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How to Explain Cryptocurrency to Your Child

How to Explain Cryptocurrency to Your Child

Although your child may have heard the phrases cryptocurrency or Bitcoin, watched the glitzy cryptocurrency movies on TikTok, or talked about the topic with pals, they still may not completely understand what they mean. They could also be familiar with these concepts and eager to invest in digital currencies or use them to purchase goods or toys. Or they can be uninterested in cryptocurrency altogether.

Whatever the circumstance, it is your responsibility as a decent parent to assist your children in comprehending the complexity of the financial world. Understanding bitcoin may be crucial for kids since younger generations are already include it in their retirement planning, per the 2022 Investopedia Financial Literacy Survey.

According to Joyce Serido, associate professor and extension specialist in family social science at the University of Minnesota, who specializes in financial parenting, “teaching about money [nearly] starts at birth.” Children are better prepared to grasp cryptocurrency if they have a firm concept of how money and currencies are converted into value and purchasing power. She continues that youngsters may increase their inquiries about cryptocurrency and feel ready to utilize it around the time they reach adolescence.

Professor of accounting Vivian Fang, the resident crypto specialist at the Carlson School of Management at the University of Minnesota, says it will be some time before she starts educating her five-year-old son about cryptocurrency. She is teaching him about the importance of money till then by teaching him about winning and losing.

In addition to giving him a $5 weekly stipend, Fang also gives her son quarters in exchange for work done, such as one for doing the dishes and two for helping with the dog walk. If, for instance, he misbehaves at a swimming session, his parents may also impose losses in the form of a fine. Fang has observed her son’s development into a savvy shopper. Her son will either make a purchase or walk away after concluding an item is “too pricey,” operating under the premise of utilizing his own money. He’ll likely develop a strong interest in cryptocurrency in a few years, just like millions of older children do right now.

Say your youngster is prepared to start investing in cryptocurrencies. You may assist your child with their study by consulting dependable sources like Investopedia, which clearly defines cryptocurrency and discusses its advantages and disadvantages. Review social media sites like YouTube with one another as well. YouTube is a great resource for tutorial videos.

Don’t ignore TikTok because it’s popular with youngsters and you may utilize it as a teaching opportunity to go through its crypto movies with your class. The website has a ton of videos, some of which are from questionable influencers who make outrageous get-rich-quick claims and are interspersed with pictures of Ferrari and Rolls-Royce vehicles parked in front of opulent residences. You are assisting your youngster in separating trustworthy information from potentially harmful information by looking at various forms of information.

Why Use Crypto?

Cryptography is used to ensure the security of cryptocurrencies, which are decentralized digital currencies. Assist your youngster in realizing that cryptocurrencies might be employed for investments and to purchase necessities and experiences just like fiat, conventional currencies like US dollars and Mexican pesos. According to CoinMarketCap, there are more than 18,847 digital currencies with a market valuation of $1.95 trillion as of April 12, 2022.

The biggest by far is Bitcoin (BTCUSD), which was introduced in January 2009 by a person who is most likely Satoshi Nakamoto and will be valued more than $40,000 per digital currency as of April 12, 2022.

Before Bitcoin was established with security safeguards in place, the early digital products were simple to copy, which was a problem for digital currencies inherently.

Blockchain is essentially a distributed ledger that is maintained by a diverse computer network. Cryptocurrencies are not issued by a central body, making them potentially resistant to intervention from or manipulation by governments. Some cryptocurrency investments require traders to be at least 18 years old, while others have no such restriction. You may still invest for your minor children up until the age of 18 despite their being a minimum age limit.

What is a blockchain?

A distributed database that is shared by all of the nodes in a computer network is known as a blockchain. A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. The novelty of a blockchain is that it fosters confidence without the necessity for a reliable third party by ensuring the integrity and security of a record of data.

The way the data is organized on a blockchain differs significantly from how it is typically organized. In a blockchain, data is gathered in groups called blocks that each include sets of data. Blocks have specific storage capabilities, and when filled, they are sealed and connected to the block that came before them to create the data chain known as the blockchain. Every additional piece of information that comes after that newly added block is combined into a brand-new block, which is then added to the chain once it is full.

