What is Cryptocurrency?
Cryptocurrency is a form of digital or virtual currency that uses cryptography for secure transactions. It operates on decentralized networks based on blockchain technology. Unlike traditional currencies, cryptocurrencies are not controlled by any central authority. This makes them resistant to censorship and fraud.
Understanding Blockchain Technology
Blockchain technology is a decentralized, distributed digital ledger that records transactions across multiple computers. It does this in a secure, transparent and immutable way. This ensures data integrity through cryptographic techniques and consensus mechanisms. This makes it the foundation for cryptocurrencies and various other applications. Such as supply chain management, voting systems and smart contracts.
Types of Cryptocurrencies.
We categorize Cryptocurrencies based on their use cases and features. Some of the the main types are:
Bitcoin.
Bitcoin is the first and most well-known cyptocurrency in the world. It was created in 2009 by an anonymous entity called Satoshi Nakamoto. Bitcoin serves as a digital store of value and a medium of exchange.
Bitcoin is also the most traded cryptocurrency in the world.
Ethereum.
Ethereum is the second most re-known cryptocurrency in the world. It was introduced in 2015. It features smart contracts that enable decentralized applications(dApps).
Ether (ETH) is its native cryptocurrency. It is used for transactions. It also powers applications on the network.
Altcoins and Stablecoins.
Another cryptocurrency is the altcoins and the stablecoins.
The altcoins comprise of other cryptocurrencies such as Litecoin, Cardano, and Polkadot. Each of these coins offers its unique features that you cant find on bitcoin.
The Stablecoins are designed to minimize price volatility by pegging their value to stable assets like fiat currency. Say for-example, tethering/tying their value are to the USD. This reduces the investment risks. However, this takes away the independence and freedom that cryptocurrency brings. You know the whole idea of cryptocurrency was to seek independence away from USD.
Ways to Make Money with Cryptocurrency.
Now that we are done with the basic explanations, we get to the juicy part. How can you use these cryptocurrencies to make money? Below, we will discuss the various ways you can use crypto to make money.
Method #1. Buying and Holding (HODLing).
Just like in the old forex trading, you can buy crypto today and hold it as you wait for the value to go up and sell it later. For-example, recently the bitcoin crossed the 100,000 USD mark. This means that one bitcoin is worth more than 100,000 USD. Just imagine that!!! Imagine the person who bought 10 bitcoin just when it was created in 2009 and kept them. Today that person is a Dollar Millionaire. Just think about that!! That is pure accumulation of value over a very short period of time.
However, you need to note that Crypto like bitcoin is very volatile. This means that it can gain value and loose value very easily and over a very short period of time. This means that you can easily loose money or easily make money. Hence you need to understand that crypto trading is much like gambling; nothing is assured.
Method #2. Trading on Exchanges.
Instead of holding the crypto like we have mentioned in method #1 above, you can trade the crypto in realtime and make money with the trends. You buy in when the curve is down and wait for the curve to rise high and sell. This way you keep making money with the curves. Similarly, when the curve is at the peak and you expect it to drop, you can short it. This implies that you expect the value to drop. When the value drops, you cash out and hence you make your money.
Unlike method #1 above, this is a quicker way of making money with cryptocurrency as it is in realtime. However, this is even more dangerous than HODLing. This is because the curve really changes a lot and if you do not know what you are doing you will loose money. This is literally like gambling. You are betting on the value of the bitcoin to go your way. If it goes your way, you win. If it goes against your way you loose money.
Hence we advice that before you venture into this, you take some classes to understand how to the trading.
Method #3. Staking and Earning Rewards.
Staking involves holding and locking up a certain amount of cryptocurrency in a wallet. You do this to support the operations of a blockchain network. This is particularly those that use Proof-of-Stake (PoS) or its variants.
In return, participants earn rewards. The rewards are typically in the form of additional cryptocurrency. They reward you as an incentive for securing the network and validating transactions.
Method #4. Mining Cryptocurrencies.
Mining cryptocurrencies is the process of validating and recording transactions on a blockchain network. This is done by solving complex cryptographic puzzles using computational power.
One way of this is by Proof-of-Work (PoW) Mechanism. In this miners compete to solve mathematical problems. Then the first to find a solution adds a new block to the blockchain. After doing this, the miners are rewarded with newly created cryptocurrency. Such as Bitcoin. They are also rewarded by transaction fees from the block they validate.
Method #5. Participating in Initial Coin Offerings (ICOs) or Token Sales.
Just as in startups, when there is a new cryptocurrency being launched, they have the initial coin offering. This is the initial sale of the coins to the markets. If you can manage to be one of the very first people in the world to buy these coins, you can sell later at a very high price. What happens is that immediately after an ICO, the value shoots up to the skies. If you cash out at this point in time, you can even double or triple your money. However you need to make sure that you were one of the very first to buy the coins.
Method #6. Yield Farming and Liquidity Providing.
Yield Farming involves lending or staking your cryptocurrency in DeFi protocols to earn rewards. Typically these rewards are in the form of interest, additional tokens or fees.
Liquidity Providing involves depositing pairs of tokens (e.g., ETH/USDT) into decentralized exchanges (DEXs) like Uniswap or PancakeSwap. In return, you earn a share of the transaction fees generated by the trading activity within the pool.
Method #7. Lending and Borrowing.
With Lending, you deposit your cryptocurrencies into lending platforms or liquidity pools such as Aave or Compound. In return, you earn interest on their deposits which are lent out to borrowers.
On the other hand Borrowing allows you to access liquidity without selling your assets. This is often used for trading or other financial activities.
Conclusion.
With this empowering information about How To Make Money With Cryptocurrency we have provided you with, you can start making money.
Just keep in mind that there are risks involved in crypto-trading. Its not a walk in the park as many make it look like. If it was that easy the whole world would be doing it and making billions from it. Take some time to learn some tactics used in crypto trading before starting.
