Have you been frequently coming across the term ‘Cryptocurrency’ and wonder what it is that everyone is so absorbed discussing? Have you been told that cryptocurrencies are what we all must be looking at in the future and only ended up in a more confused state? Are you going through a fear of missing out on something because the subject is too complex for you? You should worry no more! Here is a beginner’s guide on the subject that will help you comprehend what the financial world is going crazy about at the moment.
Cryptocurrencies Are a Form of Digital Assets
This digital asset works and is based on something that is called blockchain technology. There is no fixed value for cryptocurrencies, just like our other currencies. The difference between traditional currency and digital currency is that while our real money’s value is based on many factors such as inflation, interest rates, tourism, and import and export valuation, the value of cryptocurrencies is based only on its:
There Are a Lot of Different Cryptocurrencies
Many people think that there is only one cryptocurrency. However, even though Bitcoin has almost become a generic term for cryptocurrency and many people use it interchangeably, the fact is that it is not the only cryptocurrency available in the digital sphere.
One thing that we must all keep in mind is that cryptocurrency is digital money. It works as a means of exchange exactly how we use money from our pockets. Cryptocurrency works on blockchain technology which functions more or less like a ledger in our world. This blockchain records all the economic transactions, including the account numbers and the balances. This blockchain technology is also responsible for making sure that the transactions are not replicated, thus creating a foolproof system of exchange and distribution.
Bitcoin Was the First Cryptocurrency That the World Saw
In the year 2009, a person who is largely believed to have taken the pseudonym Satoshi Nakamoto introduced Bitcoin. There were only 21 million bitcoins created, which is why its price is so high today, applying the rule of demand and supply. An interesting piece of information is that about 18 million bitcoins have already been mined as of date.
When a cryptocurrency miner successfully verifies a block, the process rewards it with a digital currency portion. This is a process that has adapted beautifully over the years. Because of the high demand and low supply, the reward that was 50 bitcoins when it was introduced is not only 6 or 7 coins for every block that the user mines.Before you dismiss it as unworthy of your attention, let us quickly tell you its value. 6 bitcoins can value around US$300,000! This is because each bitcoin is approximately about US$58,300! It is said that the reward will keep reducing every four years till all the 21 million coins have been mined. Once that happens, there are many speculations about what will take place, including miners using transaction fees.
Other Popular Cryptocurrencies
In the meantime, a lot of other virtual currencies are appearing over the internet, and some of them have managed to gain a lot of attention. Cryptocurrencies other than Bitcoin are called ‘altcoins’ because they are alternatives to Bitcoin. Some of the most popular altcoins are Etherium, Litecoin, and Polkadot. Most of them can be transacted in seconds, and some can take longer to mine. The tougher they are to mine, the more the rewards in mining it.
Why Is There a Lot of Skepticism Around Cryptocurrencies?
The market for cryptocurrencies is highly volatile. Since they are in their early stages, there is a lot of confusion about them. A very few people know about them even now. Furthermore, Bitcoin miners are always under the cloud as to how the governments in countries around the world will regulate its usage. Whether cryptocurrency will one day become a legit source of exchange is something we all need to see with the passage of time alone. Here are some factors that make people sceptical about crypto:
Cryptocurrency has no single authority to determine its value.
Since they are not legal tender, none of the monetary authorities in the world recognises their value.
The legal implication of no recognition means that you will have no legal recourse if you are to lose money while dealing with them online.
There are no laws governing cryptocurrency or protecting deals that involve them in any country of the world
There is no organisational system that keeps track of the digital currencies or tracks and investigates fraudulent transactions.
Where Do You Buy Crypto?
The best place to buy them is to approach a cryptocurrency exchange. Here is a list that you will need to check before you can procure them there:
Your identification document, which is for personal identification only
The mode of payment that you will be using.
A secured internet connection. No public Wi-Fi
An account at the cryptocurrency exchange
A phone for authentication
Cryptocurrency wallet that is password secured
When you buy cryptocurrency at the exchange, it is sent to your account at the exchange. Therefore, you should quickly transfer the digital currency to your wallet as soon as possible. This is to protect losses if the exchange crashes or closes down or, in the worst case, if your account is hacked. Therefore, it is very important that you maintain your secured wallet.
Cryptocurrency mining and buying can be subject to many risks. This is usually attributed to the fact that it is still in its nascent stages, and a lot more needs to be done to secure it. Should you invest in cryptocurrencies? The answer depends on whether it aligns with your financial goals and if you can afford to take a risk. The market is unregulated and is subject to heavy speculation, so invest only so much that you can afford to lose.
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