A database typically organizes data into tables, but a blockchain, as the name suggests, strings together bits of data called “blocks.” When used in a decentralized manner, this data structure creates an irreversible time line of data by default. When a block is filled, it becomes a fixed point in time and is added to this timeline. When a block is added to the chain, it receives a precise time stamp.

How Do Cryptocurrency Mining and Bitcoin Work?

The method through which new bitcoins are placed into circulation is known as bitcoin mining. It is an essential part of the construction and maintenance of the blockchain ledger and is also how the network confirms new transactions. The process of “mining” involves employing advanced technology to tackle a very challenging computational arithmetic problem. The next block of bitcoins is distributed to the first computer to solve the issue, and the cycle repeats.

Mining for cryptocurrencies is time-consuming, expensive, and seldom profitable. However, because miners are compensated for their efforts with cryptocurrency tokens, mining has a magnetic allure for many investors who are interested in cryptocurrencies. This could be the case because businesspeople, like gold prospectors in California in 1849, perceive mining as a source of free money. And why not do it if you enjoy using technology?

What is a digital wallet?

A software-based system known as an electronic wallet (or “e-wallet”) is used to securely store the payment information and login credentials of users for a variety of websites and payment methods. Users may simply and rapidly execute transactions utilizing near-field communications technology by using a digital wallet. They can also make better passwords because they won’t have to worry about forgetting them.

Mobile payment systems, which let users pay for products using their cellphones, can be combined with digital wallets. Information from digital coupons and loyalty cards can also be stored in a digital wallet.

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10 Serious Errors New Crypto Investors Commit

10 Serious Errors New Crypto Investors Commit

Investing in cryptocurrencies may be thrilling, but many novice investors make typical mistakes while trading and purchasing cryptocurrencies. New innovators risk losing money rapidly for a variety of reasons, including weak security procedures and ignorance of crypto marketplaces.

We’ll go through the top ten errors that novice cryptocurrency investors make and how to prevent them.

1. Inadequate understanding of cryptography

The excitement around Bitcoin and other cryptocurrencies may draw in new crypto investors, but doing so needs knowledge of the asset class and how it operates. A formula for disaster is trying to trade bitcoin or invest in an asset you don’t comprehend without having a fundamental knowledge of how cryptocurrencies operate. You will become a better investor if you take the time to educate yourself on various cryptocurrency projects and the objectives of each cryptocurrency business.

2. Not Paying Fees

Although there are several ways to acquire cryptocurrency, novice investors could merely buy cryptocurrency without knowing how exchange gas costs operate. For instance, using a credit card to purchase cryptocurrency may result in significant surcharge costs (3% or more) as well as possible extra fees from your card provider. Long-term financial savings may be achieved by learning which cryptocurrency exchanges have the lowest fees and the most efficient way to buy and trade cryptocurrencies.

3. Momentary Perspective

Many new investors are only thinking in the short term due to the market’s promise of “get wealthy quick.” And although investing in cryptocurrencies has the potential to yield enormous returns, it also has the risk of causing you to lose all of your money in the event of a poor investment decision.

You’ll be able to pick your cryptocurrency investments more carefully and concentrate on selecting higher-quality enterprises with established track records if you adopt a long-term investing strategy. Trying to get wealthy within 90 days is a surefire way to go bankrupt, but seeing cryptocurrency investment as a multiyear process will enable you to create a more strategic crypto portfolio.

4. Maintaining Bitcoin in Online Wallets

Cryptocurrency must be stored in a digital wallet since it is a kind of electronic money. While using an online wallet is more practical, doing so carries much greater risk than keeping your cryptocurrency offline. Online wallets are more vulnerable to security flaws, making them targets for cryptocurrency frauds and attacks. An offline hardware wallet, which is simply a USB stick with cutting-edge hardware and software encryption to safeguard your crypto private keys, is the safest place to keep your cryptocurrency.

