Understanding the Basics of Cryptocurrency


Cryptocurrency can be a complicated thing. Bitcoin is one of the most well-known crypto types on the market, but it is hardly the first or only option, and many people struggle to know which cryptocurrency is right for them. Some people even mix them up on occasion.

If you are not sure which crypto you want to buy or trade with, then it is important to think about the specifics – and to learn as much as possible about your choices.

Understanding Crypto

Cryptocurrencies can all be quite confusing, and it is easy to end up putting yourself in a situation where you do not know some important terms. Since Bitcoin is the baseline and is often considered a very good currency for traders to eventually move into, it is a good idea to use that as an example.

Trading

Trading cryptocurrency involves buying or selling one currency for another. This is calculated through the relative values of the currencies in your local currency: if you are trading Bitcoin for a currency worth a third of its value, then you would trade 1 Bitcoin for 3 of the other currency.

Trading means that you do not have to convert your crypto back into money, then use that money to buy the cryptocurrency that you want. This can be helpful if you want to directly swap one currency for another and can often turn a profit depending on how the values of each currency will change.

Buying and Selling

Buying and selling cryptocurrency involves trading crypto for money, meaning that you are literally buying and selling the value of the crypto in whatever your preferred currency is. This allows you to get crypto when you do not already own any or to sell off excess coins that you will not use.

Once again, this can help you turn a profit if you sell and buy at the right times. It is just as common as regular trading, perhaps even more common among people who are just looking to make money.

If you want to know more about crypto values, then you can often learn more about their average values, global popularity, and recent changes through dedicated sites or on most crypto exchange trading platforms.

Coin Limits

Most cryptocurrencies are capped. This means that there can only be so many coins in existence at once, even if that number ranges in the millions – in the case of Bitcoin, it is exactly 21 million coins, with no exceptions. The more coins in existence, the more in circulation, minus ones that are lost due to user errors.

While these caps can be quite high and take a long time to reach. When Bitcoin hits this cap (which could take over 100 years, if not more), the network will stop producing more, and mining will not give out new coins. This will mean that the system will change, although nobody knows quite how yet.

Not all cryptocurrencies are capped, though. Dogecoin is infamously uncapped, meaning that the number of coins in existence can continue to rise effectively forever. This means that the price can also keep fluctuating forever since the amount of Dogecoins that exist can just keep growing.