Cryptocurrency works the same as the physical currency we use to sell or purchase goods, avail services and you can also trade them to earn profit. These unregulated currencies are best to trade if you want to earn huge profit as the price of cryptocurrencies are always heading upwards. There are endless numbers of cryptocurrencies, some of the famous are Bitcoin, Ethereum, Shiba Inu, Dogecoin, etc.
Here, we will discuss all the things that you must know about cryptocurrencies, their types, advantages, and many more.
What is a Cryptocurrency?
Cryptocurrency is a digital currency that is secured by the cryptograph that avoids the chances of counterfeit. These are the decentralized networks using blockchain technology for transactions. These virtual currencies do not come under government authority that is why there is no Government interference in their transactions. Cryptocurrencies can be used online for the exchange of goods and services.
Blockchain: Blockchain is a decentralized technology that manages crypto transactions and is distributed across many computers. This is the organizational method that ensures the integrity of crypto transactional data which is the most essential component of all cryptocurrencies.
Types of Cryptocurrencies
According to Coin Market Cap, A market research website, There exist more than 15000 cryptocurrencies that are traded publicly and the numbers are increasing rapidly. The total value of all the cryptocurrencies in November 2021 was $2.5 trillion. Bitcoin is the most popular Cryptocurrency which holds a value of 1.1 Trillion these days.
There are a huge number of Cryptocurrencies in the market with various functions and specifications. Some are the clone of Bitcoin while others are new cryptocurrencies.
These are the top 10 Cryptocurrencies and their market capitalization as per data of Coin Market Cap.
Popularity of Cryptocurrencies
The cryptocurrency is gaining popularity among the public and it has successfully appealed to its supporters due to many reasons. Let’s have a look at some of the reasons behind the popularity of Cryptocurrencies:
- Supporters believe that Cryptocurrency like Bitcoin is the currency of the future and they are rushing madly to buy it before the value increases further.
- Cryptocurrency is free from central bank intervention, so supporter believes that these currencies will be free from inflation effects.
- Supporters also like the blockchain technology used in cryptocurrency transactions as it is safer than other payment systems.
- Supporters also like cryptocurrencies because they are rising in value.
Cryptocurrency as a means of investment
Crypto investment is rapidly rising in public but the experts thought about it are contradicting. Cryptocurrencies’ value may rise but many investors consider it as mere speculations because it does not generate cash flow, so for your profit, someone has to pay more for the currency than you did while buying it.
The Famous investor Warren Buffett said about bitcoin: “It is a very effective way of transmitting money and you can do it anonymously and all that. With the help of check, one cantransmit money too. Can we consider checks worth its price? Just because they can transmit money?”
Those people who find cryptocurrencies like Bitcoin as the currency of the future must understand that currency needs to be stable so that customers or traders can determine its price but the price of cryptocurrency is highly volatile. And if Bitcoin might rise a lot in the future, people are never going to spend them which makes it less viable as a currency.
Advantages of Cryptocurrency
Cryptocurrencies are the easier way of transferring funds among two people directly without the need of a third party or company. These financial transactions are kept safe with the help of private/public keys. The processing fees of these transactions are minimal and users are not required to pay any charges to the bank or any other institution.
Disadvantages of Cryptocurrency
Cryptocurrency holds a semi-anonymous nature which makes it more useful for the people carrying out illegal activities like money laundering or tax evasion. Many privacy-oriented coins cannot be traced easily by anyone.
How to buy Cryptocurrency?
There are two main ways you can buy cryptocurrency in. Some of the renowned Cryptocurrencies such as Bitcoin can be easily purchased with the US dollar. Other Cryptocurrencies require payment in another cryptocurrency or bitcoin.
To buy Cryptocurrency, you need a ”digital wallet”. In this ‘wallet’ you can store your digital currency. This wallet is an online app that stores your digital money. To access this, you need to create an account on the Crypto exchange market, after which you can transfer real money in this wallet to purchase cryptocurrency such as Ethereum or bitcoin with it.
Among the crypto exchange market, Coinbase is one such example that allows you to create a wallet and trading of cryptocurrencies altogether. With the help of online brokers, you can also invest in eToro, Sofi Active, and Tradestation. Robinhood offers free-of-cost Crypto trade to users. ( it is available in most of the states in America.
The legality of Cryptocurrencies
Cryptocurrencies are legal in the USA; however, they are banned by the Chinese government. The legality of Cryptocurrencies depends on countries. Before buying Cryptocurrencies, make sure you check the reliability of the merchant.
How to protect oneself from Cryptocurrency Fraud?
If you are thinking of buying a cryptocurrency via ICO, keep these important points in mind-
- Check the reliability of the company
- Find out if other well-known investors are investing in it
- Keep your goals clear, are you going to purchase a stake or are you going to buy tokens only
- Check if the said Cryptocurrency is developing or already developed.
Make sure you read all the important points in a company prospectus to check the legitimacy of your source. However, legitimacy does not guarantee the success of Cryptocurrencies. Remember that there is always of risk of getting robbed online as hackers try to tamper with the computer network. Make sure your Crypto network has a strong security protocol.
Is Buying Cryptocurrency worth it?
Cryptocurrencies are in trend but they are very volatile speculative to purchase. In comparison to stock trading, the Crypto trade is riskier. You can buy and invest in Cryptocurrencies if you have a high-risk appetite
Cryptocurrency – FAQs
Q1. Explain Cryptocurrency in simple words?
Ans. Cryptocurrencies are digital files that are used as the mode of digital transaction. One can buy and sell things with the help of this digital file.
Q2. How can you purchase Cryptocurrency?
Ans. Many Crypto exchange markets allow you to trade in Cryptocurrencies. Some of the major Crypto exchange platforms are Cash app and Coinbase, etc.
Q3. What is the significance of Cryptocurrency?
Ans. Many visionaries see Cryptocurrency and blockchain technology as the future. It has the potential for crowdfunding and unbiased online voting. Some of the major financial institutions such as JPMorgan Chase find it useful in lessening the transaction cost.
Q4. How do Cryptocurrencies generate revenue?
Ans. The payment in Cryptocurrencies is done through secure payment gateways. These payments are known as tokens which are managed by in-built digital ledger entries. You can simply sell your cryptocurrency or mint Cryptocurrency online.
Q5. Name some of the major Cryptocurrencies?
Ans. Bitcoin is one of the oldest and famous Cryptocurrency followed by Ethereum, Solana, Binance, and Cardano.