At a glance

  • Cryptocurrency was born in the wake of the 2008 financial crisis
  • The technology it’s based on is now changing the internet and the way businesses work
  • Over the last few years, many people have become rich by investing in cryptocurrency, but many have lost money, too
  • There are five cryptocurrencies every investor should keep their eye on

At a glance

  • Cryptocurrency was born in the wake of the 2008 financial crisis
  • The technology it’s based on is now changing the internet and the way businesses work
  • Over the last few years, many people have become rich by investing in cryptocurrency, but many have lost money, too
  • There are five cryptocurrencies every investor should keep their eye on

At a glance

  • Cryptocurrency was born in the wake of the 2008 financial crisis
  • The technology it’s based on is now changing the internet and the way businesses work
  • Over the last few years, many people have become rich by investing in cryptocurrency, but many have lost money, too
  • There are five cryptocurrencies every investor should keep their eye on

Over the last few years, you’ve probably heard stories of people making, and losing, thousands of pounds investing money in cryptocurrency. But what exactly is it, how does it work, why has it gained so much attention, and should you get involved?

In the beginning there was Bitcoin

Bitcoin is the biggest and most well-known cryptocurrency. It was created in 2009 by an anonymous computer coder who went by the name of Satoshi Nakamoto.

To this day, Nakamoto’s real identity remains a mystery. Although there have been many rumours, nothing has ever been proven.

Bitcoin was born in the wake of the 2008 financial crisis, when governments around the world slashed interest rates and printed trillions of pounds’ worth of money to get the economy going again.

Many cryptocurrency proponents argue that this money printing, also called quantitative easing (QE), simply raised asset prices while lowering real wages, inspiring Nakamoto to change the system and make QE impossible.

Where does cryptocurrency get its value from?

The way Bitcoin is coded means there will only ever be 21 million Bitcoins in existence. No one can simply create more of it out of thin air, no matter how much they may want to, and this limit is where much of its value comes from.

The more famous bitcoin gets, the more people want to own it. And since its supply is finite, the price goes up.

Right now, there are around 47 million millionaires in the world. If each of them wanted to own a Bitcoin, they couldn’t. In fact, they couldn’t even own half of one.

But it’s not just scarcity that gives Bitcoin value. It’s also trust.

How does cryptocurrency work?

To really understand bitcoin you need to understand the blockchain.

The Bitcoin blockchain is a permanent ledger of every Bitcoin transaction ever carried out. It is stored and maintained by thousands of individual computers all around the world and it is accessible to anyone with an internet connection.

This blockchain has no central point of failure and cannot be controlled or altered by any one person, making it a decentralised network that cuts banks and financial institutions out of financial transactions.

With Bitcoin, you can directly exchange money with anyone, anywhere in the world, in a matter of minutes, and you can safeguard any transaction by simply looking it up on the Bitcoin network. Permanent, irreversible and available for anyone to see, Bitcoin effectively created a whole new global monetary system.

Cryptocurrency is now much more than money

Today we can think of Bitcoin as cryptocurrency 1.0 – perfectly good for storing and transferring value, but not for much else. Here’s where cryptocurrency 2.0 comes in.

While many second-generation cryptocurrencies emerged after Bitcoin, Ethereum is now the biggest and the most versatile. Just like a computer system, Ethereum is programmable. Instead of transferring a single type of currency, Ethereum can create and transfer any type of value you can think of.

It does this by using something called ‘smart contracts’, written into code, that execute automatically when certain conditions are met. A smart contract, for instance, could represent a property title, and it could be programmed in such a way that it also pays out a corresponding percentage of that property’s rental income every month.

Equally, a smart contract could represent an insurance policy, a work of art, a sports bet or just about anything you care to think of.

Second-generation cryptocurrencies are essentially platforms for people to build new, decentralised systems – or apps – on top of the existing system, which is a concept big and broad enough to earn them the nickname of ‘the next internet’.

Investing in cryptocurrency – the dos and don’ts

If you want to know how to make money investing in cryptocurrency, there are several things you need to be aware of.