5. Forgetting Seed Phrases or Crypto Passwords

Since bitcoin is stored in a digital wallet, passwords are needed to access these wallets. It’s possible that your cryptocurrency won’t be recoverable if you lose your password. Although most wallets offer a backup seed word to access the cash, if the seed phrase is misplaced or forgotten, there may be no other way to get your money back.

6. Mismatched wallet address

It is possible to acquire possession of your cryptocurrency from an exchange or move money from one party to another by transferring it across digital wallets. However, novice investors frequently make the mistake of trying to transfer cryptocurrency assets to their wallets only to write the address incorrectly. When this occurs, the cryptocurrency may be lost since it was sent to the wrong wallet address. Recovery services may be able to help with this, but they may be quite expensive.

7. Getting Scammed

The bitcoin industry, a brand-new asset class, is rife with con artists. Actually, just in 2021, the FTC stated that approximately $700 million in stolen cryptocurrency assets had been recovered. These crooks enter your cryptocurrency wallet using sophisticated phishing tactics, then they use persuasion to get you to transfer money to their wallet.

Scammers that operate in your best interest might conduct cryptocurrency scams using email or messaging services. By just granting an application access to your online wallet and integrating them together, you can jeopardize your wallet. However, fraudsters can use this method to steal money from cryptocurrency wallets even if it is a standard practice for many crypto programs.

8. Use of Leverage

Stories of people making it rich through cryptocurrency trading may tempt new crypto investors to attempt using leverage to increase their earnings. Leveraged trading has the drawback of requiring upfront security, and if a deal fails, you risk losing all of your money. Keep in mind that leverage has two sides and can increase both your gains and losses.

Leverage trading is best avoided by inexperienced cryptocurrency traders, who should only use it once they have enough trading expertise.

9. Complex Trading Methodology

New cryptocurrency investors who attempt to get into complex trading methods right away because some YouTuber encouraged them to risk losing money and giving up on cryptocurrency altogether. Learning technical analysis, conditional orders, and how the cryptocurrency markets operate takes time.

Actually, buying cryptocurrency may be easy. You don’t have to have a complex trading plan in order to try to increase your wealth. You may dollar-cost average into cryptocurrencies similarly to traditional investment without engaging in active trading or keeping a constant eye on the coin charts.

10. Order Mistakes

Even though some cryptocurrency exchanges, like Coinbase, focus on making it simple to buy cryptocurrency, many of them have convoluted order forms and trading interfaces that might befuddle novice users. A single decimal point inaccuracy while placing an order might result in hundreds of dollars in damages. In fact, a vendor recently lost approximately $300,000 as a result of selling a premium NFT for 0.75 ether rather than 75 ether.

Always double-check your orders or transactions before submitting them to prevent these expensive errors. Since cryptocurrency transactions are irrevocable, it is essential to double-check before submitting one.

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Is Cryptocurrency Hackable?

Is Cryptocurrency Hackable?

Despite the hazards, investors from all over the world have flocked to Bitcoin and other cryptocurrencies because of the promise of rapid riches. The popularity of Bitcoin has inspired several spin-off ventures, copycats, and supporters. Not to be left out, thieves also found chances since they could steal anything that had the promise of wealth.

Read more: What is Bitcoin

Your cryptocurrency may be compromised due to vulnerabilities that hackers may exploit, but only under certain circumstances. So, how can you safeguard your assets and yourself?

Blockchain Security

Bitcoin was first introduced in 2009; being a decentralized digital currency, it is not supervised or controlled by any one person, group, government, or other organization. Peer-to-peer exchanges contributed to the development of digital money, which later gave rise to a digital environment in which any object may be represented by a blockchain token.

Blockchains for cryptocurrencies are open ledgers that keep track of and validate all transactions inside a network. Everyone has access to transactions, the involved pseudonymous addresses, and the amount transmitted. The entries in these open ledgers are automatically made by scripts, programming, and an automated transaction validation procedure; nevertheless, no one is able to access them and make new entries or edit existing ones.

