We're sure you've heard about the crypto world, and if you haven't, we can bet you've been hiding since 2010! More and more people are becoming interested in the topic and deciding to enter the world of cryptocurrencies. However, if you are interested in investing in crypto, we recommend that you inform yourself before making any financial decisions. And that's why this quick guide is here for you to learn about crypto!
Crypto-Glossary: Terms you must know!
The cryptocurrency market can be viable if you want to make a passive profit, even if you consider yourself something other than an expert investor. However, as with any investment, it is crucial to understand what you are investing in before you begin, especially when it comes to a volatile and unpredictable market like cryptocurrencies. And a great way to do that is to start familiarising yourself with the basic terminology of cryptocurrencies, how cryptocurrency investments work, and the different factors that could impact your profits.
Learn some of the terms that will help you better understand this investment world:
- Cryptocurrency: Cryptocurrency is a digital currency system that doesn't rely on banks or a trusted third party to verify transactions. You don't own anything tangible if you own cryptocurrency. However, you own a private key that allows you to access and move your digital assets that live on the blockchain but can only be accessed using this private key.
- Digital wallet: A digital wallet, also known as a crypto wallet, is where you can keep your crypto safe. These digital wallets keep your private keys –or the passwords that give you access to your cryptocurrencies, mainly like a bank account number. One good example of a crypto wallet is a mobile app called Coinbase Wallet.
- Decentralized system: A decentralized system is a financial technology where no single entity controls the chain, enabling users to control what data is being shared, which makes it safer than the current centralized banking system.
- Blockchain: It is the technology that enables the existence of cryptocurrency, where transactions are verified by network nodes (connection points) through cryptography and recorded in this publicly distributed network.
- Proof-of-work (PoW): It is a form of adding new blocks of transactions to a blockchain, and it is used by most cryptocurrencies today. Since it is a more decentralized way of validating transactions on a blockchain, it prevents users from carrying out fraudulent transactions. Examples of popular proof-of-work cryptocurrencies include Bitcoin and Dogecoin.
- Proof-of-stake (PoS): It is another newer mechanism for processing transactions and creating new blocks in a blockchain. Proof of work is more secure than proof of stake. However, the PoS is slower and consumes more energy. Examples of popular proof-of-stake cryptocurrencies are Ethereum 2.0 and Cardano.
- Stablecoin: It is a cryptocurrency whose value is fixed to another asset, such as gold, the euro, or the dollar. Stablecoins aims to provide an alternative to the high volatility of cryptocurrency.
- Mining: Mining is the process of creating new cryptocurrencies. The complex mining process involves using computer power to solve algorithms that generate these digital coins. Users can also buy crypto from brokers and store it using their digital wallets.
- Staking: Staking is locking crypto assets for some time to help support a blockchain's operation. Staking cryptocurrencies is a way to generate passive income, such as dividends from a stock or coupons from a bond. It's also interesting to mention that many blockchains use a proof of stake consensus mechanism.
- Volatility: The marketplaces for cryptocurrencies are very speculative, and there is no formal regulatory framework for their trading. Therefore, compared to equities and bonds, the price of cryptocurrencies fluctuates more. One recommendation to manage volatility in crypto is to learn the markets, understand the risks involved and think about investing for the long term.
- Bitcoin: Bitcoin is decentralized digital money (money that does not rely on banks, brokerages, or exchanges) that may be purchased, sold, and exchanged using blockchain technology. Bitcoin has become the most popular crypto available because of its longevity and credibility.
This article does not recommend investing in cryptocurrencies, so if you make any financial decision, you will have to inform yourself better and consider the risks of investing in cryptocurrencies. Make sure you start investing in these digital assets by becoming well-versed in these terms. And read on to learn more about how Canada's world of cryptocurrencies works.
How do I get started with cryptocurrency in Canada?
Did you know it takes only a few dollars to invest in cryptocurrency? However, to get started in this digital financial world, we recommend you search as much as possible to understand crypto. Before investing, consider whether crypto fits your financial goals and be aware of the risks involved. For example, crypto prices tend to be volatile and may have a higher chance of suffering financial loss than other investments. Also, you will need to consider that digital assets such as crypto require specific security knowledge and being aware of tax considerations.
An excellent way to start is by familiarising yourself with cryptocurrency exchange platforms or digital brokers and getting informed about those that are safe and secure for investors, for example, where you can buy, sell and trade cryptocurrencies like Bitcoin and Ethereum. In Canada, the most popular brokers are:
- Binance,
- Coinbase,
- Kraken,
- Crypto.com,
- KuCoin, and
- Bitfinex.
But How do you get cryptocurrency in Canada? To invest in cryptocurrencies through these platforms, you must create and verify your account, deposit a certain amount of funds, choose the best crypto to invest in, and select a crypto wallet. Keep in mind to manage your investments and set a strategy, and goals focused on regular investing, diversification, and investing for the long term. Be clear about your intentions and expectations before diving in. And most importantly, keep yourself updated! Did you know if crypto is legal in Canada?
What do I need to know before buying cryptocurrency in Canada?
If you are a beginner in crypto, figuring out how Bitcoin, Dogecoin, Ethereum, and other cryptocurrencies work can be confusing. Thankfully, here you will find some interesting points to consider if you want to get started in the world of digital assets:
- Cryptocurrency is legal in Canada: You can buy and trade any cryptocurrency in Canada by opening an account and purchasing your cryptos on any platform.
- All forms of cryptocurrency are subject to taxation in Canada: If you live in Canada, you don't have to pay taxes for buying or holding cryptocurrency. However, if you are selling or mining cryptocurrency, you must pay taxes subject to capital gains or a business income tax. The percentage of net taxable profits will depend on whether the profits are classified as capital gains or business income.
- Cryptocurrency could be risky: Cryptos are considered highly volatile assets since they could be subject to price fluctuations. So, if their value goes down, there's no guarantee it will rise again. Also, since no established regulatory regime exists for their trading, cryptos are more unpredictable than other financial assets such as stocks and bonds.
And last but not least, remember that going hand in hand with experts is always a good idea!
Learn more about the types of cryptocurrencies available in Canada.
Is cryptocurrency safe?
If you ask yourself if cryptocurrency is a safe investment, you must know first how it works for you to get the most accurate answer. Blockchain technology is typically used to create cryptocurrencies. Blockchain explains how transactions are recorded into "blocks." Although the technological procedure is very complicated, the result is a digital record of cryptocurrency transactions that is quite difficult for hackers to alter. Also, transactions demand a two-factor authentication procedure. To begin a transaction, you could be required to enter a username and a password. The next step is entering an authentication code provided to your cell phone via SMS. So, considering these, crypto could be pretty safe.
However, even with security measures, crypto can still be compromised. Did you know that several costly cyberattacks have severely hit crypto start-ups? Sadly, in 2018, Coincheck was targeted for $534 million, and BitGrail, with $195 million. Such a waste!
Keeping this in mind, investing in crypto can be safe if you follow best practices for keeping your crypto secure and using only recommended and verified platforms. However, it's important to remember that no investment is ever guaranteed.
Discover more about the Pros and Cons of Cryptocurrency in Canada!
How do I teach myself crypto trading?
Have you thought about taking private classes to get started on cryptocurrency? Learn everything you need to know to successfully learn about crypto! Private lessons are an excellent option to learn about anything that comes to mind, such as crypto and finance, for example. Taking crypto and finance classes in Canada can be a perfect way to learn about crypto trading. Become a crypto expert with the best private training with Superprof, the best online platform for private tutoring in Canada!
Learn everything you want, and welcome to the Superprof family!
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