What is cryptocurrency?

The concept of cryptocurrency is not new. Since the launch of the first cryptocurrency in 2009, the concept has garnered huge attention. Bitcoin was the first crypto to enter the digital currency market. Fast forward a decade, today there are more than 14000 cryptocurrencies in the market. These cryptos make transactions easier. It allows for the easy peer-to-peer transfer of crypto tokens. If you want to make money with bitcoin trading, check to invest in crypto and you might become a millionaire.

How does cryptocurrency work?

The working model of cryptocurrency is quite simple. Most cryptos deploy the decentralized finance model. This means no central authority or regulatory agency is validating each transaction. Like fiat currencies, cryptocurrency also holds value. It can be exchanged as a legal medium of payment to buy goods and services. Cryptocurrencies depend on administrators to confirm each transaction. These administrators are spread across the world globally. They work on a high-speed working computer and have undisturbed network connectivity. In 2017, Japan became the first country to legalize crypto payments. Continuing the footstep, many online companies including PayPal, Microsoft, etc. today accept crypto payments. Coming to the automobile industry, Tesla had announced their support in 2020 and 2021. Tesla fans can use bitcoin and Dogecoin to make purchases. Both automobiles and merchandise are available using cryptos. The payment gateways are configured to include crypto payments during checkout.

See also  Your Guide to Find the Right Health Insurance for Your Family

Advantages of owning cryptocurrencies

Your investment is protected from Inflation

Pandemic was the biggest example to vouch on the above advantage. The global lockdown and stock market crashing did not impact the crypto industry. The number of crypto investors has increased multifold in the last two years. Despite market fluctuations and currency prices facing rough changes, cryptos sustained. In most cases, cryptos enter the market with a fixed supply. For example, it is estimated that there will be only 21 million bitcoins. With the increase in demand, there will also be an increase in the current market price. This will eventually curb inflation. 

Non-intervention by any third-party regulatory agency

This is the ground principle with which every crypto operates. Cryptos are decentralized and no regulatory authority or central bank monitors your transaction. There are miners across the globe who validate each transaction and approve the same. This validation process is called crypto mining and has a fixed cost tagged to it. The transactions are accurate and stored using blockchain technology. This process has eliminated the need for third-party regulatory agencies to track any transaction. 

Transactions are secured and private

Cryptocurrencies deploy blockchain philosophy to store records. This means every transaction is broken down into multiple chains and stored in a single ledger across the user computer. To decode a blockchain, there is a mathematical puzzle that the user needs to solve. Another additional layer of security is the pseudonym concept. Every transaction has a pseudonym tagged to it. This pseudonym does not have any link to a user account, profile, transaction amount, etc. 

See also  These 5 exchanges have all cryptocurrencies under the sun

An easy and faster method for fund transfer

Cryptocurrency is a global phenomenon. A user can undertake crypto transactions from anywhere in the globe. The only prerequisite is to have a digital wallet, internet, and a computer. The transactions are completed using a dual authentication process. 

Disadvantages and risks of owning cryptocurrencies

Highly volatile

Most cryptocurrencies are highly volatile and market conditions affect their price fluctuations. An example of this is Bitcoin itself. The price of Bitcoin touched an all-time high of $60000 in 2021. But, the market was soon to react and the price dropped to $40000. The price now seems to stagnate at $40000. The high risk of capital losses is inevitable. 

Losing your private key

This is the worst nightmare of any investor. Every crypto investor wants their transaction to be highly secured. It should not be easy to decode and carry many levels of authentication. But, if an investor loses his/her key, then you are bound to face financial losses. Once lost you cannot retrieve your private key. Your digital wallet will always remain closed. The private key is required for you to move your crypto coins and tokens to any physical form. 

Crypto exchange can always be hacked

Yes, you heard it. While your cryptocurrencies are secured. There is always a possibility of hacking the crypto exchange. Investing your money in a reputed exchange with zero hacking records is important.

Originally posted 2022-03-13 12:18:08.

Leave a Reply

Your email address will not be published. Required fields are marked *