Firstly, never invest more money than you are happy to lose. Investing in cryptocurrency can potentially turn a small amount of money into a life-changing sum. But by the same token, you can also lose almost everything you put into in within days, or even hours.

To give you an example, if you’d put £1,000 into Ethereum in January 2017, you’d have been sitting on £165,000 by January 2018. However, if you’d put £1,000 into Ethereum in January 2018, you’d only have been left with £96 in January 2019, according to analysis from the price-tracking website CoinMarketCap.

Secondly, you’re in charge of storing your own cryptocurrency. If you lose it, no one can get it back for you. In traditional investing, you use a bank or a broker to store your assets, but with cryptocurrency you have to trust yourself to do that.

However, as cryptocurrency has become ever more popular, a number of companies have popped up that will take care of that for you. The question is, how do you know if you can trust them?

Currently the most popular places for UK investors to buy and store cryptocurrency are Coinbase and Bitpanda. Both of these institutions are regulated and insured, and they have both been running for a number of years.

Five cryptocurrencies to watch

Once you have a grasp on what cryptocurrencies are and why they are valuable, you need to do your research to find out which ones are worth investing in. New cryptocurrencies are emerging all the time, and investing is a fast-paced business that demands constant monitoring. Here are five to watch:

Bitcoin

Bitcoin is the cryptocurrency that started it all. While it may lack the features of some of the newer cryptocurrencies, it still accounts for more than 60% of all the money invested in cryptocurrency, according to CoinMarketCap.

Ethereum

Ethereum is the second-biggest cryptocurrency by market capitalisation, according to CoinMarketCap. Data analyst and investor Adam Cochran reported in early 2020 that Ethereum has more than 350 major companies building apps on it, including Microsoft, Nike, Amazon, Intel, Nestle, Ford, McDonald’s, American Express and countless others.

Monero

While many people think Bitcoin allows people to pay for things anonymously, it does not. In fact, tracing Bitcoin transactions is much easier than tracing traditional ones.

Monero, on the other hand, has a high level of privacy. And in an ever more public world, a truly private means of exchange could become extremely valuable.

Like bitcoin, Monero is simply a pure cryptocurrency. It only transfers value – no apps or smart contracts – but it does so with complete anonymity.

Tezos

The main thing to know about Tezos is that it is possible to make money simply by holding it.

It uses a different method to Bitcoin to keep its network secure. And this means that if you choose, you can ‘stake’ your Tezos and receive around 7% per year in rewards – paid out roughly every three days.

It’s one of the newer kids on the block, but it has gained traction fast and is working with a number of big businesses.

In the last couple of years tens of millions of pounds of real estate has been secured on the Tezos blockchain, according to the CoinDesk platform.

IOTA

IOTA takes a completely different approach to almost every other cryptocurrency out there.

While you have to pay a small fee to send a transaction on Bitcoin, Ethereum, Monero or Tezos, IOTA lets you do it for free.

And while most cryptocurrencies slow down as more demand is added to their network, IOTA actually speeds up.

These properties make it a cryptocurrency for the ‘machine to machine economy’ or the ‘internet of things’. While IOTA has yet to completely prove itself, it holds a huge amount of potential, which makes it a very interesting cryptocurrency to watch.

Over the last few years, you’ve probably heard stories of people making, and losing, thousands of pounds investing money in cryptocurrency. But what exactly is it, how does it work, why has it gained so much attention, and should you get involved?

In the beginning there was Bitcoin

Bitcoin is the biggest and most well-known cryptocurrency. It was created in 2009 by an anonymous computer coder who went by the name of Satoshi Nakamoto.

To this day, Nakamoto’s real identity remains a mystery. Although there have been many rumours, nothing has ever been proven.

Bitcoin was born in the wake of the 2008 financial crisis, when governments around the world slashed interest rates and printed trillions of pounds’ worth of money to get the economy going again.

Many cryptocurrency proponents argue that this money printing, also called quantitative easing (QE), simply raised asset prices while lowering real wages, inspiring Nakamoto to change the system and make QE impossible.

