Bitcoin, blockchain and cryptocurrencies burst onto the world stage in 2008, when an online posting of a pseudonymous white paper provided a vision of a new way of transferring value over the Internet. In the decade since the crypto-asset market has gone through all the classic phases of a disruptive technology: massive bull markets and crushing pullbacks, periods of excitement and moments of despair, FOMO (fear of missing out), fear and everything in between In.
As the cryptomarket enters its second decade, the cryptocurrency market is headed for a new all-time high and many of the world’s biggest investors and financial institutions are joining in. Most cryptocurrencies operate without the need of a central authority such as a bank or government and instead operate through a distributed ledger to spread power among their community.
Like any investment, it’s important to understand what it really is. This becomes essential when it comes to speculative and still evolving assets like crypto.
A type of currency that is digital and decentralized. Cryptocurrencies can be used to buy and sell things or as a long-term store of value. However, many countries do not allow the use of cryptocurrencies to purchase goods and services.
Cryptocurrencies are basically digital assets. It is cryptographically secure, making it nearly impossible to counterfeit or double spend. Digital currency can be bought and sold using hundreds of online exchanges available to investors. Investors make big bucks by throwing their cash behind new digital currencies, but their volatile nature means savers can easily lose their money.
Why is cryptocurrency popular?
With cryptocurrency, there is a new way of transacting and storing value. Many believe it to be much better than traditional fiat and gold. The decentralization of financial operations through cryptocurrency has many potentials over the traditional financial system. This cuts the overhead cost by approx. In addition, transaction costs are less expensive and can be sent and received internationally.
With fiat currencies (government-issued currency that is not backed by a commodity like gold and derives its value entirely from the trust that people place in it), nations can print and restrict the printing of money. Therefore, the price may fluctuate. For those living in countries with hyperinflation and unstable economies, cryptocurrencies can be an alternative to storing value compared to fiat currency.
However, in the case of cryptocurrencies, there is a defined monetary policy that cannot be changed by anyone, whoever they are.
types of cryptocurrencies
Cryptocurrencies are used for payments, transmitting value (similar to digital money) across a decentralized network of users. Many altcoins (ie, not bitcoin or sometimes even ether) are classified as such, and can sometimes be called value tokens. Below is a list of popular digital currencies based on the total dollar value of the coins in existence:
|Cardano (ADA)||Binance Coin (BNB)|
|Polkadot (dot)||USD (USDC)|
How does cryptocurrency work?
Cryptocurrency works much like PayPal or credit cards, except you exchange digital assets for goods and services instead of US dollars. To transact with cryptocurrency, you need to exchange currency with a peer using a digital wallet known as a cryptocurrency wallet.
A digital currency wallet is a software that allows you to transfer funds from one account to another. To complete a transaction, you need access to a password, known as a private key. The private key is like a bank account. You can own multiple keys and own all the money sent to those keys. Transactions are recorded on a public ledger, which shows the total of transactions without revealing the identity of the parties involved.
Cryptocurrency mining is the process required to verify transactions. It involves a large amount of computing power and complex algorithms, but those who succeed in solving problems through mining can earn reward coins, tokens or transaction fees.
When it comes to cryptocurrencies, one of the biggest challenges for investors is not getting caught up in the hype. Cryptocurrency has emerged as an asset class that provides an opportunity to invest and earn substantial returns. The asset class has gained massive popularity in recent years. To start crypto trading, one needs to set up an account. For starters, a person can invest as little as Rs 100.
Risks of Cryptocurrencies?
Cryptocurrencies are still relatively new and the market for these digital currencies is very volatile. Since it does not require banks or any other third parties to regulate cryptocurrencies; They are uninsured and difficult to convert into tangible currency (such as US dollars or euros).
Furthermore, since cryptocurrencies are technology-based intangible assets, they can be hacked like any other intangible technology asset. Lastly, since you store your cryptocurrencies in a digital wallet, if you lose your wallet (or access to or wallet backups), you have lost your entire cryptocurrency investment.
Digital currency is also susceptible to some forms of hacking, which is why it is important to keep your cryptocurrency accounts extremely secure. If someone gets your crypto wallet address and password, they can take your crypto and you will have no way of recovering the loss.
Before investing in cryptocurrency, make sure you understand how it works, where it can be used and how it can be exchanged. Just as no one carries crores of rupees in a paper bag, don’t choose an unknown or lesser-known wallet.