With the increasing mainstream adoption of cryptocurrencies, more and more people are learning more about the underlying technology and how they can use it to their advantage.
But understanding the concepts behind the technology is not as straightforward as it seems. Whether you are just getting started or have been involved in cryptocurrency for some time, here are some things you should know to help you along your path.
What is cryptocurrency?
Before going into too many details, it is wise to have a solid understanding of what cryptocurrencies are. The concept of cryptocurrency basically refers to a system in which cryptographic techniques are used to control the creation of units and to verify funds transfers. Cryptocurrencies are virtual currencies that allow peer-to-peer transactions that are verified by cryptography. In order to keep these transactions secret, cryptocurrencies use private cryptographic keys and public addresses and rely on cryptographic techniques to regulate the creation of currency units. The decentralized nature of cryptocurrencies allows them to be exchanged easily without going through a bank or intermediary.
What is Blockchain?
Blockchain can be defined as a record of transactions or events that are grouped into blocks. There are chains of such blocks that make up a chain of ledgers and they cannot be changed without changing all subsequent blocks in the chain. The data stored on the blockchain is distributed among many users who can access this data via public keys, to which different users have contributed. Various blockchain technologies are used to facilitate cryptocurrency trading.
Before sending cryptocurrency to someone else, here are some things to consider
If you plan to send cryptocurrency to someone else, be sure to do your research. This is not a decision you should take lightly. There are always security and personal information concerns with this type of transaction.
Make sure you know who you’re sending it to
The first step in knowing to whom you are sending cryptocurrency is to verify their public block chains. You can do this by entering their address into the blockchain explorer. A great example of making sure you know who the recipient is comes from the amazing Twitter hack of 2020 where a young man from the UK hacked the Twitter accounts of several celebrities. He then persuaded people to send a certain amount of bitcoin to his address while ensuring that the celebrity would return twice as much as they sent. With this in mind, you should understand the importance of the person you are actually sending tokens to as there are no refunds in the crypto world, which leads nicely to the next point!
It is important to remember that you cannot get your money back
Cryptocurrency transactions are non-refundable, so there is no way to request a refund after sending the transaction if the recipient does not want your refund. This is not the same as paper money, where you can open chargebacks and get on the phone with your bank. Sending money from one wallet to another is the end of the transaction, and unless you know the person, it is almost impossible to get it back if you make a mistake.
Make sure you understand any transmission limits
There are no restrictions on sending cryptocurrency. You can easily send your cryptocurrency anywhere in the world using an online wallet or exchange. But there are limits to how much you can spend, and you should be careful about the fees that may be charged for each transaction. However, while there are limits to the highest amount you can send, there may be restrictions on the minimum amount you can send. For example, the smallest unit of Bitcoin is known as the Satoshi (named after the mysterious creator of Bitcoin and the underlying technologies of the blockchain). It’s the equivalent of a hundred million bitcoins, and depending on which wallet you use, it could be the minimum amount you can send at any one time. Moreover, different icons will have different limits, so you should take that into account.
Always try to trade with your own wallet
Many beginners will choose to hold their cryptocurrency on the exchange they bought them from. Although this is generally considered bad practice for various reasons, you can still transfer to another wallet directly from the exchange. However, the best option is to trade with your personal portfolio. A premium digital wallet usually has features that make trading more efficient and allow you to track your transactions better than you would if you were to do so via an exchange.
Make sure the recipient address is correct
A cryptocurrency wallet address is a unique identifier that you use to send or receive Bitcoin, Ethereum, and other tokens. The wallet address consists of alphanumeric characters. Also known as the account number. These addresses are usually a long and complex string that can be difficult to correct if written by eye. Therefore, you should try to copy and paste the address to increase the chances of getting it corrected. As mentioned in the second point, you will not get a refund if you send it to the wrong address.
Consider transaction fees
Cryptocurrency transaction fees are related to the amount you send or receive and the type of cryptocurrency you are sending or receiving. There are different types of cryptocurrencies, such as Bitcoin and Ethereum. Cryptocurrencies can be cheaper or more expensive, depending on the currency you use. These fees are usually higher when sending and receiving via an exchange than a wallet, but even select wallets charge a fee to make a transaction. Therefore, if you are sending any amount to someone else, you should always factor the cost into that amount.
With this guide, you now have all the tools you need to send encryption with confidence. Unfortunately, sending cryptocurrency is much easier than buying it in the first place. So if you have ever bought some Bitcoin or Ether, you must have the skills to send it with confidence.