Recently, we increasingly hear such a term as cryptocurrency. What is it in simple words and how to make money on it, everyone can figure out if he pays a little attention to the issue.
Cryptocurrency: what is it in simple words
In plain language, cryptocurrency is virtual money that has no physical expression. "Coin" is a unit of cryptocurrency, this word is literally translated from English as a coin. How do cryptocurrencies differ from regular money? Electronic currencies in the standard sense (for example, rubles, dollars, euros, yuan) are one of the forms of real currency, money issued by states and their central banks. To fund an electronic account with such money, you must have physical, printed banknotes. The cryptocurrency is not issued by the state and has no material counterpart. Such money is issued on the network and is not subject to regulation by countries, their legislation, and other supranational governing bodies.
Anyone can mine cryptocurrency. This process is called "mining" from the English word "mine" and means the extraction of minerals. To receive the first cryptocurrencies, it was enough to have a computer with special software installed and access to the Internet. Now this process has become somewhat more complicated, since all currencies have a restriction on the number of coins set by the script, both per day and the total amount, and for successful mining it is necessary to have more and more capacities to solve problems of processing blocks of information (transactions).
A crypto-coin is, in simple terms, a block of encrypted data, a record on the user's computer that has a connection with the previous one and information about the transaction.
Such money does not have a centralized storage center, as well as an emission center, and can be located in the wallets of users around the world.
Cryptocurrencies are open source, so everyone can become a miner, that is, earn on cryptocurrency. Unlike transactions with ordinary electronic money, transactions with cryptocurrencies are completely anonymous, which, by the way, led to the use of cryptocurrencies in illegal business.
Cryptocurrency, as stated earlier, is independent of the control center. It is not released or controlled by any institution. Thanks to this, it is reliably protected, because all the program code is distributed over the computers of millions of users, and not on a single server. Therefore, counterfeiting, hacking and other types of cryptocurrency fraud will not work.
Cryptocurrencies also have disadvantages. So, each owner bears personal responsibility for the money, if it is stolen, it will be difficult to prove anything, and there is no one to turn to for help. Virtual money is very volatile, in other words, it is subject to sharp fluctuations due to various factors. They may also be at risk of being banned in certain states under the threat of prison terms and fines. The complexity of mining cryptocurrencies is growing, and therefore mining is gradually becoming an inaccessible form of earnings.
What are cryptocurrencies
There are currently several dozen popular cryptocurrencies.
The founder in this direction was bitcoin, which in 2009 was sold for a couple of dollars, and by 2017 it had grown in price to $ 10,000. Initially, bitcoins were used mainly in computer games, and the number of miners was small. However, a year later, interest in this money increased significantly due to anonymity, security and decentralization. Today, bitcoins can be bought and exchanged on various exchanges, pay for goods and services with them, and transfer to other users.
In addition to Bitcoin, there is a whole list of currencies: namecoin, peercoin, litecoin and others. However, according to experts, they are unlikely to achieve such success as Bitcoin in the near future.
Cryptocurrency: how to make money
There are several types of cryptocurrency earnings.
1. Mining
In simple terms, this is cryptocurrency mining. To receive coins, you need a special farm, consisting of a computer with special software and a powerful video card, or a whole network of such computers.
The cost of the farm is quite high, new networks are currently paying off for a long time, while constant equipment updates are required.
2. Cloud mining
A good way out, if there is no money for large investments, is cloud mining. Its essence is that you buy power from other farms, your own equipment is not required. Investments pay off much faster, certain technical knowledge is not required, you can choose the most suitable from many different tariffs, there is the possibility of earning several currencies at the same time. However, on rented farms, there is a commission for the withdrawal of cryptocurrency, such centers are susceptible to hacker attacks, there are many scammers in this market. Examples of rental sites are hashing24.com, hashflare.io, www.genesis-mining.com.
3. Buying and resale on the exchange
Cryptocurrencies can be bought on the exchange. And the essence of earnings lies in its subsequent resale and gain due to the difference in rates, both with market fluctuations and on different exchanges. The difficulty lies in the fact that the scheme for withdrawing currencies and replenishing the account of such exchanges is not easy, there are high commissions, it is necessary to devote a lot of time to the process, constantly monitor the rates. A plus will be a large selection of different currencies, the start amount, which can be determined independently, due to the volatility of cryptocurrency rates, you can win up to one hundred percent per day on promising coins such as ether, bitcoin. Examples of exchanges: bitfinex.com, exmo.me, poloniex.com.
4. Purchase and storage of cryptocurrency
Buying currency is suitable for those who are ready to make investments for the future, and do not expect quick earnings. In simple terms, the meaning of this method is to purchase virtual money at a low rate in anticipation of growth. This option is suitable for those users who are not ready to follow the exchange rates on a daily basis, but have the opportunity to invest a certain amount for a period of six months or more.
