrency in the future!

Thanks for taking the time to read this article, this is the beginning of a series of articles dedicated to the absolute basics of Crypto, Crypto 101. These can be a simply resource for users to get their feet wet in crypto terminology and concepts. If you like what I'm doing be sure to tip and follow! Thanks again!

You can check out the next installments of Crypto 101 here:

Crypto 101: How to choose a reliable Exchange (Coming SOON)

Crypto 101: How to choose a reliable Wallet (Coming SOON)

If you'd like to see my top 5 advice for cryptocurrency, you can check it out here!