Where does cryptocurrency get its value from?

The way Bitcoin is coded means there will only ever be 21 million Bitcoins in existence. No one can simply create more of it out of thin air, no matter how much they may want to, and this limit is where much of its value comes from.

The more famous bitcoin gets, the more people want to own it. And since its supply is finite, the price goes up.

Right now, there are around 47 million millionaires in the world. If each of them wanted to own a Bitcoin, they couldn’t. In fact, they couldn’t even own half of one.

But it’s not just scarcity that gives Bitcoin value. It’s also trust.

How does cryptocurrency work?

To really understand bitcoin you need to understand the blockchain.

The Bitcoin blockchain is a permanent ledger of every Bitcoin transaction ever carried out. It is stored and maintained by thousands of individual computers all around the world and it is accessible to anyone with an internet connection.

This blockchain has no central point of failure and cannot be controlled or altered by any one person, making it a decentralised network that cuts banks and financial institutions out of financial transactions.

With Bitcoin, you can directly exchange money with anyone, anywhere in the world, in a matter of minutes, and you can safeguard any transaction by simply looking it up on the Bitcoin network. Permanent, irreversible and available for anyone to see, Bitcoin effectively created a whole new global monetary system.

Cryptocurrency is now much more than money

Today we can think of Bitcoin as cryptocurrency 1.0 – perfectly good for storing and transferring value, but not for much else. Here’s where cryptocurrency 2.0 comes in.

While many second-generation cryptocurrencies emerged after Bitcoin, Ethereum is now the biggest and the most versatile. Just like a computer system, Ethereum is programmable. Instead of transferring a single type of currency, Ethereum can create and transfer any type of value you can think of.

It does this by using something called ‘smart contracts’, written into code, that execute automatically when certain conditions are met. A smart contract, for instance, could represent a property title, and it could be programmed in such a way that it also pays out a corresponding percentage of that property’s rental income every month.

Equally, a smart contract could represent an insurance policy, a work of art, a sports bet or just about anything you care to think of.

Second-generation cryptocurrencies are essentially platforms for people to build new, decentralised systems – or apps – on top of the existing system, which is a concept big and broad enough to earn them the nickname of ‘the next internet’.

Investing in cryptocurrency – the dos and don’ts

If you want to know how to make money investing in cryptocurrency, there are several things you need to be aware of.

Firstly, never invest more money than you are happy to lose. Investing in cryptocurrency can potentially turn a small amount of money into a life-changing sum. But by the same token, you can also lose almost everything you put into in within days, or even hours.

To give you an example, if you’d put £1,000 into Ethereum in January 2017, you’d have been sitting on £165,000 by January 2018. However, if you’d put £1,000 into Ethereum in January 2018, you’d only have been left with £96 in January 2019, according to analysis from the price-tracking website CoinMarketCap.

Secondly, you’re in charge of storing your own cryptocurrency. If you lose it, no one can get it back for you. In traditional investing, you use a bank or a broker to store your assets, but with cryptocurrency you have to trust yourself to do that.

However, as cryptocurrency has become ever more popular, a number of companies have popped up that will take care of that for you. The question is, how do you know if you can trust them?

Currently the most popular places for UK investors to buy and store cryptocurrency are Coinbase and Bitpanda. Both of these institutions are regulated and insured, and they have both been running for a number of years.

Five cryptocurrencies to watch

Once you have a grasp on what cryptocurrencies are and why they are valuable, you need to do your research to find out which ones are worth investing in. New cryptocurrencies are emerging all the time, and investing is a fast-paced business that demands constant monitoring. Here are five to watch:

Bitcoin

Bitcoin is the cryptocurrency that started it all. While it may lack the features of some of the newer cryptocurrencies, it still accounts for more than 60% of all the money invested in cryptocurrency, according to CoinMarketCap.

