Cryptocurrency: The Know-Hows
Cryptocurrency. With the growing economy, there are now several forms of currency that may work as a medium of exchange. Cryptocurrency is one of them. This may sound like a complex term, but don't worry it is a lot easier to understand than you might think. However, it is important that you know the process of how Cryptocurrency works before you dive in.
What is Cryptocurrency?
A cryptocurrency is a kind of digital or virtual currency that serves as a medium of exchange. It is virtual in nature, so it uses the technology of cryptography to process, secure, and verify all transactions made using cryptocurrency. In simple terms, Cryptocurrency is just like every other currency that can be used to purchase any products or services. Bitcoin has been a famous method used as a currency exchange for any goods or services, famous for its transaction without the need of any middlemen, However, not a lot of people know that Bitcoin is actually a type of cryptocurrency.
How was it developed?
Cryptocurrencies were made initially as a side product of the creator, Satoshi Nakamoto, the maker of Bitcoin Cryptocurrency. His first intention was to create a peer-to-peer cash system electronically that is able to facilitate any transactions without the need for central oversight.
How does it work?
Cryptocurrency is powered by a technology called Blockchain. This is a separate ledger that contains all of the transactions across the peer-to-peer system. With this technology, participants are able to confirm the transactions made without the need for a central clearing approval. This can be used during fund transfers, settling trades, voting, and other issues. Cryptocurrency is a medium of exchange that is made and stored electronically in the blockchain. This uses encryption techniques that help control the construction of monetary units and verify the funds. This has no innate value so it cannot be redeemable for any other commodity, such as fiat money or gold. The value only exists in the network and has no physical form.
What are they worth?
There are a lot of cryptocurrencies in the market, with a number of 6700 different ones. These are actively trading publicly, and the numbers are continuing to increase, raising the value through ICOs or initial coin offerings. In 2021, the total value of cryptocurrency was recorded for more than $897.3 billion. The most popular, bitcoin, had a total value of $563.8 billion and is continually growing every year. Here are some of the best cryptocurrencies available in the market.
- Bitcoin Cash
- Binance Coin
Why is it popular?
There are several reasons why cryptocurrencies are appealing to their supporters. Here are the most popular reasons why:
- Supporters believe that it is the currency of the future, so they are racing to purchase them now before they become more valuable.
- Some people like the fact that cryptocurrency does not have any central banks that manage the supply, since these banks reduce the value of the currency over time.
- Blockchain technology is secure because it is a decentralized process.
- The value is going up without any interest in the long-term acceptance.
- This currency is not associated with any world government, which means the value will remain stable even if the country is in financial turmoil.
- There is a huge potential for profit
- Thanks to more online companies adapting to the new currency, it has become easier to use.
- The process is decidedly simple and customer friendly so it surprisingly easy to get.
Before diving into the trade of cryptocurrency, here are some important questions you should ask.
Is Cryptocurrency secure?
The safest way you should purchase Cryptocurrency is through an offline wallet, by doing so reduces the risk of cyberattacks. So, you only go online when you are conducting trades or exchange. Security is the most important feature you should look out for when choosing a crypto exchange platform.
What determines the price?
Cryptocurrencies are not controlled by any regulatory body, which means the value is solely determined by the user. It is up to the user if they would drive the price up or down. Usually, the price increases when a big crypto exchange adopts a cryptocurrency and diminishes when it leaves.
Is it risky?
The unpredictability in making the investments in cryptocurrency makes it a high-risk investment. If you wish for a low-risk investment, it is best to avoid cryptocurrency.
When should I buy it?
The currency is very volatile, so there is really no perfect time to buy cryptocurrency. It rises and falls at an uncontrolled pace, so it is best to do proper research before you invest.
Is it legal?
Cryptocurrency is legal in the United States, though China has banned its use, so its legality depends on each individual country.
How do I protect myself?
Before purchasing, always make sure to check the company's prospectus for information. Some information you should check is if the owner is identifiable and well-known, the major investors, will you own a stake in the company or just a currency, and is the currency already developed. Combing through the prospectus may be a lot of work. but it is important to scan through it all and remember that the more detail it has the more chances it is legit. However, the legitimacy does not ensure its success. But beyond all of this, cryptocurrency does expose you to a lot of risks, like theft and hackers penetrating your computer system that maintains your assets. These aren't small risks when investing in stocks and funds on major trades and exchanges.
Should I Buy Cryptocurrency?
Investing and purchasing Cryptocurrency is an immensely speculative and uncertain investment. Trading of stocks of certain establishments and companies is generally less risky than investing in cryptocurrencies like Bitcoin. There are various exchange platforms where you can invest in cryptocurrency. Your choice should be influenced by the security that they offer. Make sure that the digital wallet they provide is secure and consider how much they charge between each transaction since different platforms charge differently. When you have decided on which platform to use, you can purchase cryptocurrency in your local currency using either a bank account or credit card.
The technology of Cryptocurrency may be relatively new to some while others may have been quite familiar with it for years now. However, it is not too late to jump in and join the train. This technology is guaranteed to stay and improve. But before you do, make sure that you are able to conduct proper research and you are able to understand how the system works.