What is Cryptocurrency? Crypto Definition & Explanation for 2022

Cryptocurrency Explained

Before we take a look at the finer points of trading crypto in Canada, it’s worth taking some time to ensure you understand some of the background and key terms relating to the industry.

For most people, cryptocurrency came into being when the mysterious Satoshi Nakamoto published his white paper, outlining the protocols for an entirely new kind of digital payment. Of course, the technology wasn’t developed overnight and Nakamoto’s paper actually represented the culmination of decades of research. However, for most crypto reviews, the development of Bitcoin is cited as the real beginning of cryptocurrency as we know it today.

What is crypto?

A cryptocurrency is a decentralised digital payment system that effectively acts as a medium of exchange between two parties. The crucial distinction between cryptocurrency and fiat currency is that crypto is not governed by a central authority, like a bank or financial institution. Instead, transactions are verified by computers on the network, known as miners.

Each cryptocurrency works in a slightly different way and will have different ways of limiting the number of tokens available, in order to create scarcity and allow the cryptocurrency to act in a similar way to any other financial asset.

Most of the top cryptocurrencies utilise blockchain technology, which is effectively a public ledger system. However, in order to update the ledger with transactions, computers on the network must solve complex equations to verify any changes – and these must match up across the network, which makes it virtually impossible for anyone to erroneously edit the records. It is this technology that allows people to buy and sell crypto in Canada without a central authority.

Crypto Trading

One of the things that makes trading crypto in Canada so popular, is simply how accessible it is. The volatility of the market makes it perfect for traders looking to speculate on short term price movements and anyone looking for a crypto platform in Canada is somewhat spoilt for choice. If you’re looking to enter the market, you’ll need to find a reputable platform – we advise reading plenty of crypto reviews – and potentially a crypto wallet, which is where you’ll store any assets that you choose to buy outright.

Once you are set up with a crypto wallet, then a quick web search will show that there are hundreds of cryptocurrency exchanges on the market. It is through these that you can gain exposure to the market, whether by buying cryptocurrency outright or by speculating on trading pairs. Opening an account with a crypto platform in Canada is usually very straightforward and many operators will let you try a demo account before committing any real funds. You can check out some of the top crypto exchanges by checking out TradersBest.com numerous crypto reviews.

Crypto Mining

In a nutshell, cryptocurrency mining is a process wherein nodes on the blockchain network solve equations to verify transactions and unlock additional units of a given cryptocurrency. The cryptocurrency is given as a reward, in exchange for the expense and computing power required to effectively mine cryptocurrency. Whilst trading cryptocurrency does not require an in-depth understanding of exactly how crypto mining works, it’s important to be aware of what it is and how changes in the process may affect prices.

It’s also possible for you to get involved in crypto mining yourself. Many platforms offer ways to join the process – but you’ll need some fairly significant computing power to be successful. Our cryptocurrency mining page will tell you everything you need to know to get started mining crypto in Canada.

Cryptocurrencies

You’re probably already aware that there are numerous different cryptocurrencies in circulation. In fact, at the time of writing, there were more than 4,000 different tokens, with more being added all the time. Understanding all the differences between the cryptocurrencies requires a high level of technical understanding, but for anyone looking to trade crypto in Canada, there are just a few key details to be aware of.

In many cases, the most significant differences between cryptocurrencies is how their transactions are authenticated and how new tokens are brought into circulation.  For example, Bitcoin transactions are verified by network miners, who are then rewarded with new BTC tokens, whereas XRP is released by Ripple – the company behind the cryptocurrency. Of course, supply and demand are the key tenets of investment, so it’s important for traders to understand how the stock of a given cryptocurrency is subject to change.

You don’t need to understand all of the technical ins and outs to start trading crypto in Canada, but we strongly advise that you research potential investments thoroughly. Understanding the basic differences between each token will help you to predict how they are likely to be affected by certain market forces.

