Many people are getting into the cryptocurrency game with Bitcoin and other popular altcoins. There are a lot of new users who see the potential but don't understand the real benefits of using cryptocurrency. I'm worried some of these newer users may be making mistakes which forfeit some of the protections provided by blockchain technology. This guide will strive to explain these benefits and how to attain them.
What is the blockchain?
In a traditional payment system like PayPal, you ask the PayPal server to send your money somewhere. The PayPal server checks its database and if you have money in your account it will send it. Unless they decide at their discretion whether your transaction seems "suspicious", then they can block you from sending money until you verify your identity, show your social security card, etc.
With Bitcoin, there is no server to ask for your money. Instead, every person who runs a Bitcoin device is holding the database. When you want to spend money, you broadcast your intent to the entire network and the first miner to pick up your transaction is given incentive with a small fee. Then, these nodes running across the world all add your transaction to their database forever.
Why use this over my bank?
If one miner decides not to take your transaction another one will, because that is how they get paid. No incentive to block your money and spread across numerous individuals means almost guaranteed that your money will be secure and in your control.
For example your employer deposits your cheque to bank account, but for 2-3+ days, your bank holds that money. During that time, they benefit from that money being in limbo and you can not touch it. With bitcoin, a transaction is sealed as soon as it is picked up and placed in a block. While this can sometimes take a bit of time, it is computationally guaranteed and therefor a more solid form of currency.
A Word of Warning
While cryptocurrency is an amazing technology which is putting our money more in our control than ever before, you should be careful. Bitcoin is an open-source project which is easily copied. There are many clones of bitcoin and other coins which are created specifically to trick new people into buying so the creator can sell quickly and make an easy buck off of you. Other scams are prevalent in the cryptocurrency community and the internet as a whole.
Additionally, most cryptocurrencies are very volatile. You might buy Bitcoin at $9,300 each and the next day it will go up to $15,000 or down to $4,300. You will come across people on social media who claim to know how Bitcoin's price will go in the future. They will show you flashy graphs or tell you complex math beyond your understanding. Some of them may even know what they're talking about, but I would advise not to make investment decisions on these people.
Before buying any cryptocurrency do a LOT of research. Watch videos, read articles, read the whitepapers of the coin and see their goals and the reason for the coin to exist. If you believe in a project, invest only what you can afford to lose. Then, hold your coin in a wallet, not an exchange! Do not keep your investments in wallets you have no control over like an exchange or lightweight mobile wallet. You open yourself up to the dangers of traditional banks. Ideally, you should store your digital currency in a hardware wallet like Ledger, but again, do this after your own research.
