Digital currency is cryptocurrency and is an old term referring to currencies that were created on computers. The use of this term has expanded greatly with the advent of Bitcoin , and today you can hardly find anyone who has not heard of this term.
.png)
Many users are looking to buy and invest in digital currencies and earn profit from them, but this requires knowledge of the concept of this word and other concepts related to it. In this article, we will explain cryptocurrencies for beginners and teach the question of what is digital currency in simple language, and we will also study its uses, its differences with current fiat currencies, types of digital currencies , the technologies used, and how to buy and sell them.
?What is digital currency
As its name suggests, "digital currency" refers to a currency that is produced and used in the online and digital world. Digital currencies are similar to traditional currencies such as "dollars" and "pounds" which are known as fiat currency and are used to buy and sell goods and services.
The main difference between them is in the context of their creation. Due to the fact that digital currencies are available electronically i.e. they are only available on the internet, they have the possibility of rapid transfer from any part of one world to another.
The popularity of digital currencies dates back to before the emergence of “Bitcoin” in 2009. In fact, normal bank accounts connected to central bank servers and users can buy and sell goods and services using only bank cards and related information and is also considered a digital currency.
Digital cryptocurrencies such as “ Bitcoin ” and “ Ethereum ” is a special type of digital currency, and due to the technologies used in it, it has the ability to create a financial system without the presence of intermediaries such as banks.
The current Shiba Inu coin price
Below, after answering the question of what are the characteristics of digital currency, we will examine the features of digital currencies and types of digital currencies .
?What are the advantages of digital currency
Explain the advantages of digital currency
Digital currencies Like fiat currencies, digital currency is used to buy goods, merchandise, and services online, but unlike publicly available money in the form of fiat or coins.
Cryptocurrencies are stored online and in a digital platform in people's accounts.
There are significant differences between digital currencies and fiat currencies from the medium of exchange, which we will mention below:
The first difference between these two currencies is the form of their existence. Digital currency is only produced and used digitally, while regular or paper money is produced by governments in the form of banknotes and coins.
The value of digital currencies is different from regular money. Ordinary money, as an object of economic value supported by governments, can be used to buy and sell goods and services.
Digital currencies can be created in a centralized or decentralized manner. This is while paper money is only produced and distributed by the governments and central banks of each country. Central cryptocurrencies are the same as fiat money transferred by bank cards. Decentralized digital currencies are created using Blockchain technology , and no government, organization or individual oversees their transactions.
?What are the types of digital currencies
Explain the types of cryptocurrencies
Due to the expanding use of decentralized digital currencies, many people consider cryptocurrency to be equivalent to digital currency. But crypto is only one type of digital currency.
In fact, any currency created on the electronic and digital platform is known as digital currency, which can generally be categorized into three categories: cryptocurrencies, virtual currencies, and central bank currencies. In what follows, we will examine these three categories.
?What are digital currencies
A “digital currency” is a type of cryptocurrency that uses cryptography and blockchain technology to create a peer-to-peer payment system in a distributed and decentralized manner i.e. without the intervention of any intermediary or third party.
In this type of cryptocurrency, transaction information is checked, verified and added to the blockchain technology by network nodes, and the security of information and transactions is provided by the mentioned technologies and economic incentives.
Cryptocurrencies differ from other types of digital currencies and have a wider range of applications.
Various currencies such as Ethereum , Litecoin , Cardano, BitTorrent and Sandbox are all among the group of cryptocurrencies, and each is used for a specific purpose.
The most important feature of these cryptocurrencies is that no person or organization is involved in managing them, and people from all over the world can play a role in managing and using them freely.
?What is virtual currency
“Virtual currency” refers to unregulated digital currencies that are created and controlled by an application developer or a group of stakeholders in an organization.
The virtual currency does not use a blockchain model and therefore it is not decentralized and its security is low compared to cryptocurrencies.
Virtual currencies are mostly used in Chinese computer games other than blockchain technology.
?What is a central bank digital currency
“Central Bank Digital Currency” (CBDC) is a legal digital currency that is created and managed by the central banks of countries. Central bank currency can complement or replace fiat money and can also use blockchain technology to increase its security and efficiency.
In any case, the central bank is responsible for these currencies and their management is completely centralized, and for this reason, there is always the possibility of changes in the supply and demand for these currencies.
