What Is Cryptocurrency? Here’s What You Should Know

Are you a firm believer in taking the risk? Do you also get fascinated by the perks that cryptocurrencies offer? If your answer is a big yes, then cryptocurrencies are definitely meant for you. All you have to do is just keep on scrolling and get your facts updated.

What are cryptocurrencies?

Cryptocurrencies are a decentralized network of virtual currencies appended by cryptography. It is based on blockchain technology which is a database that collects data in groups. Its decentralized nature protects it from government invasion or manipulation. ‘Crypto’ defines the numerous encryption algorithms and cryptographic techniques which preserve these entries.

Bitcoin was the first blockchain-based cryptocurrency, which is considered to be different, famous, and priceless. There are numerous types of cryptocurrencies with different functionalities. Some are forks of Bitcoin, trending currencies that are developed from the starting stage.

What are Blockchains?

Blockchains are ledger that records the transactions in codes. It can be dreamed of like a chequebook that’s shared across limitless computers. The day-to-day transactions are calculated in “blocks” and then joined the dots together in “chains” of previously held transactions of the virtual coins. The individual whose day-to-day utility surrounds a cryptocurrency has a copy of the book of trades. The software records each new transaction as it happens the next moment; each copy of the blockchain is updated simultaneously, which comprises further information, keeping all records similar and perfect.

Types of Cryptocurrencies:

As of April 2021, there are over 10,000 different types of cryptocurrencies that fall into either of the two categories

  1. Coins (ex. Bitcoins and altcoins)
  2. Tokens

Coins:

Digital coins are the same as real coins except that they can only be used as money, and that’s all. They can be used as follows:

  • To transfer money
  • For storing purpose
  • A significant unit of account

Transactions of virtual coins can be exchanged from one person to other. However, a strange fact about these coins is that they don’t move their place when you send or receive them. However, in the blockchain, they reside, which keeps records of all transactions and is verified by computers globally. Furthermore, a bizarre part about these coins is that they cannot be stored to grab more coins, and it is independent concerning the specific application.

Examples of some of the coins and their market capitalization are:

Crypto CoinsMarket Capitalization
Bitcoins$1,085,882,736,296
Doge coin$70,153,546,090
Lite coin$23,209,991,630
Binance coin$100,111,925,058
USD coin$15,522,472,847
Ethereum$460,439,732,705
Cardano$55,909,375,460
Tether$55,717,066,749
XRP$70,224,996,549
Bitcoin Cash$25,749,355,230

Note: Chart Updated Date: 10,May 2021

Tokens:

It can be said that Crypto tokens are the denomination of cryptocurrency. It operates on an above level of blockchain that acts as an intermediary between the creation and execution of decentralized apps and smart contracts and tokens. Additionally, these are used to initiate the transactions.

Types of Cryptocurrency tokens are:

  1.  Platform tokens: These are the tokens that help numerous apps to build on the blockchain.
  1.  Security tokens: These are the tokens representing legal ownership of a physical asset and a digital one.
  1.  Utility tokens: It’s one of the crucial types of cryptocurrency tokens synced into an existing protocol and utilized to operate the services of that specific protocol.
  1.  Governance tokens: These are the ones that are used in fuel blockchain-based voting systems

When you are created, tokens are often utilized to activate the significant characteristics of the application they were constructed for. For example, Musicoin helps the users to operate numerous characteristics of the Musicoin platform. Some can be listening to songs or watching a video. For different kinds of utilities, tokens are created, and they are used according to physical suitability.

Why are cryptocurrencies so popular?

These cryptocurrencies are prevalent in today’s world, and there are ample reasons why they are the future currencies of the world:

Low fees

The fees associated with the crypto coins are meager, making it a popular currency to deal with. Hefty fees are incurred when you transact with other online payment applications, making the cryptocurrency an effective medium.

  1. The decentralized nature

The values of cryptocurrencies have to do nothing with the stability of the central government. It makes this virtual asset a safe place to invest. Investors look at this as a secure place to protect their wealth.

2. Potential for Profit

The reason to gain in profit is a significant reason why cryptocurrencies have become so trendy and in demand for numerous people worldwide. For example, if you buy a Bitcoin for a low price and then sell it when its price rises, you can make a profit. All the public who invested in this virtual asset before it got hot end up making a considerable profit.

3. Lucid handling

As cryptocurrencies are getting popular, it is getting easier to use them as many online companies are coming up with their way. Websites are now accepting cryptocurrencies as one of the payment methods. Debit cards dealing with payments of these virtual assets are also coming up.

4. Overall Security

The security of cryptocurrencies is one of the primary reasons for it becoming as popular as its payment is safer than other payment options from cybersecurity issues.

5. Easy to Get

People don’t have to skip through hoops to acquire a cryptocurrency. You can obtain it from any reputable sources. In the past, it was thought that to own a cryptocurrency, you have to go through a lot of sweat, but now it’s a ubiquitous and customer-friendly process.

6. Elimination of Banking fees

It is pretty genuine concerning the cryptocurrency among its exchanges to charge “maker” and “taker” fees. The story does not end here; they even charge deposit and withdrawal fees.

Are Cryptocurrencies a good investment? 

Anything that you purchase today that can help increase cash flows in the subsequent years, even if you don’t want to sell it in the market, is commonly called an investment. Few examples: You buy any property and just keep it the way it is because they have a minimal depreciation rate. Properties always tend appreciated and many other similar examples.

