What is Cryptocurrency?
Cryptocurrency has revolutionized the modern-day concept of money transactions to a significant extent. With its reliable blockchain system, it is drawing more people into it every day. In 2020, the global worth of cryptocurrency reached $1.49 billion with an estimated growth rate is 12.8% per year. In 2018, around 1600 cryptocurrencies were functioning. In this article, we’ll try to provide a concise idea of cryptocurrency, how it works, which cryptocurrencies have the potential to stay in the long run, and the prospects of the blockchain system in the future.
An encrypted currency that has no physical existence, can bypass all the conventional transaction systems, highly secure digital currency.
Cryptocurrency relies on cryptography or more specifically on the blockchain system. It is a digital or virtual system of transaction that bypasses the conventional central issuing or regulating body. Instead, it keeps a digital ledger of transactions between the two parties in a highly secure and authentic manner. Then this recorded data of the ledger were cloned and spread all over the computers on the network.
This peer-to-peer system provides the opportunity to both send and receives payments. So, there is no need to carry physical money be dragged all over the world. This very concept motivated people to invest in it more.
The primary objective of all cryptocurrencies is to make the transaction appear untraceable. It uses a cryptographic algorithm known as Hash to process the transaction. Then it comes up with a result. Lengthwise, the output matches the input. However, it looks nothing like the original entry.
Since, all the payments exist in a virtual database, moving millions and billions have become easier. A public ledge archives the transaction and the cryptocurrency moves from one digital wallet to another.
As the first cryptocurrency, Bitcoin retains the leading position since its arrival in 2009. It is the brainchild of Satoshi Nakamoto – a highly speculated pseudonym for an anonymous individual or group of people. On 20 June 2022, the exchange rate for 1 Bitcoin is 19,059.50 USD.
Although, all cryptocurrencies lay heavy stress on safety and security. None can assure stability. The value of cryptocurrencies fluctuates all the time. Because people are mining data to acquire digital currencies as a profession these days. Massive groups are investing time and resources to grab this opportunity. Block. one, a Chinese corporation, comes as the top private owner of bitcoin. Block. one possesses 140,000 BTC, which is 0.667% of the entire supply.
Unlike traditional financial products such as mutual funds, stocks, and bonds- cryptocurrencies are less subjected to regulatory measures. Thus, the value of cryptocurrencies are depending on supply and demand. The stakes of the risk and the reward are higher.
Safe Investment in Cryptocurrency: 4 Simple Principles
When it comes to investment, every step needs to be calculated. A farsighted investor should know that cryptocurrency is one of the riskiest investments of them all.
Thorough research of currency exchanges
It is estimated that cryptocurrency exchanges have more than 500 ways. Thus, you need to read, research, and get in touch with experienced investors to know which one is the best suited for exchanges before you invest.
Stashing Digital Currency
Cryptocurrency needs to be stored. Either on a digital wallet or an exchange. Each wallet comes with its own set of advantages and disadvantages. The security and technical demands vary according to place. Whereas, exchanges should be investigated in respect of storage choices beforehand.
Investing in only one cryptocurrency will not work out well in the long run. Simply because Bitcoin has the most reputation today, does not guarantee its success in the future. There is a wide array of choices. Multiple investments in different cryptocurrencies should bear better fruition.
Fasten up for Volatility
Even stock market crashes would fall short to cause you heartache that severely, in comparison to the volatile nature of the cryptocurrency market. You would require a nerve of steel and an iron will the weather create this storm!
Cryptocurrency is still in its early days. Due to its unpredictable nature, investors should research and invest wisely.
Cryptocurrency v/s Regular Currency
- The regular banking system is prone to technical difficulties. The servers can be down or the machines can malfunction.
- Physical accounts can be hacked which leads to identity thefts by the hacker or a denial-of-service by the bank.
- Due to transfer limits and governmental restrictions; conventional currencies cannot be moved in bulk quantity if required.
- The banking system is centralized. Whereas, cryptocurrency relies on decentralization.
Cryptocurrency: Good or Bad?
No need for a long list of paperwork anymore! Cryptocurrency is accessible to all, with unlimited purchases and withdrawal opportunities. The transaction cost is lower than what the banks used to charge as well!
Although the great minds of the world are still in two minds regarding cryptocurrencies. Richard Branson and Bill Gates are in favor of cryptocurrencies. Whereas Warren Buffet, Paul Krugman, and Robert Shiller are opposing it. Nobel Prize-winning economists like Krugman and Shiller consider it a Ponzi scheme and a doorway to criminal activities.
Cryptocurrency protects anonymity. Terrorists are capitalizing on it the most these days. Thus, governments are trying to impose some regulatory measures on it. Which practically creates a conflict.
It is believed that, in 2030, 1 out of 4 men would embrace cryptocurrency for their transactions. But the fluctuating price would remain to exist. This is a concerning matter for economists around the world.
You need storage before anything else. Meaning, you need a wallet to store your cryptocurrency. Which is available for free online. That would, however, demand a percentage when you withdraw or purchase something.
A physical device or a hardware wallet can be bought as well to store transaction information and history for future validation. A paper wallet is also another option. It is either a printed or written QR code or a set of characters. After setting up your wallet, you are ready to buy cryptocurrencies from sites like Binance or Gemini. When your purchase is complete, the purchase amount would then get deposited into your wallet and becomes usable.