Various countries including England, Sweden and China are trying to create their own central bank digital currency.
In the rest of the article, we will study the different characteristics of cryptocurrencies and we will use the word digital currency instead of the word cryptocurrency.
?What is the reason for the emergence of digital currencies
To investigate the cause of the emergence of digital currencies, the flaws and problems of the fiat currency-based financial system must be investigated.
In the traditional financial system, money is created in the form of paper bills or coins. Generating these notes is costly for governments. In addition, paper money is subject to physical damage and this problem leads to its disappearance over time. Governments have solved these problems by creating digital versions of paper money that can be accessed through bank cards, and today paper and digital money is widely used.
However, the main problem with the traditional financial system is not related to the printing and use of money. In traditional systems, banks are responsible for the production and distribution of money. In addition, transactions are also confirmed and recorded by banks, and doing so is usually associated with the payment of fees by users. In this system, all activities are checked and controlled by the central organisation. This entity can print money without support, prevent people from conducting financial transactions and using users' information for other purposes.
In general, it can be said that the traditional financial system is based on people's trust in government. In this system, without a supervisory body, transactions are not properly confirmed and recorded, and many users may spend their money several times, which greatly reduces the value of money in practice. Therefore, we are looking for a system in which we can record our transactions in Blockchain technology without an intermediary entity and without trusting other users. This system reduces transfer costs by removing the middleman and prevents governments from printing money without subsidies, and on the other hand, it solves network security problems using encryption techniques.
Trading and investing in the cryptocurrency market without acquiring the required knowledge can lead to irreparable losses for investors.
?How do digital currencies work
Cryptocurrencies use crypto-technologies, blockchain technology, and economic incentives to create a decentralized and untrustworthy system. The combination of these technologies allows people from all over the world to act as members of this network and to record and confirm transactions. These people do not need to trust each other and all their activities are carried out according to pre-established protocols. If the user wants to act against this protocol, they will be fined and the network will reward the user for honest activity. In the following, we will examine the different parts of this system.
?What is Blockchain Technology in Cryptocurrency
Blockchain can be thought of as a database where transaction information is recorded. Blockchain means a series of blocks that are linked together using a parameter called “hash” and a change in the information of each block changes the hash and invalidates the next blocks. Each block in the blockchain contains transaction information and other information related to the network such as a hash. Blockchain technology differs from other popular databases, the most important of which are the following.
The blockchain acts as a distributed ledger. In a traditional financial system, account information is located in a database managed by a central institution. In a decentralized digital currency system, a copy of the information is provided to all network users in order to ensure the security of information preservation. Using this information, users can confirm the validity of transactions and reach a consensus on their implementation.
To process information and add new information to the network, more than half of network users must confirm that the information is correct. To do this, algorithms are used in which users have to spend energy and money. If fifty percent of users reach a consensus after implementing a network protocol, new information is added to the network and the ledger of all members is updated with new information. Note that consensus is made by everyone, but in the end only one user has the ability to make changes to the blockchain at any time, and that user is also chosen randomly.
In a blockchain, it is not possible to go back, delete or edit a transaction. In traditional systems, users can edit transactions made by going to the bank and submitting documents, but in Blockchain, since there is no central institution, this cannot be done.
Blockchain is a transparent database and all users and non-users can view transaction information. In the traditional system, transaction information is confidential and can only be accessed by the central organization.
According to the mentioned features, Blockchain can be said to have created a secure and decentralized data logging platform. The question you may be asked is how is the consensus of users to add new information to the network. We will study this question further.
compatibility algorithm
A “consensus algorithm” is an algorithm that anonymous users can use to access consensus and store transaction information in a blockchain. There are different types of consensus algorithms, here we will examine the Proof of Work (PoW) consensus algorithm used in Bitcoin and to better understand the issue. Proof of Work is a consensus algorithm where users must solve equations designed in the network using computers to prove their validity in recording transactions.
In simpler terms, in this case, users are asked to solve equations designed by the network using their computers. This work requires energy and time. Therefore, if users do not act honestly, the cost they spent on getting the work done will be lost. Equations in Proof of Work are solved competitively and is a completely random process. The user who solves the equation before the others announces the answer on the network so that other users can evaluate its accuracy. After confirming that the information is correct, the information is added to the network by the said user and all users update their blockchain with the new information.