There are numerous “high risk-high reward investment options” available in the crypto market that are irrelevant in financial markets. Investment in a cryptocurrency is a “High risk” investment. This investment through security is of high risk.

To risk the cryptocurrency, two points should be considered: 

  1. Market instability
  1. Lack of central protection and guidelines

Let’s go through this with an example, when your account is fully loaded, for up to $250,000, it is FDIC-insured per depositor, per account class, per bank. This results in your balance with $100,000, a total savings account of $50,000, and an investment of $100,000 in your Current Deposit, all under a single FDIC-insured bank. However, there is complete security and assurance regarding your funds as secured by the Federal Deposit Insurance Corporation. There won’t be any experience for an individual to face any lack of money, and even your bank goes out of business.

Relative to the investment in a cryptocurrency, if something happens to the company that holds your virtual asset, you could lose your entire investment. Cryptocurrencies like stocks tend to fluctuate drastically and wildly, leading to inflation or deflation, unlike that of the cash you would hold in a bank whose value will change marginally. They are highly volatile currencies.

As the central government backs the normal currencies, if they ban one of their notes shortly, one can still exchange those notes in the central bank and get the value worth those exchanged ones. Still, if cryptocurrencies are banned, they neither have an intrinsic value nor will they be backed by the government.

Banks confront inflation by reducing the flow of money in the financial market and overcoming deflation by increasing the money supply. The money whose inflow is not authorized by central banks would lead to scarcity of supplies.

Despite the high risks, you can still invest in the cryptocurrency field based on your risk appetite after doing your homework on the project. Furthermore, utilize legitimate exchanges that follow KYC and AML guidelines.

Are cryptocurrencies legal in India?

Yes, we can buy virtual currencies in India, but there is no legal guarantee of these assets in India. To provide more transparency, the body Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 has constructed a structural framework for the construction of the virtual currency issued by the Reserve Bank of India and prohibits all private cryptocurrencies in India.

How do I buy cryptocurrency?

Bitcoins are purchased for US dollars, while others need payment through bitcoins or other cryptocurrencies. All you need is a wallet or an online app that can hold your currency. A person creates an account and simultaneously buys bitcoin with the help of real money. Several online brokers sell cryptocurrencies. Tradestation, Sofi Active Investing is a trending example of online brokers. 

How do I protect myself?

To invest in cryptocurrencies, a person should have a transparent understanding of the following pointers:

  1. The company should have an owner.
  2. One should be aware of all the stakeholders who’ve invested in the company.
  3. Check whether the currency is already developed or is in the process of developing
  4. Check whether you will own a stake or just coins and tokens; owning a stake will entitle you to be a participant of that company’s earnings while holding coins and tokens will only allow you to use them.

Best App to buy cryptocurrencies?

Apps to buy Cryptocurrencies from available for:

  • Coinbase

Coinbase is one of the favorite apps that help in purchasing cryptocurrencies.

  • eToro

This platform is known as a Trading platform with operations of more than 15 cryptocurrencies.

  • Robinhood

The type of app which helps in purchasing cryptocurrencies. The app Robinhood deals in a total of seven cryptocurrencies.

  • SoFi Active Investing

Bitcoin, Ethereum, and Litecoin are best for facilitating cryptocurrencies.

The latest news on Cryptocurrency:

The founder of BitTorrent has created Chia. The famous personality named Bram Cohen has made chia, which is one of the most trending cryptocurrencies on the internet and, sooner or later, will be its domain. The world is still waiting for this magic to happen in real. “Digital Coin” is one of the most trustworthy and reliable crypto trackers, which was assigned with XCH signage, was expected to have a hike of more than 55% by the end of the year 2021. It is believed to cross the $5000 mark.

The reason for it being so hyped is:

  • Its viability and Cloud integration 

Chia is much more viable than more established crypto coins like Bitcoins and Ethereum. These coins use a process called “proof of work,” which requires owning high-performance computing components to “mine” these cryptocurrencies. In contrast, with Chia, any user can mine these with an average PC.

  • The sustainability edge

Chia uses the fraction of the energy that Bitcoin does. The two use the evidence of energy prototype, leading to miners and GPUs running at peak performance for hours and hours.

  • Media Attention

It is quite a significant reason bitcoin is achieving a lot of success and is attracting numerous media forces to its network. Bitcoin is one of the rarest assets and viable options behind the bull cycle. Numerous institutions and retail stakeholders have concluded bitcoin to be a bar of digital gold.

Should you buy cryptocurrency?

There is a risk involved in cryptocurrencies, but people still love taking these risks and investing in these bitcoins. It’s a slight request do not endorse the same without any prior knowledge or experience; however, there is a famous saying, experience is the best teacher, and it teaches you the best. Slowly or steadily, you will be the leader in this. Some people love to take risks; as more extensive the risk, the greater is the benefits. If investments are made wisely and strategies are implemented accordingly, it can make you earn a lot.

Conclusion: If you feel that cryptocurrencies excite you more, but you restrict yourself to being a beginner in this field, then do not worry, as slow and steady wins the race. Start trading slowly, and then with a valuable experience, you can be updated to a PRO.

Keep Investing!!! Keep Cryptocurrency

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