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What’s behind blockchain and crypto: how it all works

·3-min read
(Getty Images)

Everything you need to know about assets, brokers and platforms.

Crypto doesn’t have to be confusing. Get up to speed with the basic principles, and give your investments a boost:

What are cryptoassets?

Cryptoassets have grown in popularity in recent years, and have become a popular investment option. These assets are in the form of “coins” or tokens that enable you to trade currency and other assets digitally. They use decentralised technology – where no one person or entity controls the platform - to make secure payments and store money. Cryptoassets can be volatile, and it’s not uncommon to see big percentage fluctuations in the space of one day. They can be a high-risk asset so it’s important to develop a risk management strategy before investing. It can also be a good idea to invest in several different cryptoassets so your risk is spread out appropriately. eToro has a wide range of crypto to invest in.

What’s a blockchain?

Crypto wouldn’t exist without a blockchain. They are the foundation of crypto, and work on a decentralised digital ledger, where many computers and people have access to the data. This makes it impossible to duplicate or counterfeit data. A blockchain is independent of any third parties, and allows encrypted data to be transferred securely. When Bitcoin launched in 2009, blockchain technology came into its own, allowing crypto to be traded securely.

 

Which crypto is most popular?

There are hundreds of cryptoassets available. Bitcoin (BTC) was the first cryptocurrency, and is now the largest. Supporters believe it could be the global currency of the future, and several companies accept it as payment, including Wikipedia, and some Subway stores. Ethereum (ETH) is the second largest cryptoasset by market capitalisation. Many investors believe it could be the future leader of the crypto world, as it often moves in line with Bitcoin. It’s received international recognition from technology giants such as Microsoft and Intel. XRP by Ripple Labs (XRP) allows real-time payments with greater transaction speeds and lower costs, and is already in use by many well-known brands, such as American Express. IOTA (MIOTA) is based on a proprietary ‘blockless’ blockchain called Tangle, and is paving the way for a decentralised network to power the Internet of Things (IoT). All these assets can be traded at eToro.

 

How to choose a crypto broker

Finding the right crypto broker where you can buy, sell and trade crypto is essential to ensure you’re getting the right security, paying minimal fees and getting a good selection of cryptoassets on offer. At eToro there are also extra tools available. There’s a CryptoPortfolio which is a diversified portfolio with exposure to selected cryptos. It is managed by eToro’s investment committee, and offers several options for people wishing to invest in the crypto market. There’s also the Stop Loss and Take Profit parameters which you can set up to suit your strategy and automatically protect your investments. You can also work with a virtual crypto portfolio so you can try out all of the features on eToro’s trading platform risk free with $100,000 of virtual money.

It’s also important to know how your cryptocurrency is stored. eToro supports over 40 cryptoassets and has stringent security levels, with authentication through SMS, and complies with ASIC regulations.

Check out eToro’s entire offering of seamless crypto services. Sign up and open an eToro account for free here.

 

Disclaimer: Investing in stock markets and cryptoassets involves the risk of loss.

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