Cryptocurrency is an increasingly popular way for New Zealanders to trade and invest. It’s a virtual currency that can be used to purchase and exchange online products. Just like physical money, it has unique and unpredictable codes or encryption to indicate its authenticity and value.
Simply referred to as crypto, it works using blockchain technology to manage and record transactions. One of its best selling points is its security and freedom, as it can exist outside the control of the government and central agencies.
If you want to start trading and investing your money in Bitcoin, Dogecoin, Ethereum, and the like, read this ultimate guide on how to buy, invest, and trade cryptocurrency in NZ.
Cryptocurrency works like digital, encrypted, and decentralised money to exchange goods and services on the internet. Unlike physical currency, it doesn’t have a central or reserve bank that sets the regulations. The users’ behaviour is the biggest factor that influences its value.
As mentioned, the cryptographic process is made through blockchain. This technology makes the transaction verified and recorded, giving you the confidence to entrust your money online.
Blockchain works like an open ledger that keeps track of every transaction made using cryptocurrency. Each exchange corresponds to a unique code. This makes it almost impossible to make counterfeit and fraudulent transactions. It’s also an open-source and decentralised system to prevent anyone from tampering with the records.
Coming from the name itself, blockchain consists of two components — the block and the chain. They work together to create an easy and secure transaction process.
A block is the data storage for every transaction made using cryptocurrency.
When you make a transaction, every piece of information is formed into a block. Once the transaction is formed into a block, it can’t be rewritten, edited, nor removed. This ensures the security and reliability of the transaction.
When the block is finalised, it will be formed into a link of other blocks through a set of chains.
The chain is the digital link between each block. The block comes right after the other, creating a series of tamper-proof blocks containing every single cryptocurrency transaction.
Most blockchains consist of one unbroken chain of blocks — or simply called a blockchain. Although, some blockchains may branch out different chains, creating a web-like structure rather than a single chain.
It’s important to note that not all cryptocurrencies use blockchain technology, and not all blockchain work similarly. Nonetheless, most cryptocurrencies work along with these principles.
For starters, Bitcoin and Ethereum are types of virtual currency. You can think of them much like Euro and Dollar as their physical counterparts. Of course, there are other cryptocurrencies just like there are plenty of other physical currencies.
Other popular cryptocurrencies available are:
1. Ripple (XRP) - Ripple was developed with the sole purpose of making international money transfers easier. It’s now used by many companies from all over the world to make their international payment more efficient.
2. Monero (XMR) - Monero is a secured and private cryptocurrency that helps you keep your payments and transactions anonymous.
3. Golem (GNT) - Golem uses blockchain technology to enable regular computers to turn into supercomputers. This is possible thanks to its assembly and monetisation of the worldwide supercomputer networks.
4. IOTA - For IoT transactions, IOTA is the only way to go! It’s often named the next generation of blockchain technology with the aim of machine-to-machine network transactions.
5. Dogecoin - Dogecoin started as a meme alternative to Bitcoin. However, it has now become full-pledge crypto and one of the most profitable in the market.
Play-to-earn cryptocurrencies is another way to enjoy crypto investing. Instead of directly trading your money in the market, you play a game, and you earn crypto tokens whenever you win. These tokens can then be converted into full-fledged cryptocurrencies like Ethereum or Dogecoin.
Play-to-earn cryptocurrencies aren't as popular as traditional cryptocurrencies, but it's becoming more popular even outside the crypto community. The games are easy to play, which even beginners can follow.
Popular play-to-earn cryptocurrencies include:
1. Axie Infinity - Axie Infinity is one of the most popular play-to-earn cryptocurrencies. It involves battles and challenges between monsters called Axies. These battles can be computer-simulated or played live with other opponents. You can improve your skills by buying AXS and SLP. It runs primarily on Ethereum.
2. DogemonGo - Dogemon Go runs on Dogemon Go, which is a spin-off of the famous mobile game, Pokemon Go. As almost all rules are based on Pokemon Go, it's really easy to play. Instead of Pokemons, you hunt Dogemons and earn DOGO credits or DOGE whenever they successfully capture one.
Aside from the usual payments for goods and services, there are different ways to use digital currency. Here are some of the most popular methods of crypto use:
One of the most popular ways to use cryptocurrencies is trading and investing. Users simply hold on to their money and sell them when they finally increase in value. Then, they use the profit to buy more cryptos to sell later on.
Otherwise, they simply take advantage of smart contracts. There are over a thousand cryptos so your ways of trading and investing may vary.
Some cryptos are designed for quick and easy money transfers. This is a popular choice for international companies as they can make money transfers to different parts of the world in just a few seconds without any additional fees.
Cryptos are also used as a tipping platform. When you find someone entertaining or informative on different social platforms, you can use crypto to tip someone. Popular examples are Bits for streaming on Twitch, and Stars for streaming on Facebook.
