DETROIT – Every time the crypto market is in the news for any reason, there is a discussion about whether it’s too late to get involved. After every market peak or slump, at the release of a hyped new coin, when governments raise the possibility of regulating crypto or of releasing their own official coin, or while discussing the environmental impacts of the industry — all these moments are treated as opportunities to make people feel like they’ve missed their chance.

The reality is that the cryptocurrency market is incredibly volatile, so great moments to invest come around fairly regularly. Even if you’re not interested in investing in cryptocurrencies, being knowledgeable about them is becoming increasingly important. It may have started as a very niche movement, but cryptocurrencies have gone mainstream and do not appear to be fading away any time soon.

This article will go over the basics of cryptocurrencies, from the different coins and wallets to just what all the environmental concern is all about. By the end, hopefully you’ll feel confident enough to talk about it when the topic comes up and inspired to do more in-depth research on the subject.

Types of cryptocurrencies

Bitcoin and Ethereum are the most famous and widely traded cryptocurrencies. All cryptocurrencies exist on a blockchain, a system that records information in a highly secure and uneditable way. It is, in the simplest of terms, a digital ledger.

The OKX cryptocurrency list gives some indication of the number of cryptocurrencies that are currently being mined and traded. Many alternative coins have fairly short lifespans. There are also meme coins, such as Dogecoin. These were created as a joke initially, but some of them have become quite successful.

Stablecoins are another type of cryptocurrency. Unlike Bitcoin and other typical cryptocurrency coins, stablecoins are non-volatile and tied to a specific currency. Despite the name, not all stablecoins are created equally. There have been issues with some stablecoins crashing due to increased market pressure and the way that they were set up.

Types of wallets

Cryptocurrencies are stored in digital wallets. There are two types of wallets: hot and cold. A hot wallet is connected to the internet and is used to make transfers, while cold wallets are used for storing crypto. Both are essential. The hot wallet allows you to trade and receive coins and the cold wallet is the safest way to store your coins.

Exchanges

Mining is how cryptocurrency coins are created, but it is a time-consuming process that requires specialized computing equipment. Nowadays, most people acquire crypto coins by purchasing them on an exchange. These exchanges allow users to use government-issued or fiat currencies to buy cryptocurrencies and also allow them to make trades between different types of crypto coins.

Since crypto is a decentralized market, these exchanges are essential. They provide a secure and relatively stable platform and make the entire process of investing in cryptocurrency straightforward and easy to follow.

Proof of work or proof of stake?

When cryptocurrency is mined, the process involves verifying blocks of data before they are added to the chain. Traditionally, this was done by solving a complex mathematical puzzle. This process is known as proof of work and uses a significant amount of electricity.

There is an alternative to the proof of work protocol, which is known as proof of stake. It uses considerably less electricity but it still very secure. Initially, it was only smaller coins that had moved to proof of stake. Just this month, Ethereum has completed a test run of proof of stake and will move to the new protocol later this year. This is a massive positive move for the cryptocurrency world.

Global climate change has been the biggest threat to the planet for decades and it is finally being taken more seriously by governments and individuals around the world. Digital alternatives to traditional habits and products are often hailed as a more sustainable option, for example, ordering items online instead of driving from store-to-store cuts down on emissions. The move to proof of stake is another huge step that will help the environment.

Rugs

If you’ve done any reading about crypto, you’ll have heard references to rugs or rug-pulls. These have unfortunately become more common as the market has expanded. A rug pull is when a new cryptocurrency is heavily promoted to inflate the price — typically by a social media influencer who has been paid to do promote it. The original holders of the coin sell as the price goes up and the new investors are left with a coin that has little actual value.

This is not a problem caused by crypto, rather it’s an issue with unscrupulous individuals taking advantage of the trust that fans place in influencers and excitement surrounding crypto investing.

This article was provided by David Harrison