The Security of a Blockchain

Blockchain security is handled by cryptographic methods and consensus procedures. Blockchains encrypt transaction data and include information from earlier blocks in each subsequent block. Encrypted data is used to link the entire ledger together. The security increases with each new block that is added.

Therefore, an existing blockchain cannot be “hacked” in the sense of “being hacked” that refers to the introduction of harmful code or the use of brute force to gain access to the network and start making modifications.

How Might One Attack a Blockchain?

A blockchain might be taken over by an attacker—or group of attackers—if they have the majority of its hashrate, or computing power. A so-called 51% assault allows for the introduction of a modified blockchain if the attackers control more than 50% of the hashrate. This enables them to modify transactions that the blockchain had not yet validated when they gained control. Six confirmations are required before a transaction is deemed successful.

For instance, the first confirmation would occur if you sent a buddy 1 BTC, which would be recorded and validated in one block. The data from that block is validated, recorded in the following block, and then the block is closed—this is the second confirmation.

The tokens used in transactions that the network has not yet approved would then be available for use by the attackers. The updated blockchain would behave as they had intended it to, and they could transfer the coins to anonymous addresses.

How to Protect Your Bitcoin

To prevent the theft of your bitcoin, you may take a few simple measures. Knowing where your keys are kept, how to get to them, and how to prevent others from getting to them are important considerations.

Wallets can be hot, cold, custodial, or non-custodial, as was before noted. Any hot wallet, or one that is connected to another device or the internet, is the least secure type of wallet. Never keep your keys on a device that has a connection that is always on or accessible for security reasons. It can be hacked if it has a connection and a program is used to obtain your keys.

You don’t need a commercially produced gadget to operate as a wallet, despite what advertising and bitcoin wallet reviews would lead you to believe. Another option is an encrypted USB thumb drive. A computer or other connected device must be connected for a cold storage device to become hot storage; however, with time, USB connections might deteriorate.

There is no technique of key storage that is completely safe, unbreakable, and long-lasting. However, keep in mind that a lot of individuals become targets of hackers and con artists, losing money from their bank accounts as a result of personal information being exploited to get access to them. Private key security is identical to that of your personally identifiable information.

Non-custodial cold wallets are the safest type of wallet. These may be anything from a sheet of paper with the keys written on it kept in a safe to a gadget with passkeys and further encryption. Because they are readily destroyed, paper wallets should only be used as a temporary solution.

There are numerous solutions on the market that promise ease and security for your Bitcoin or other cryptocurrencies, but the best way to protect your cryptocurrency from hackers and thieves is to follow a few basic guidelines:

  • Don’t store your keys in the wallet on your mobile device or any other device that has a connection to the internet.
  • Your private keys should always be held in cold storage.
  • Don’t let someone else store your keys for you unless you’re comfortable with the risks.
  • If you want to use your cryptocurrency, only transfer the keys you need to your hot wallet, conduct your transaction, then remove them from the hot wallet immediately.
  • Keep your cold storage method in a secure, humidity-controlled environment without a wired or wireless connection.
  • Check on your devices periodically to ensure they’re not degrading. If they are, transfer your keys to a new storage device.
  • Never share your private keys with anyone else.

Can hackers take cryptocurrency?

Cryptocurrency can be taken and stolen by hackers. Exchanges, wallets, and decentralized financial apps are frequently targeted since they are the weak areas.

This article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other Initial Coin Offerings (“ICOs”). Investing in cryptocurrencies and other ICOs is very hazardous and speculative. Before making any financial decisions, it is always advisable to get the advice of a knowledgeable specialist because every person’s circumstance is different. No guarantees or claims are made by Investopedia on the timeliness or accuracy of the information provided here.

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What Is Bitcoin?

What Is Bitcoin?

By acting as money and a means of payment independent of any one person, organization, or entity, a cryptocurrency like bitcoin eliminates the need for third parties to get involved in financial transactions. It is available for purchase on numerous platforms and is given to blockchain miners as compensation for their efforts in verifying transactions.

By utilizing the alias Satoshi Nakamoto, an unidentified developer or group of developers presented Bitcoin to the general public in 2009.