Unlike popular belief, getting started with crypto isn’t difficult. Here are three simple steps you need to take to get started with crypto.
As mentioned, there are plenty of cryptos available, and getting access to them is very easy. You have to choose a currency that offers you the usage and benefit you want. If you need to diversify your portfolio, Bitcoin and Ethereum can be a good start.
Like physical money, you also need a wallet to keep your cryptocurrency. Most of these cryptocurrency wallets come in the form of a computer program that you can access through your phone or desktop.
Different wallets also come with different purposes such as holding coins, exchanging on the market, and purchasing. Make sure to get a wallet that matches your needs and usage.
Exchanging physical money is the best way to buy cryptocurrencies and services. Conversions from physical to virtual currency are usually calculated with USD, but some can easily be converted into NZD, EUR, or AUS.
For first time buyers, here’s a handy guide.
1. Verify your identity - This step includes sending proofs of identification like a driver’s license or passport. This is standard practice before you can exchange your money into digital tokens.
2. Deposit your payment - You can deposit for your payment through different methods including bank transfers, credit cards, or wire transfers. Check the best methods offered by digital currency and banks.
3. Buying your coins - Different exchanges have different cryptos for sale. Always conduct your research to know the best practices of buying and selling cryptos.
The best digital currency exchanges may vary per person. Generally, these are the most common cryptocurrency exchanges where you can buy, sell, trade, and invest cryptos. Take a look at this side by side comparison.
|Deposit methods||Fiat currencies||Cryptocurrencies|
|Easy Cryptocurrency Exchange||Bank transfer, POLi||NZD||104 cryptocurrencies|
|Crypto.com||Bank transfer, BPAY, Osko, PayID, NPP, Credit or Debit Card||USD, AUD, CAD, CHF, EUR, GBP, NZD, SGD, JPY, ZAR, among others||66 cryptocurrencies|
|eToro Cryptocurrency Trading & CFDs||Bank transfer (ACH), PayPal||EUR, GBP, NZD, USD, AUD, CAD, HKD, SGD, CHF, NOK, among others||16 cryptocurrencies|
|YoBit Cryptocurrency Exchange||Bank transfer (ACH)||USD, RUB||1,427 cryptocurrencies|
|Huobi Cryptocurrency Exchange||Cryptocurrency||GBP, USD, AUD, EUR, INR, BRL, KHR, CAD, CNY, NZD, among others||290 cryptocurrencies|
|Binance Cryptocurrency Exchange||Bank transfer (ACH)||USD, AUD, GBP, EUR, RUB, TRY, NGN, UAH, PHP, CZK, among others||269 cryptocurrencies|
|OKEx Cryptocurrency Exchange||Bank transfer (ACH)||USD, AUD, GBP, EUR, RUB, TRY, NGN, UAH, PHP, CZK, among others||263 cryptocurrencies|
|CoinSwitch Cryptocurrency Exchange||Bank transfer (ACH)||USD, JPY, RUB, EUR||987 cryptocurrencies|
|Changelly Crypto-to-Crypto Exchange||Bank transfer (ACH)||USD, EUR, GBP, AUD, CAD, CHF, HKD, JPY, PHP, ZAR, among others||146 cryptocurrencies|
|Bitfinex Professional Trading Exchange||Cryptocurrency||USD, EUR, GBP, JPY||164 cryptocurrencies|
When your cryptocurrency investment finally peaks, withdraw it immediately to get the most returns. As long as you have your crypto wallet and exchange set up, cashing out your investments is also easy. There are two ways you can withdraw your cryptocurrencies:
1. Crypto to fiat - This process includes only one major transfer from cryptocurrency to fiat. This works well on basic cryptos like Bitcoin and Ethereum. To initiate the withdrawal process, you just need to transfer money from your exchange to your wallet, then to your bank account.
2. Crypto to crypto to fiat - Most crypto withdrawals only support basic cryptocurrencies. If you have an altcoin or other cryptos that have limited support, then you have to take an extra step of converting it into supported crypto before you can initiate the withdrawal.
Ultimately, it's always your choice. While it can really bring plenty of returns once all things go well with your investment, there's also a high chance of things going wrong because of its volatile nature. In September 2020, an attack compromised $150 million worth of crypto from the KuCoin exchange hot wallets.
Cryptocurrency frauds are rampant, especially as more and more people are joining the crypto craze. While you can really get rich by investing in crypto, it's always best to be extra cautious whenever you're investing. Remember that you're investing, and not gambling your money. Make calculated risks to reap the best results.
If you have a family member, relative, or friend overseas that you need to constantly wire money to, cryptocurrency may be the best way to go! It’s quick and easy and involves only a simple process. But if you don’t find crypto fitting to your needs, there are plenty of other international money transfer options for you!
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