Cryptocurrency wallet password
An application of cryptographic techniques in the consensus algorithm process. Hash functions are a type of cryptographic technique used to link blocks together and create competition between miners. In addition, the transactions in the block are also linked to each other by hash functions, so that the transaction information is also increased security and cannot be changed. But the main application of crypto-techniques in digital currency is related to the creation of user accounts in the Blockchain.
Best cryptocurrency for long term investmen
The digital currency wallet used today to connect to the blockchain and store cryptocurrency is actually not the same as a regular wallet that holds fiat currencies. In fact, every cryptocurrency wallet consists of a “private key” (password) and an encrypted “public key” (codes), the information of which is stored in the blockchain and to which the digital assets are attributed. The private key, like the bank card password, is only for the user's private use, and the public key is like the account number that other users can deposit digital currency into the user's account with.
The public key is generated from the private key, and the accessibility of the private key through the public key is virtually non-existent. In the process of sending transactions, the user signs the transaction information using the private key of his wallet (this is done automatically by confirming the transaction in the wallet) so that miners with the user's public key can confirm the authenticity of the sender of the transaction The accuracy of the information is also confirmed by referring to the blockchain and displaying previous information. The password is provided to users in different ways, the most popular method today is the use of 12, 18 and 24 English words.
?What is digital currency exchange
A digital currency exchange is a place where digital currency is bought and sold. In terms of nature, cryptocurrency exchanges can be divided into two categories: “centralized exchange” and “decentralized exchange.” A central exchange is an exchange operated by one company or several people. At these exchanges, users can buy digital currencies by paying fiat currencies such as dollars, euros and pounds and, when necessary, sell their digital currency and convert it into fiat currency. In addition to the instant buying and selling of cryptocurrencies, the central exchange also supports other types of transactions such as futures contracts, derivatives, and leveraged transactions.
In addition to its many advantages, centralized exchange also has disadvantages. The centralized nature of this type of exchange is incompatible with the decentralized nature of the cryptocurrency market, and there are problems such as the need to trust the system, low security, the need for authentication, and the potential to use user information and transactions to manipulate it. Many of these exchanges are forced to follow the laws of governments, and for this reason, users' funds may be locked into these exchanges at their request. Arguably the most important function of these exchanges is to connect the real world economy with the crypto world. Below are some of the most popular centralized cryptocurrency exchanges.
Binance .
Queen Piece .
Hobby .
Cocoin .
decentralized exchange
Decentralized exchanges are exchanges that are created as decentralized blockchain projects and are not managed by a specific person or organization. The security and efficiency of these exchanges are provided by the blockchain system and network users. To provide liquidity on these exchanges, “liquidity pools” are used, where users put their assets for use in the exchange and receive interest in return. Providing liquidity to pools is one of the ways to make money from cryptocurrencies.
Decentralized exchanges continue to be at a lower level than central exchanges in terms of facilities. Many decentralized exchanges only support single-network crypto token transactions. Many types of transactions such as futures and derivatives are not active on these exchanges and it is not possible to provide liquidity for many digital currency pairs. In recent years, strong steps have been taken to develop these exchanges, which promise that very soon these exchanges will have a large part of the market transactions. With the advent of decentralized stablecoins like “DAI” and “UST”, expansion in this area will also be inevitable. Among the most famous decentralized exchanges, the following can be mentioned:
Uniswap .
PancakeSwap.
Raydium.
Sushiswap .
How to buy and sell cryptocurrency
What is a cryptocurrency wallet? Get to know the best wallets in the market
The easiest way to buy cryptocurrency is to use platforms to trade cryptocurrencies. To do this, you must first select a suitable platform using the criteria mentioned in the platform section and create your account there. For this you need to send information about yourself and authentication. In most exchanges, all authentication procedures are done in person. Note that the used bank account and contact number must be registered in your name, otherwise authentication will not take place.
With the rise in the price of Bitcoin and other cryptocurrencies, people have become interested in buying and selling digital currencies . But what is the best way to enter this market? Are you looking for a seller to buy cryptocurrency from and sell it to someone else? A simpler and more effective way to buy and sell digital currencies is to use a digital currency exchange or platform.