Since then, it has grown to be the most well-known cryptocurrency worldwide. Numerous additional cryptocurrencies have been developed as a result of its popularity. These rivals either want to displace it as a means of payment or are employed in other blockchains and cutting-edge financial technology as utility or security tokens.

Learn more about the first cryptocurrency, including its origin narrative, workings, where to find it, and applications.

Knowledge about Bitcoin

The domain name Bitcoin.org was registered in August 2008. This domain is WhoisGuard Protected today at least, which means the person who registered it’s identity is private.

On the Cryptography Mailing List at metzdowd.com in October 2008, a person or group going by the name Satoshi Nakamoto announced: “I’ve been working on a new electronic payment system that’s totally peer-to-peer, with no trusted third party.” “Bitcoin: A Peer-to-Peer Electronic Cash System,” a now-famous white paper that was posted on Bitcoin.org, would go on to become the Magna Carta for how Bitcoin functions today.

Block 0—the very first Bitcoin block—was mined on January 3, 2009. This is sometimes referred to as the “genesis block” and contains the text: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” which may serve as both pertinent political commentary and as evidence that the block was mined on or after that date.

Every 210,000 blocks, bitcoin payouts are half. For instance, in 2009, the block reward was 50 brand-new bitcoins. The third halving took place on May 11, 2020, reducing the reward for finding a block to 6.25 bitcoins.

The smallest unit of a bitcoin, which is divisible to eight decimal places (100 millionths of a bitcoin), is known as a satoshi.
Bitcoin might someday be divided to even more decimal places if necessary and if the active miners agree to the move.

The concept of Bitcoin as money isn’t too difficult to grasp. For instance, if you have a bitcoin, you may transmit smaller amounts of that bitcoin to pay for goods or services using your cryptocurrency wallet. However, when you attempt to grasp how it operates, it gets really difficult.

Blockchain Technology for Bitcoin

A blockchain and the network needed to power it include cryptocurrency. A distributed ledger, or blockchain, is a common database that houses data. The blockchain uses encryption to protect the data inside. On the blockchain, when a transaction occurs, data from the previous block is transferred to a new block with the new data, encrypted, and the transaction is validated by validators, or miners, in the network. A new block is constructed and handed as a reward to the miner(s) that validated the data in the block once a transaction has been confirmed, and they are then free to use, hold, or sell the new Bitcoin.

The information held in the blocks on the blockchain is encrypted by Bitcoin using the SHA-256 hashing algorithm. Simply explained, a 256-bit hexadecimal integer is used to encrypt transaction data that is stored in a block. All transactional information and details related to blocks before to that block are contained in that number.

A backlog of transactions is created for network miners to validate. In the Bitcoin blockchain network, many miners simultaneously attempt to validate the same transaction. The nonce, a four-byte number contained in the block header that miners are attempting to solve, is worked on by the mining software and hardware. A miner continually hashes or generates the block header at random until it reaches a target value set by the blockchain. A new block is constructed so that additional transactions may be encrypted and confirmed once the block header has been “solved.”

Bitcoin: Is It a Smart Investment?

The brief investment history of bitcoin is marked by extreme price volatility. Your financial situation, investment portfolio, risk tolerance, and investment objectives will all influence whether it is a wise investment. Before investing in cryptocurrencies, you should always get advice from a financial expert to be sure it is appropriate for your situation.

How Is Bitcoin Profitable?

By verifying blocks and earning rewards, the Bitcoin network of miners generates revenue. Through cryptocurrency exchanges, bitcoins may be converted into fiat money and used to make purchases from businesses that accept them. Buying and trading bitcoins may provide income for investors and speculators.

This article does not constitute a recommendation by Investopedia or the author to invest in cryptocurrencies or other Initial Coin Offerings (“ICOs”). Investing in cryptocurrencies and other ICOs is very hazardous and speculative. Before making any financial decisions, it is always advisable to get the advice of a knowledgeable specialist because every person’s circumstance is different. No guarantees or claims are made by Investopedia on the timeliness or accuracy of the information provided here.