Simplified guide to cryptocurrencies

February 13, 2017
simplified guide to cryptocurrencies

Cryptocurrencies and blockchain technology in general are mind blowing. Once people see and understand the benefits they bring, not only to the financial world, but to all industries, they usually become full-time crypto advocates. We have yet to hear of someone that understands the wonders of cryptocurrency but thinks that centralized services are a better option. The hard part, however, is to get someone without any time of technical knowledge or background to come to terms with the concept of cryptocurrency and to use them properly and actively. That’s why we have taken the time to deliver a simplified guide that everyone can understand and use as a basis for they crypto-related endeavours.

In order to use cryptocurrencies like they are meant to be used, you need to define your purpose and which cryptocurrency will best serve this purpose. Are you looking for an investment or a store of value? For a way to make anonymous purchases? Maybe you want to make a normal purchase using Bitcoin, or you’re looking to accept cryptocurrency payments. You can read more about different cryptocurrencies and their applications here.

Where to store cryptocurrencies?

When using Bitcoin or any other digital currency, the first step is to have a wallet, which can be considered the equivalent of a bank account. Many users struggle with this and when left to their own devices, they will usually store cryptocurrencies with the same service that was used to buy them. Depending on the exchange used, this can often prove to be a fatal mistake. Many popular exchanges have been hacked before, including Mt. Gox, Poloniex, Gatecoin, Bitfinex, and others.

When you have your own private wallet, attackers need to target and hack your computer or to access it physically in order to get your coins and while this isn’t impossible, it’s less likely to happen to you than to a known exchange that’s holding a large amount of crypto assets.

There are many types of wallets with different levels of control. A full node wallet will require you to download and process the blockchain (meaning that you’ll be required to run a full node) and will allow you to retain full control of your private keys. Web wallets will have different types of security, some store your private keys, others encrypt them before hand and others do not store them at all. You can also have a mobile wallet, which can facilitate everyday use. It will be up to you to choose your preferred crypto wallet according to the features and characteristics you value the most, like ease-of-use, privacy, trust, and so on. Click here to see a list of cryptocurrency wallets and their features.

In Exscudo, users have multiple points of access to their financial ecospace. For example, there is the ‘Chatwallet’ – the mobile app that unites the functions of a wallet and a protected messenger. It is based on the EON blockchain, is absolutely secure, fast and usable. The app is among the first products of the Exscudo ecosystem to launch in 2017.

Now that you have chosen your cryptocurrency and that you have a wallet for said currency, you’ll need to get coins. You can either purchase or mine cryptocurrencies. The first one is easy, you can use an exchange like Exscudo to buy cryptocurrencies and transfer them into your wallet or store them with Exscudo. Mining coins, on the other hand, is much more complicated. It often requires some degree of technical knowledge and hardware, which will vary according to the coin. You can always use a cloud mining service to rent mining equipment for a certain time period.

When in possession of any crypto asset, you must be careful not to lose your private keys because once they are gone, they are gone for ever. Some wallets create a seed, a combination of random words that can recover your private key, so if you’re ever shown one it’s important that you make a copy and store it safely. Because of this risk, some users will often choose to store their cryptocurrencies with centralized services like an exchange or webwallet as they usually have a two-factor authentication.

How to use cryptocurrencies?

Now that you are in possession of your favorite cryptocurrency and you have the knowledge required to choose where to store it you can start using it. There are many services and stores that accept cryptocurrencies, especially Bitcoin. You can shop online, gamble, donate to charity, invest, lend, trade, etc. Everything you can do with a payment processor like Paypal, you can do with Bitcoin or altcoins but for a lower fee and more efficiently. All you have to do is choose the Bitcoin option and send a transaction to the correct wallet address. Furthermore, using Exscudo, you will be able to use cryptocurrencies everywhere. Thanks to Exscudo’s credit/debit card feature, users will be able to make fiat payments that are automatically withdrawn from their cryptocurrency balances within the exchange wallet.

You can also accept cryptocurrencies yourself as a merchant, as there are many services like Coinbase and Blockpay that facilitate this process.

These are the basics to acquiring, storing and using cryptocurrencies, but there is still much to learn. When buying into any cryptocurrency it’s very important to perform due diligence and to research the topic thoroughly, as there are many “worthless” coins out there that do not provide any new feature and are not widely accepted. Generally it’s best to stick with known and proven coins like Bitcoin, Ethereum, Monero, Ripple, and so on.
It’s also important to check up on every wallet and service used as to evaluate its reputation and security. Since cryptocurrencies are still emerging technology, it’s a realm where scams and incompetence are not so unusual.
If using a centralized wallet and/or it’s very important that you maximize your security by using a strong and random password and activating two factor authentication.

The biggest challenge for blockchain technology today is mainstream adoption and the biggest obstacle in reaching this goal has been security. If users are well-informed, we can greatly reduce security risks, so it’s up to every single one of us to use crypto responsibly and to help our peers to do so whenever possible.

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