Ali Al-Bayaty
Email
7/2021

Cryptocurrency, aka crypto, is a decentralized digital asset/money used to buy and sell online products and services. Such a decentralization is based on the blockchain technology that is utilized on decentralized networks (distributed nodes and validators for validating, managing, and recording crypto transactions) and secured by a strong cryptography algorithm (SHA-256, Ethash, Scrypt, RandomX, etc.). For that, cryptocurrencies use decentralized institutions, such as DEXes (decentralized exchanges), as opposed to centralized institutions, such as traditional banks and PayPal, for fiat currencies [1-3]. Cryptocurrencies, such as Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE), are a subset of digital currency, aka digital money [4], and most of them can be mined, staked, and traded for profit, as investments.

The provided infographic demonstrates the life-cycle of earning and investing cryptocurrencies from:

• mining crypto through Proof of Work, Proof of Connectivity, Proof of Coverage, Proof of Credit, and Proof of Storage,
• developing and selling dApps (decentralized applications) [5] and NFT (non-fungible token) [6],
• utilizing auto crypto trading bots and manual crypto trading through DEXes/markets,
• borrowing and lending crypto through DeFi (decentralized finance) projects [7], and/or
• holding crypto for a period of time through Proof of Stake.

 
Notes

1. Purchasing miner(s) and related components are considered as risk factors in investments, a fair amount of research and understanding what mining demands are required. For more information, please check WhatToMine and WhereToMine websites.
2. Electrical power consumption is considered as a risk factor in investments, a fair amount of research and understanding how the 120V/240V system works are required. For more information, please check Newegg or OuterVision power supply calculator.
3. Market capitalization and fluctuation for crypto pairs are considered as risk factors in investments, a fair amount of research and understanding the analysis of crypto markets are required. For more information, please check CoinGecko or CoinMarketCap websites.
4. Different crypto wallets are used in action based on their simplicity, portability, ease of access, and security. For more information, please check this article.
5. Crypto wallet should match the sent, received, and earned cryptocurrency.
6. Banks, PayPal, DEXes, and others networking fees should be taken into account.

References
[1] K. Ashford and J. Schmidt. “What is cryptocurrency?” Forbes.com. https://www.forbes.com/advisor/investing/what-is-cryptocurrency (accessed Jul. 24, 2021).

[2] J. Royal and K. Voigt. “What is cryptocurrency? here’s what you should know.” NerdWallet.com. https://www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know (accessed Jul. 24, 2021).

[3] J. Frankenfield. “Cryptocurrency.” Investopedia.com. https://www.investopedia.com/terms/c/cryptocurrency.asp (accessed Jul. 24, 2021).

[4] M. Grant. “Digital Money.” Investopedia.com. https://www.investopedia.com/terms/d/digital-money.asp (accessed Jul. 24, 2021).

[5] J. Frankenfield. “Decentralized applications – dApps.” Investopedia.com. https://www.investopedia.com/terms/d/decentralized-applications-dapps.asp (accessed Jul. 25, 2021).

[6] S. Jablonski. “Are NFTs the new crypto? A guide to understanding non-fungible tokens.” Forbes.com. https://www.forbes.com/sites/forbesbusinesscouncil/2021/06/09/are-nfts-the-new-crypto-a-guide-to-understanding-non-fungible-tokens (accessed Jul. 25, 2021).

[7] V. Mosinegutu. “15 Best DeFi crypto projects to look into in 2021 and their tokenomics.” Coinzilla.com. https://academy.coinzilla.com/best-defi-2021 (accessed Jul. 25, 2021).

Disclaimer
This Cryptocurrency Investments Life-Cycle infographic is for educational purposes only and is never intended to be financial investment advice.