A digital currency exchange is a virtual base for buying and selling bitcoin and other cryptocurrencies. Usually, the price of a digital currency is determined in the process of supply and demand on exchanges. In the following, we will compare different types of cryptocurrency exchange, and introduce you to reliable Arab and foreign platforms.
Types of cryptocurrency exchanges
In the cryptocurrency market, there are generally two types of exchanges: broker exchanges and trading platforms.
broker exchanges
Some platforms sell cryptocurrencies directly to users and in return receive common currencies such as dollars or riyals. These exchanges are called broker platforms. In fact, in this exchange model, the price is set by the exchange or the platform itself, and users have no role in pricing.
Trading platforms
Other types of exchanges connect buyers and sellers rather than doing the buying and selling themselves. In fact, these exchanges play the role of intermediaries of transactions. In trading platforms, buyers and sellers do the pricing themselves.
The way that trading platforms earn is by receiving fees from users who use the services of the site
In general, 3 different things are done in a cryptocurrency exchange:
1- Buy digital currencies .
2- Selling digital currencies .
3- Transferring digital currencies to each other, which is called currency pair transactions.
The main criteria in choosing a cryptocurrency exchange
The main criteria in choosing cryptocurrency platforms
The number of cryptocurrency exchanges in Egypt and the world is increasing day by day. However, you cannot rely on all of them in cryptocurrency trading. There are various criteria for choosing the best cryptocurrency exchange:
How does the exchange work?
Before choosing an exchange, make sure that the exchange is a broker or platform. You have more options to buy or sell prices on the platforms than on the brokers' platforms. But if you plan to buy and sell at the daily rate and prefer faster transactions, then a broker exchange is a better option.
Warranty and validity of the platform
The first concern of cryptocurrency users is usually the security of the platform. 3 important factors in choosing a cryptocurrency exchange for users are:
Exchange security .
credit exchange .
Liquidity and volume of exchange transactions .
It is natural that we all prefer to store, buy and sell our digital currency assets in a place where we are sure of their security. Review the list below for the questions you must answer before choosing a platform.
How is your currency stored in the platform? What type of cryptocurrency wallet is there in this platform? .
Has the platform you want been hacked yet? .
Did the platform provide compensation after the hack or not? .
Does the platform comply with security measures such as two-factor authentication? .
3- Check the platform
You must ask yourself how many users have trusted this platform which is the most important indicator of the credibility of the exchange. Usually, user reviews are available on social networks such as YouTube and Facebook and search for the platform via Google search engines and Q&A platforms. Using these indicators, you can gauge the credibility of the exchange and ensure that it is a reliable platform.
Verify or know your customer
An important issue in financial institutions is identification and confirmation of customer identity in order to prevent financial corruption. Reputable cryptocurrency exchanges usually ask users to verify their identity by sending a photo of their ID.
It is true that for some users, performing the authentication process is undesirable and tedious, but in general, this work helps the security of the entire exchange and the preservation of the assets of all users.
5- Support
In fact, platform support is one of the most important indicators by which you can find a platform. In the cryptocurrency market, you will constantly encounter many questions and errors that you will need guidance on. A good platform is one that can answer your questions and problems with various support methods.
What is Bitcoin? An explanation for beginners with its advantages and disadvantages
Buy Binance Cryptocurrency
Cryptocurrency platform Binance has gained a lot of credibility and reputation in the cryptocurrency market. This exchange is a trading platform and intermediary between buyers and sellers of digital currency.
Authentication is not necessary on Binance up to the transaction limit of two bitcoins , but you will need authentication to trade more cryptocurrencies.
How do you sell digital currencies?
How to sell cryptocurrency
To sell a digital currency in a decentralized platform, you must first connect your wallet to the exchange. Once connected, you can sell your coin for several stablecoins. With this, your digital assets become a stable currency. If you want to convert it to money, you have to transfer your coins to the platform and then convert them into money.
If you want to use your money again to enter transactions and your exit from the market is temporary, it is better not to convert your coins so that you do not have to pay fees a second time, it is better to transfer your stablecoins to the wallet after selling the coins, so that you can transfer them to the platform again in time and make the transaction. Note that the passwords for the platform's wallet are not available to the user, and on the other hand, the platforms are exposed to all kinds of cyber attacks. Therefore, it is not recommended in any way to keep the digital currency in the platform, whether it is Arab or foreign, and it is preferable to keep it in your electronic or digital wallet.
