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Cryptocurrency Basics

Crypto

A cryptocurrency is a digital or virtual currency that uses cryptography for security. It is difficult to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Cryptocurrencies make it easier to transfer funds between two parties in a transaction; these transfers are facilitated through the use of public and private keys for security purposes. These fund transfers are done with minimal processing fees, allowing users to avoid the steep fees charged by most banks and financial institutions for wire transfers.
Central to the appeal and functions of Bitcoin Technology, it is used to store an online ledger of all the transactions that have ever been conducted using bitcoins, providing a data structure for this ledger that is exposed to a limited threat from hackers and can be copied across all computers running Bitcoin software. Every new block generated must be verified by the ledgers of each user on the market, making it almost impossible to forge transaction histories. Many experts see this blockchain as having important uses in technologies, such as online voting and crowdfunding, and major financial institutions such as JP Morgan Chase see potential in cryptocurrencies to lower transaction costs by making payment processing more efficient.
However, because cryptocurrencies are virtual and do not have a central repository, a digital cryptocurrency balance can be wiped out by a computer crash if a backup copy of the holdings does not exist. Since prices are based on supply and demand, the rate at which a cryptocurrency can be exchanged for another currency can fluctuate widely.

Staking

Crypto staking is locking up cryptocurrency that you already own in order to earn rewards in a blockchain that uses a Proof-of-Stake (POS) consensus protocol. The protocol then randomly assigns the right to validate the next block and earn the block rewards associated with adding that block to the blockchain to a user who has locked up the required amount of cryptocurrency.
In simple terms, it's almost like pledging an asset so that you can be entered into a lucky draw where the winner gets the prize of writing the next ledger entry, or block, to the distributed ledger (called the blockchain), and the fees for doing so.
You don't lose the asset you pledge, regardless of whether you are chosen or not, and the more coins you pledge, the higher your chances of being selected as the lucky winner. Some systems even offer a small reward for staking your cryptocurrency.
Similarly, when you stake your digital assets, you lock up the coins in order to participate in running the blockchain and maintaining its security. In exchange for that, you earn rewards calculated in percentage yields. These returns are typically much higher than any interest rate offered by banks. Staking has become a popular way to make a profit in crypto without trading coins. As of April 2022, the total value of cryptocurrencies staked exceeded the $280 billion threshold, according to Staking Rewards. The stake does not have to consist exclusively of one person's coins. Most of the time, validators run a staking pool and raise funds from a group of token holders through delegation (acting on behalf of others) - lowering the barrier to entry for more users to participate in staking. Any holder can participate in the staking process by delegating their coins to stake pool operators who do all the heavy lifting involved with validating transactions on the blockchain.

Crypto Loan

A crypto loan is a type of secured loan in which your crypto holdings are used as collateral in exchange for liquidity from a lender that you'll pay back in installments. As long as you make your payments and pay the loan amount in full, you get your crypto back at the end of the loan term.
Typically, the crypto loan amount is a loan-to-value, or LTV, percentage of the cryptocurrency you are pledging as collateral. You can borrow up to 50% of your crypto's value with a lender like variable , or up to 90% with a lender like variable. Some lenders accept as many as 40 different cryptocurrencies as collateral, with Bitcoin and Ethereum being the most popular.
Loan terms can be anywhere from seven days to a year or more. Interest rates are low compared to personal loans and credit cards, with rates starting at a range of 0%-13.9% with a lender like Nexo.
Crypto loans are attractive for holders who believe their crypto assets' long-term value will increase, but need cash for purchases in the present. But crypto loans come with inherent risks, like requiring additional collateral if the value of your crypto goes down and high penalties for missed payments.

There are 2 types of crypto loans: CeFi and DeFi.
Centralized Finance, or CeFi, loans are custodial crypto loans where a lender has control over your crypto during the repayment term. Most crypto loans fall under the CeFi umbrella.
Decentralized Finance, or DeFi, loans rely on smart contracts to ensure you adhere to the loan requirements. You retain control of your crypto assets, but a lender can take automatic actions against your account if you default or miss a payment. DeFi crypto loans can have higher interest rates than CeFi.