Ethereum

Ethereum is the second-biggest cryptocurrency by market capitalisation, according to CoinMarketCap. Data analyst and investor Adam Cochran reported in early 2020 that Ethereum has more than 350 major companies building apps on it, including Microsoft, Nike, Amazon, Intel, Nestle, Ford, McDonald’s, American Express and countless others.

Monero

While many people think Bitcoin allows people to pay for things anonymously, it does not. In fact, tracing Bitcoin transactions is much easier than tracing traditional ones.

Monero, on the other hand, has a high level of privacy. And in an ever more public world, a truly private means of exchange could become extremely valuable.

Like bitcoin, Monero is simply a pure cryptocurrency. It only transfers value – no apps or smart contracts – but it does so with complete anonymity.

Tezos

The main thing to know about Tezos is that it is possible to make money simply by holding it.

It uses a different method to Bitcoin to keep its network secure. And this means that if you choose, you can ‘stake’ your Tezos and receive around 7% per year in rewards – paid out roughly every three days.

It’s one of the newer kids on the block, but it has gained traction fast and is working with a number of big businesses.

In the last couple of years tens of millions of pounds of real estate has been secured on the Tezos blockchain, according to the CoinDesk platform.

IOTA

IOTA takes a completely different approach to almost every other cryptocurrency out there.

While you have to pay a small fee to send a transaction on Bitcoin, Ethereum, Monero or Tezos, IOTA lets you do it for free.

And while most cryptocurrencies slow down as more demand is added to their network, IOTA actually speeds up.

These properties make it a cryptocurrency for the ‘machine to machine economy’ or the ‘internet of things’. While IOTA has yet to completely prove itself, it holds a huge amount of potential, which makes it a very interesting cryptocurrency to watch.

Over the last few years, you’ve probably heard stories of people making, and losing, thousands of pounds investing money in cryptocurrency. But what exactly is it, how does it work, why has it gained so much attention, and should you get involved?

In the beginning there was Bitcoin

Bitcoin is the biggest and most well-known cryptocurrency. It was created in 2009 by an anonymous computer coder who went by the name of Satoshi Nakamoto.

To this day, Nakamoto’s real identity remains a mystery. Although there have been many rumours, nothing has ever been proven.

Bitcoin was born in the wake of the 2008 financial crisis, when governments around the world slashed interest rates and printed trillions of pounds’ worth of money to get the economy going again.

Many cryptocurrency proponents argue that this money printing, also called quantitative easing (QE), simply raised asset prices while lowering real wages, inspiring Nakamoto to change the system and make QE impossible.

Where does cryptocurrency get its value from?

The way Bitcoin is coded means there will only ever be 21 million Bitcoins in existence. No one can simply create more of it out of thin air, no matter how much they may want to, and this limit is where much of its value comes from.

The more famous bitcoin gets, the more people want to own it. And since its supply is finite, the price goes up.

Right now, there are around 47 million millionaires in the world. If each of them wanted to own a Bitcoin, they couldn’t. In fact, they couldn’t even own half of one.

But it’s not just scarcity that gives Bitcoin value. It’s also trust.

How does cryptocurrency work?

To really understand bitcoin you need to understand the blockchain.

The Bitcoin blockchain is a permanent ledger of every Bitcoin transaction ever carried out. It is stored and maintained by thousands of individual computers all around the world and it is accessible to anyone with an internet connection.

This blockchain has no central point of failure and cannot be controlled or altered by any one person, making it a decentralised network that cuts banks and financial institutions out of financial transactions.

With Bitcoin, you can directly exchange money with anyone, anywhere in the world, in a matter of minutes, and you can safeguard any transaction by simply looking it up on the Bitcoin network. Permanent, irreversible and available for anyone to see, Bitcoin effectively created a whole new global monetary system.

Cryptocurrency is now much more than money

Today we can think of Bitcoin as cryptocurrency 1.0 – perfectly good for storing and transferring value, but not for much else. Here’s where cryptocurrency 2.0 comes in.