Cryptocurrency trading
The word "trade" means to trade, buy and sell. In the cryptocurrency market, trading means the transaction of digital currencies. Traders seek to profit from price changes by selling and buying different currencies respectively. Therefore, trading requires knowing the market and predicting its direction. There are different ways to predict price trends in the financial markets, the most important of which are “technical analysis”, “fundamental analysis”, “emotional analysis” and “this data analysis”.
The basic principle in technical analysis , is to pay attention to the chart of price changes. Technical analysts are of the opinion that the effect of various market variables on the price is taken into account and price changes are formed according to certain patterns. These principles have created various methods of market analysis in technical analysis such as indicators, harmonic patterns, price action. The advantage of technical analysis is that it can be used in all financial markets such as stock market, forex, cryptocurrency and for all types of traders. The disadvantage of this method is that there is no certainty in it and each analysis has a chance of winning with a possible percentage.
Fundamental analysis of a digital currency means examining the economic and technical factors and variables that affect the price of a currency. In the stock market, fundamental analysis is carried out by examining the financial statements of the company and forecasting the variables that affect its profitability. In the forex market, the role of economic variables of countries and economic and political news is highlighted. In the cryptocurrency market, in addition to the macroeconomic variables and the technical and economic characteristics of each project, the reception of network users and investors also plays a fundamental role.
Emotional analysis is used less than other types of analysis and its purpose is to check market conditions according to the behavior and feelings of users. Various indicators have been created for this type of analysis, and one of the most useful is the Fear and Greed Index. The fourth type of analysis, called this analysis, is specific to cryptocurrencies. In this method, users check market conditions by checking the information available in the cryptocurrency network, such as purchases and sales, the number of addresses created, and other indicators.
Note that trading is different from analysis and that a good analyst may not be a good trader and vice versa. Although the analyst can examine the market based on different methods, the trader must enter the trade using a proven and tested trading system, capital control and risk management. There are different ways of trading, including day trading.
The cryptocurrency market is an emerging market based on new ideas in technology. Many projects are active in this field, some of which provide valuable services and applications to humanity, while others are created without any specific idea or purpose, and their price is driven by the browsing of various people on them. Due to the extreme price fluctuations, it is very dangerous to operate in this market without receiving cryptocurrency training.
The best digital currencies for trading and investing
Best cryptocurrency for investment and trading
Among the more than 7000 cryptocurrencies we will present to you is this paragraph the currencies that we found suitable for trading and investment, which were selected among the top 10 cryptocurrencies for the year 2022. Here are the best cryptocurrencies that you can start from and trade:
1- Cardano currency .
2- Litecoin .
3- Bitcoin .
4. Solana coin .
5- Tron (TRX) .
6- Ethereum coin .
7- Bitcoin Cash (Bcash) .
8- The star coin .
9- Binance Coin .
10- Ripple currency (XRP) .
For more information about the best cryptocurrencies, we advise you to read : Top 10 digital currencies to invest in 2022 .
Best Cryptocurrency Trading Platforms
Best cryptocurrency exchanges
Among the many thousands of platforms for cryptocurrency trading , we will present to you in this paragraph the best reliable platforms for trading digital currencies through which you can start trading and investing, and you must choose reliable platforms with a good reputation, among them Arab and foreign platforms, and these platforms are licensed and legal, and from In order not to fall for fraud and theft, we have prepared for you the best reliable and reputable platforms that you can start trading without any worries and safely. Here are the best platforms for cryptocurrency trading:
AvaTrade platform.
CoinMena platform.
Binance platform.
The kucoin platform.
What is the difference between digital money and electronic money
Huobi platform.
Conclusion
Today, digital currency has emerged as a financial market in most countries of the world, and many investors have become interested in working in it. There are different types of digital currencies, the most important of which are cryptocurrencies. Using cryptography and blockchain technology, cryptocurrencies seek to remove intermediaries from human activities and carry them out without the need for users to trust each other. At the present time, digital currencies have expanded their activities to include different areas and this market continues and every day is new and different.