How to buy Bitcoin

Step 1: Choose a Crypto Trading Service or Venue

Exchanges are a convenient option because they offer a breadth of features and more cryptocurrencies for trading, enabling investors to buy, sell, and hold cryptocurrency, and allow its users to withdraw crypto to their online wallet for safekeeping.
When creating a cryptocurrency exchange account, use two-factor authentication and a long, unique password that includes a variety of lowercase letters, capitalized letters, special characters, and numbers. There are many types of cryptocurrency exchanges. Some exchanges allow users to remain anonymous and are decentralized and do not require users to enter personal information. For certain demographics, like refugees or those living in countries with little to no infrastructure for government credit or banking, anonymous exchanges can help bring them into the mainstream economy.
Popular exchanges in the United States are not decentralized and follow laws that require users to submit identifying documentation. These exchanges include names like Coinbase, Kraken, Gemini, FTX, and Binance which offer Bitcoin and a growing number of altcoins.
Binance caters to a more advanced trader, offering more serious trading functionality and a better variety of altcoin choices. FTX, a fast-growing crypto exchange that has garnered a multibillion-dollar valuation, offers a restricted number of altcoins to U.S. investors.

Step 2: Connect Your Exchange to a Payment Option

Depending on the exchange, personal identification is required and may include pictures of a driver's license or Social Security card, as well as information about your employer and source of funds. The process is largely the same as setting up a typical brokerage account.
At most exchanges, you can connect your bank account directly or you can connect a debit or credit card. Although you can use a credit card to purchase cryptocurrency, cryptocurrency price volatility could inflate the overall cost of purchasing a coin when combined with a credit card's interest. Bitcoin is legal in the United States, but some banks may question or even stop deposits to crypto-related sites or exchanges.
Fees vary for deposits via a bank account, debit, or credit card, and exchanges also charge fees per transaction.

Crypto Basics

A cryptocurrency is a coded string of data representing a currency unit. Peer-to-peer networks called blockchains monitor and organize cryptocurrency transactions, such as buying, selling, and transferring, and also serve as secure ledgers of transactions. By utilizing encryption technology, cryptocurrencies can serve as both a currency and an accounting system.
A cryptocurrency is a digital or virtual currency that is meant to be a medium of exchange. It is quite similar to real-world currency, except it does not have any physical embodiment, and it uses cryptography to work.
Because cryptocurrencies operate independently and in a decentralized manner, without a bank or a central authority, new units can be added only after certain conditions are met. For example, with Bitcoin, only after a block has been added to the blockchain will the miner be rewarded with bitcoins, and this is the only way new bitcoins can be generated. The limit for bitcoins is 21 million; after this, no more bitcoins will be produced.

Commission

An investor can execute a wide variety of transactions on a cryptocurrency exchange, each of which comes with its own cost structure. The cost of any given crypto transaction can change regularly and on short notice — so if you're trading cryptocurrency, you should be checking fees often. There are two types of crypto fees. Here's a look at each.

Exchange Fees For a cryptocurrency exchange to make money, it needs to attach to some of the financial momentum flowing through it. In most cases, that means assessing fees for common transactions, such as:
Trading Deposits made when moving crypto to online storage spaces, like digital wallets Withdrawals and liquidations Loans

Network Fees Cryptocurrency is a digital asset that, to date, is not controlled by any regulatory party, including the government. Cryptocurrency is hosted on networks and computers all over the globe and, at present, trades are made between buyer and seller, with no third party running point. The transaction does need to be recorded, though, so with network fees, you're paying compensation for the resources needed to validate and record your transaction on the public blockchain. Most cryptocurrency exchanges charge between 0% and 1.5% per trade, depending on whether you're a maker (buyer) or taker (seller). Fees vary by exchange.
That means that if you've dedicated $1,000 to invest in crypto, the fee you'll pay for that transaction, on average, could be anywhere from $0 to $15.

What is XRP/ BITCOIN

XRP, a cryptocurrency launched in 2012 by Ripple Labs, operates within a different framework compared to Bitcoin. While Bitcoin aims to decentralize financial transactions and replace traditional currencies, XRP is designed to facilitate fast, low-cost cross-border payments for financial institutions.

In an XRP transaction, the sender specifies the recipient and amount, similar to Bitcoin. However, instead of relying on proof-of-work mining like Bitcoin, XRP transactions are validated by a network of trusted validators, most of which are operated by Ripple. This consensus mechanism allows for much faster transaction times and lower fees compared to Bitcoin.

XRP transactions are processed through Ripple's proprietary technology called the XRP Ledger. This ledger maintains a record of all XRP transactions and account balances, ensuring transparency and security.

One unique aspect of XRP is its utility as a bridge currency. Financial institutions can use XRP as a liquidity solution to facilitate transactions between different fiat currencies, reducing the need for pre-funded nostro and vostro accounts.

While Bitcoin is often viewed as a store of value or digital gold, XRP serves primarily as a utility token for facilitating efficient cross-border payments. Its use case and technological approach distinguish it from Bitcoin, positioning it as a key player in the realm of blockchain-based financial solutions.