While many second-generation cryptocurrencies emerged after Bitcoin, Ethereum is now the biggest and the most versatile. Just like a computer system, Ethereum is programmable. Instead of transferring a single type of currency, Ethereum can create and transfer any type of value you can think of.

It does this by using something called ‘smart contracts’, written into code, that execute automatically when certain conditions are met. A smart contract, for instance, could represent a property title, and it could be programmed in such a way that it also pays out a corresponding percentage of that property’s rental income every month.

Equally, a smart contract could represent an insurance policy, a work of art, a sports bet or just about anything you care to think of.

Second-generation cryptocurrencies are essentially platforms for people to build new, decentralised systems – or apps – on top of the existing system, which is a concept big and broad enough to earn them the nickname of ‘the next internet’.

Investing in cryptocurrency – the dos and don’ts

If you want to know how to make money investing in cryptocurrency, there are several things you need to be aware of.

Firstly, never invest more money than you are happy to lose. Investing in cryptocurrency can potentially turn a small amount of money into a life-changing sum. But by the same token, you can also lose almost everything you put into in within days, or even hours.

To give you an example, if you’d put £1,000 into Ethereum in January 2017, you’d have been sitting on £165,000 by January 2018. However, if you’d put £1,000 into Ethereum in January 2018, you’d only have been left with £96 in January 2019, according to analysis from the price-tracking website CoinMarketCap.

Secondly, you’re in charge of storing your own cryptocurrency. If you lose it, no one can get it back for you. In traditional investing, you use a bank or a broker to store your assets, but with cryptocurrency you have to trust yourself to do that.

However, as cryptocurrency has become ever more popular, a number of companies have popped up that will take care of that for you. The question is, how do you know if you can trust them?

Currently the most popular places for UK investors to buy and store cryptocurrency are Coinbase and Bitpanda. Both of these institutions are regulated and insured, and they have both been running for a number of years.

Five cryptocurrencies to watch

Once you have a grasp on what cryptocurrencies are and why they are valuable, you need to do your research to find out which ones are worth investing in. New cryptocurrencies are emerging all the time, and investing is a fast-paced business that demands constant monitoring. Here are five to watch:

Bitcoin

Bitcoin is the cryptocurrency that started it all. While it may lack the features of some of the newer cryptocurrencies, it still accounts for more than 60% of all the money invested in cryptocurrency, according to CoinMarketCap.

Ethereum

Ethereum is the second-biggest cryptocurrency by market capitalisation, according to CoinMarketCap. Data analyst and investor Adam Cochran reported in early 2020 that Ethereum has more than 350 major companies building apps on it, including Microsoft, Nike, Amazon, Intel, Nestle, Ford, McDonald’s, American Express and countless others.

Monero

While many people think Bitcoin allows people to pay for things anonymously, it does not. In fact, tracing Bitcoin transactions is much easier than tracing traditional ones.

Monero, on the other hand, has a high level of privacy. And in an ever more public world, a truly private means of exchange could become extremely valuable.

Like bitcoin, Monero is simply a pure cryptocurrency. It only transfers value – no apps or smart contracts – but it does so with complete anonymity.

Tezos

The main thing to know about Tezos is that it is possible to make money simply by holding it.

It uses a different method to Bitcoin to keep its network secure. And this means that if you choose, you can ‘stake’ your Tezos and receive around 7% per year in rewards – paid out roughly every three days.

It’s one of the newer kids on the block, but it has gained traction fast and is working with a number of big businesses.

In the last couple of years tens of millions of pounds of real estate has been secured on the Tezos blockchain, according to the CoinDesk platform.

IOTA

IOTA takes a completely different approach to almost every other cryptocurrency out there.

While you have to pay a small fee to send a transaction on Bitcoin, Ethereum, Monero or Tezos, IOTA lets you do it for free.

And while most cryptocurrencies slow down as more demand is added to their network, IOTA actually speeds up.

These properties make it a cryptocurrency for the ‘machine to machine economy’ or the ‘internet of things’. While IOTA has yet to completely prove itself, it holds a huge amount of potential, which makes it a very interesting cryptocurrency to watch.

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