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5 Things to Consider Before Investing in Blockchain and Cryptocurrency

02/10/2022 18:00:55 +0000
Blockchain and cryptocurrency such as Bitcoin aren't only disruptive technologies changing how people, organizations, and governments transact and exchange data. For investors seeking prospective returns and diversification, digital assets have emerged as a key asset class. The cryptocurrency market alone has a whopping 12,000 coins with over $2 trillion market capitalization.

 

You're missing out on the complete picture if you assume bitcoin and blockchain are the only digital assets worth learning about as an investor. The digital asset ecosystem encompasses more than simply cryptocurrency and blockchain; it also includes companies that mine crypto and supply technology, as well as businesses that stand to benefit from blockchains' numerous applications.

What is the Blockchain?
Before we can really talk about investing in blockchain, you first need to know what it actually is. So, in simplest terms, a blockchain is a ledger or database that is distributed and shared among many different parts of a computer network. Due to it being a sort of a database, blockchain is used to store digital information electronically.
 

When it comes to cryptocurrency systems like Bitcoin, the blockchain is absolutely crucial. Thanks to the blockchain, Bitcoin has a decentralized and very secure record of all transactions that have been made. One of the biggest benefits that blockchain brings to the table is security of data. Moreover, it also helps to ensure high fidelity, plus it helps to create trust without a third party being required.

What is important to note is that the blockchain is very different from a normal database. In the blockchain, information is gathered and stored in what are known as blocks, which are nothing more than groups of information.

Each of these blocks has a capacity in terms of the amount of information that can be stored. When that capacity is met, the block is closed and then linked together with the previous block, hence forming a chain, which is why it is called a blockchain. Any information that comes after the full block is put in a new block, until said block is also full, at which time is is then added to the chain.

With a normal database, things like table and spreadsheets are used to store information, but the blockchains uses blocks or chunks to data that are linked together like a chain. What is also worth noting is that each block has a timestamp associated with it. 

How a Blockchain Works - Key Features and Takeaways 
Now that you have a rough idea of what a blockchain is, let's take a closer look at exactly how it works and what some of the key features of blockchains are. As you will see, there is a wide range of reasons why investing in digital transactions may be a good idea.
 

The number one goal and feature of the blockchain is to allow information to be stored and recorded in a digital manner, but in a way that it cannot be edited. In this sense, the blockchain is the cornerstone of what is known as an immutable ledger. In other words, these are recorded transactions that are 100% permanent. They cannot be altered or destroyed in any way.

In terms of how the blockchain works, first a new transaction is entered. This transaction is transmitted through a series of peer to peer computers that could be anywhere in the world. This network of computers uses mathematical principles to solve equations designed to confirm that the transaction is valid and legitimate. once the legitimacy of the transactions has been confirmed, they are then organized into blocks. Once a block is full, it is added to the chain, thus making it permanent. Blockchain stocks are therefore said to be very safe.

What is also important to note, in terms of cryptocurrency, is that it has intrinsic value. This is due to the fact that it allows for an easy way to transfer value at a very low cost, if any cost at all. There is also the fact that cryptocurrencies, and the blockchain as a whole, are all very secure and trustworthy. Blockchain investing can therefore be very profitable.

Another reason why investing in the blockchain can be a good idea is because it is totally decentralized, and is therefore totally transparent. There are tools out there that allow you to see blockchain transactions as they occur in real time. On this front, you may be worried about hackers stealing your cryptocurrencies. Well, although the hackers may not be traceable per say, each and every Bitcoin is. Cryptocurrencies are therefore great to add to your investment portfolio.

Also worth noting is that Bitcoin and cryptocurrencies have many advantages over normal centralized banking. For instance, Bitcoin is always available for use, unlike banks which have set business hours.

Next, Bitcoin also tends to have much lower transaction fees than any other bank out there. Moreover, Bitcoin transactions are very fast, unlike banking transactions which can sometimes take days to complete. Next, all you need to invest in and use Bitcoin is an internet connection and a Bitcoin wallet. However, if we are talking about regular banking, you need a variety of government issued identifiers. This helps make investment in cryptocurrencies a great option. 

Enter At Your Own Risk!
You should identify which risk category you belong to and what you expect from purchasing digital securities, just as you would with traditional securities like equities and bonds. Keep in mind right away: cryptocurrencies do not pay interest or dividends. The only way to make money is if the value of the coins you own rises in the future when this price increase is expected, and in what form it will take will be largely determined by the individual appraisal rather than relevant expert opinions or fundamental analyses.

