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Home Blog Cryptocurrencies What are Cryptocurrencies – Four Tips for Safe Investments in Cryptocurrencies
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What are Cryptocurrencies – Four Tips for Safe Investments in Cryptocurrencies

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Technology has basically changed the way we work, communicate, shop, and pay for goods. Vendors and consumers prefer cash less and less, which paves the way for alternative payment methods such as cash. B. Apple Pay paves. Customers can pay for items at digital cash registers by simply holding their smartphone in front of a corresponding sensor. But currently another payment system is making headlines: cryptocurrencies.

By now everyone has probably heard of Bitcoin. It was the first cryptocurrency that made it to the general public, but other currencies are also becoming increasingly popular. There are currently over 2000 different types of cryptocurrencies and new ones are being added every day.

Studies show that most consumers have heard of cryptocurrencies before but don’t know exactly how they work. So what are cryptocurrencies, how secure are they and how can you invest in this market? We have put together an introduction to this in which these questions are answered.

Table of Contents

  • What are Cryptocurrencies?
  • How Safe are Cryptocurrencies?
  • Four Tips for Safe Investments in Cryptocurrencies
    • Find Out About Stock Exchanges
    • Find Out How To Store Your Digital Currency
    • Diversify Your Investments
    • Prepare For Price Fluctuations

What are Cryptocurrencies?

A cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a so-called peer-to-peer system in which any user can make and receive payments anywhere. Instead of physical money exchanged in the real world, cryptocurrencies only exist as digital entries in online databases that describe individual transactions. When you transfer cryptocurrencies, the transactions are recorded in a public register. You keep your own crypto money in a digital wallet (cyber wallet or e-wallet).

Cryptocurrencies owe their name to the fact that encryption is used to verify transactions. This means that complex coding used when storing and transferring cryptocurrency data between e-wallets and the public register. The aim of this encryption is to increase security.

How Safe are Cryptocurrencies?

Cryptocurrencies are usually based on blockchain technology. “Blockchain” describes the type of recording of transactions in so-called blocks and with a time stamp. The technological process is extremely complex, which makes the digital register of crypto transactions difficult for hackers to crack.
In addition, all transactions require two-factor authentication. For example, users have to log in with their username and password to start a transaction and then enter an authentication code that was sent to their cell phone via SMS.

But although there are various security mechanisms in place, that does not mean that cryptocurrencies are unhackable. In fact, some crypto start-ups have already lost large sums of money to hacking. In 2018, Coincheck hit $ 534 million and BitGrail hit $ 195 million. These are the two biggest cryptocurrency hacks of 2018.

Also Read: Bitcoin – Definition, How It Works, Future And More

Four Tips for Safe Investments in Cryptocurrencies

Investments are always associated with risks. But as Consumer Reports reports, some experts believe that investing in cryptocurrencies is one of the riskier options. However, digital currencies are currently one of the most sought-after goods. Earlier this year, CNBC estimated that the cryptocurrency market would hit $ 1 trillion by the end of 2018. So if you need to invest in cryptocurrencies, we can support you with the following tips.

Find Out About Stock Exchanges

Before you even invest a penny, you should research the various crypto exchanges. These platforms offer features to buy and sell digital currencies, you have 500 different exchanges to choose from. This is why you need to do your research, read reviews, and speak to knowledgeable investors before proceeding.

Find Out How To Store Your Digital Currency

When you buy cryptocurrencies, you have to store them somewhere too. You can use an exchange or an e-wallet for this, e.g. B. one of the crypto wallets in our blog post about choosing the right cyber wallet . There are different types of wallets, all of which offer different advantages, technical requirements and security functions. Just like with exchanges, you should study carefully choosing the right wallet before investing.

Diversify Your Investments

Diversification is the key to any good investment strategy. This also applies to cryptocurrencies. For example, don’t put all of your money in Bitcoin just because you already know that name. There are thousands of options – and it’s best to split your investment across multiple currencies.

Prepare For Price Fluctuations

The cryptocurrency market is extremely volatile. Therefore, you should prepare for price fluctuations. And these fluctuations can sometimes be very severe. If your budget does not offer sufficient buffer or the stress does not get you, then you should think twice about investing in cryptocurrencies.

Cryptocurrencies are currently the number one topic, but remember: the technology is still in its infancy. Investing in this market therefore associated with challenges. If you want to earn money in this market, do your research and invest conservatively at the beginning.

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  • Cryptocurrencies
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