Entering the World of Cryptocurrency

It may seem like there are endless terms and technologies to get to grips with when entering the cryptosphere, but for the purposes of trading crypto in Canada, there are in fact just a handful of things you need to be aware of. That being said, it is definitely worth investing the time in researching as much about the industry as possible. Our page on cryptocurrency trading will furnish you with the mechanics of buying and selling digital currency and our crypto reviews will let you know where to get started. That being said, there are a couple of things you should be familiar with from the outset:

Blockchain Technology

Many people new to the industry conflate cryptocurrency and blockchain as more or less the same thing. However, this is not correct and, in fact, not all cryptocurrencies actually use blockchain. However, for the most part, the potential of cryptocurrency is intrinsically linked to blockchain. A Blockchain is a type of ledger or database that comprises, as the name suggests, blocks. New transactions are recorded in new blocks which are added to the chain and distributed across the entire network. Each block contains new transactions, as well as a record of every entry that has been made to the database throughout the entirety of its existence – and it is this that makes blockchains so secure.

All ledger entries are available to be seen by the entire blockchain network. Therefore, if an anomaly appears, it is soon identified. If cybercriminals wanted to fraudulently affect the blockchain, they would need to change every block in the chain, across all of the distributed versions of the chain. This simply isn’t feasible and, even if it were possible, would not be more beneficial than simply joining the network as a miner.

Cryptocurrency Regulations Canada

Cryptocurrency is still an emerging technology and many jurisdictions are still getting to grips with their regulation for the trading of digital assets.  Of course, it is very important to be up to date with cryptocurrency regulations in Canada. You may already be wondering ‘is cryptocurrency legal in Canada?’ and the short answer is yes, it is. However, there are certain things would-be traders need to be aware of.

Canada allows the use of cryptocurrency, but it is not considered legal tender. Instead, the Canada Revenue Agency has classified cryptocurrency as a commodity, which inevitably has a knock-on effect when it comes to trading fees and taxes. Strictly speaking, trading commodities (as opposed to currencies) requires that Canadian citizens report any gains derived from cryptocurrency trading as taxable income.

Tips & Tricks for Beginners

Whichever way you look at it, there is a lot to learn when it comes to cryptocurrency, but this shouldn’t put you off on your journey – everyone has to start somewhere and whilst research is always a good thing, you don’t need to be a blockchain expert to start profiting from trading cryptocurrency. One of the most important steps is to take your time in choosing a crypto platform in Canada. Different operators will have different features and some are definitely more suited to novices, whilst others are aimed at professional traders. You should also be open-minded and prepared to accept the differences between the crypto markets and other financial assets.

Do your research

It’s important to see your cryptocurrency journey as an ongoing process. Not least because the market is always in flux. Initially, you might want to invest some time learning about the major players, like Bitcoin, Ethereum and Litecoin. These are often the best options for novices to begin trading. However, as time goes on you may wish to branch out. It’s important to make sure you are aware of the individual qualities of each token, and how they may be affected by market forces.

Be prepared for volatility 

The cryptocurrency market is notoriously volatile – but this is no bad thing. Any savvy trader knows that with volatility comes opportunity for profit. Don’t be alarmed when you see the price of some tokens fluctuate significantly throughout the day. Instead, familiarise yourself with long and short selling and embrace volatility. Even if you prefer to hold onto crypto, the markets inevitably bounce back, much in the same way traditional financial assets tend to.

Keep up to date with regulation

This is perhaps where trading cryptocurrency differs from other financial assets. The regulatory landscape is changing all the time and a single piece of legislation can make or break a cryptocurrency. Make sure you are not caught off-guard by keeping abreast of development with regards to Canada’s regulation of cryptocurrency.

Keep your options open

There are numerous crypto exchanges on the market. Choosing the right one can take a lot of time and research, but it’s worth remembering that you can always change providers. The crypto market changes quickly, very quickly, so the best operator today may not be the best operator in five years. By regularly checking back with our broker comparison, you can see if more suitable platforms emerge.

How our Experts Find the Top Crypto Platforms in Canada

To find the top crypto brokers on the markets, our experts here at TradersBest.com consider several factors. Of course, we ensure that each operator is completely legitimate and has all the necessary regulatory credentials – this is a prerequisite, but we also take a deep dive into what a platform has to offer to make it stand out from the crowd. Three key things we consider are:

Trading options

Different exchanges often vary on which cryptocurrency pairs they list. If you’re looking to speculate on, say, Dogecoin or Cardano then there’s little point in choosing a crypto platform in Canada that doesn’t list those currencies. Alternatively, you might want to branch out and trade in other financial assets so will have a preference for platforms that also offer trading in ETFs, commodities or forex.