 

Once you've decided to invest in digital assets, you're in a similar situation to when you first learned to swim: it's advisable not to dive headfirst into unknown currencies or coins. It makes sense to gain experience in little increments. Your expertise, confidence in creative investing options, and understanding of the hazards will improve as you gain experience. Soon, you can swim in the crypto world freely. Finally, it would help if you considered whether you could sleep well knowing that you have taken on the danger of investing in digital assets.

Know the Basics!
Blockchain is an immutable database that enables data to be saved and distributed across a global network of computers. Compared to traditional means of transacting and sharing information, it offers advantages to decentralization, security, and transparency. According to Deloitte, 75% of executive teams believe blockchain has a strong commercial case. Blockchain offers a vast - and rapidly developing - range of applications that might transform the way consumers, businesses, and governments trade and exchange information.

 

Cryptocurrency, first introduced in 2009, is a decentralized digital currency based on blockchain technology. A cryptocurrency, more exactly, is a non-traditional, digital form of currency that serves as a means of exchange and relies on encryption to verify and secure transactions. Altcoins are some of the names of cryptocurrency and referred to, while Bitcoin is the first and most commonly used cryptocurrency. As more companies enter the market, the market continues to grow and evolve.

Are You Feeling It?
Learning digital currencies is important for newcomers to understand how digital currencies operate before investing. There are different kinds of currencies to offer, and it's up to you to learn them and take time. With hundreds of other coins and tokens available, it's vital to explore beyond the largest names, like Ripple, Bitcoin, and Ether. Blockchain technology is also crucial to understanding how this component of the bitcoin industry operates.

 

If you don't have a background in computer science or coding, understanding some parts of blockchain technology will be difficult. There are numerous primers on blockchain technology written in layman's terms. Once you've decided on a cryptocurrency or many of them to invest in, look into how those tokens utilize blockchain technology and if they offer any unique features that set them apart from the competition. It'll better equip you to judge whether a possible investment opportunity is worthwhile if you have a deeper understanding of cryptocurrencies and blockchain technology.

Is it Unstable or Not?
It's true: crypto is as irritable as your 10-year-old cousin that always throws a tantrum. Its value rises and falls dramatically, and you never know what you'll get each day. Cryptocurrencies and blockchains both have massive ups and downs in their value. There's no doubting that some are popular right now, but how long will this last? The price is reduced when something fails to deliver to the server. Investing in cryptocurrencies is dangerous, to say the least.

 

Cryptocurrency trading is similar to gambling. Because it's swapped from person to person without any meaningful controls, there's no pattern to rising and falling of its value. You can't computer returns or figure out changes as you can with growth stock mutual funds. There isn't enough data or credibility to build a long-term bitcoin investment strategy. That's why people in this industry always say that you must enter at your own risk.

Where and How Can You Buy Cryptocurrency and Blockchain?
A cryptocurrency exchange is necessary if you want to purchase or sell cryptocurrencies. These online services are similar to stockbrokers in that they allow you to purchase and sell digital currencies such as Dogecoin, Bitcoin, and Ethereum. With cheap costs and excellent security features, the best cryptocurrency exchanges make buying and selling the currencies you desire simple. It's critical to consider supported currencies, pricing, withdrawal choices, and security when selecting the best cryptocurrency exchange for your needs.

 

You can't stroll into the bank or phone up your retirement plan administrator to buy cryptocurrency. Determining when and where to buy it greatly helps you acquire crypto for your investment. Because cryptocurrency exchanges are largely unregulated, investors do not have the same level of oversight and protection as they do with banks and traditional mainstream investment platforms. The burden is on the user to evaluate and appraise different degrees of security and insurance offered by different exchanges.

Final Takeaway
Investing in cryptocurrency and blockchain is not a good method to develop money for the future, plain and simple. Don't mess around with adding some crypto coins to your digital wallet if you want to make a good investment. Here's the better plan: If you're out of debt, have an emergency fund that will cover three to six months of spending, and you're ready to invest. Focus then on putting 20% of your income in growth stock mutual funds—which are considerably more secure than any cryptocurrency.
A Little Bit of Advice to our Aspiring Entrepreneurs
Starting a business is a continuous process of learning and growth. It's critical to develop both practical and emotional abilities. Check out Aspiring Entrepreneurs today. Blogs, podcasts, courses, and books are offered by our very own business expert Sophie Howard.
About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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