Security

Security should always be of paramount concern with anything relating to e-commerce but especially when cryptocurrency is involved. The industry is often the target of scams so our review team makes it a priority to conduct a thorough review of each platform’s security credentials. This includes both the operation of the trading platform itself and the handling of funds held with the operator.

Location

As we have previously noted, cryptocurrency regulation is still something of a grey area. If you’re a Canadian trader, you’ll want to make sure you choose a crypto platform in Canada or at least one that is fully supported by the domestic trading conditions.

Fees

Another important consideration when choosing any crypto platform in Canada is the fees charged by the operator. This is especially relevant if you plan on trading in high volumes – there is little point in trading at all if any profit will be eaten up in commission fees. Generally, platforms will either charge a fixed fee or offer a ‘commission-free service’ wherein the platform makes its money back by having a wider spread than fee-charging sites.

What do I need to look for?

At this stage, you will hopefully have an idea of the important features of the cryptocurrency industry. Of course, education in the field of digital currency – and financial markets in general – is an ongoing process and keeping informed as to the latest updates and developments is key if you want to be a successful trader.

Trading, in general, involves keeping a constant eye on the market, tracking price changes and learning when to make trades, but trading in cryptocurrency also requires you to keep informed on the latest regulatory changes and conduct research into developments in the world of blockchain technology. Our intention here at TradersBest.com is to give you a single reference point for all things crypto – ensuring you can enter the market confidently and with a good chance of success.

In addition to offering information on trading cryptocurrency, our in-depth reviews also provide an unbiased and balanced look at some of the top trading platforms on the market. This helps you make an informed choice on the best crypto platform in Canada for you personally, something that will pay dividends later down the line. Aside from being able to see what services a platform offers, you’ll also be able to check they support your preferred payment method, offer adequate security and are in line with the latest Canadian trading regulations.

Once your up-and-running with a trading account, it’s important to continue your education in the industry, by keeping up to date with new coins coming onto the market, as well as any news from prominent blockchain developers.

Crypto Reviews FAQ

What is cryptocurrency?

Cryptocurrency has gone from being a niche technology to one of the most exciting investment prospects in little over a decade. Since Bitcoin launched in 2009, there have been numerous developments and new cryptos emerge almost weekly. To fully understand crypto requires careful research of a specific coin, but here at TradersBest.com, we offer a wealth of information for anyone interested in trading cryptocurrency to get a firm overview of the industry and the crypto regulations in Canada.

Is cryptocurrency legal in Canada?

Many people have reservations about the legality of trading cryptocurrency. Different jurisdictions have different rules governing the buying, selling and use of digital payment systems. Canada is one of the most forward-thinking nations in this respect, having adopted an adaptive approach to this emerging technology. Each of our crypto reviews for Canada will cover the relevant regulatory credential of a platform, so you can rest assured you will be operating within the law at all times.

What are the top cryptocurrency platforms in Canada?

There are literally hundreds of crypto exchanges available in Canada, but choosing the best one will depend largely on your individual circumstances. Our guide to cryptocurrency exchanges in Canada takes an in-depth look at some of the top operators, allowing you to decide for yourself which one best suits your needs.

Where can I trade cryptocurrency?

Choosing where to trade cryptocurrency is an important decision and depends on several factors. Typically, the average trader will need to find a suitable broker or exchange. Our guide to crypto exchanges in Canada will let you know what’s available and each in-depth review will let you know whether they offer the functionality you require.

Should I buy Bitcoin?

There’s no question that Bitcoin is the most well-known and most successful cryptocurrency in terms of market capitalisation and token value. Choosing whether to add Bitcoin to your portfolio can certainly be profitable, but there is also plenty of opportunity to be found with the altcoins, such as Etherum, Litecoin, Bitcoin Cash and Cordano. It is worth noting, however, that Bitcoin’s popularity means it is arguably the most stable of the cryptocurrencies.

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