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What Is Cryptocurrency and How does It Work? Ultimate Guide for Beginners.

Technological Advancements have brought up new ways for living And all these is changing the world around us at a pace that humans are nota customed too So it’s best to at least have an idea on what these new technologies are that will shake our world. You may have heard of Bitcoin years ago. Now the old name developed and became the new future issue for experts to talk about.

 

What is cryptocurrency?

Cryptocurrency is a kind of digital decentralized currency. which doesn’t rely on banks or governments. Most of the cryptocurrencies are based on blockchain technology. And blockchain is a ledger that provides all the transactions and everything happens on it. Cryptocurrency is a peer-to-peer currency, which means anyone can send or receive payments anywhere. Its coding languages and the technology behind it has made it impossible to be hacked or changed.

 

What is the point of cryptocurrency?

Because this kind of currency is not run by any outer regulator such as the law or banks it is said that crypto is purer than physical national money.

 

What is blockchain?

Blockchain in simple words is a system to register the reports and information. The point is that the recorded data can be shared with all subscribers of its network so with the use of data encryption and distribution, the possibility of hacking, deleting and manipulating recorded information is usually eliminated.

 

What is Bitcoin?

Bitcoin is not the only cryptocurrency but it is the first and most notorious one. It is still the most popular and most valuable cryptocurrency. Bitcoin was developed to make a new faster, cheaper and safer way of payments in an innovative and fast growing internet’s atmosphere, without the government’s regulations.

 

Other types of cryptocurrency

Bitcoin is not the only one. There are more than 5000 different cryptocurrencies estimated. The most popular is bitcoin and then Ether takes the  second place. The other cryptocurrency types are called ‘altcoin’. These are some of the  most famous altcoins you may have heard of before:

Ethereum (ETH)

Litecoin (LTC)

Cardano (ADA)

Polkadot (DOT)

Bitcoin Cash (BCH)

Stellar (XLM)

Dogecoin (DOGE)

Binance Coin (BNB)

Tether (USDT)

Monero (XMR)

 

Why use cryptocurrency

People use digital currency to have quick payment and to avoid bank regulator’s transaction fees which means person to person transactions. On the other hand, as a statement, we are to start living in ‘Metaverse’ where everything is fast paced and all valuable assets can be transformed into digital assets.

 

Cryptocurrency pros and cons

To have a better understanding of crypto you should consider cryptocurrency advantages and disadvantages listed below:

Advantages

Cryptocurrency’s aim has always been to provide fast and secure transactions between two people  without the involvement of third parties such as banks and alikes. This has been provided by verification keys, private key and the public key. The public key is used for the wallet and the private key is used to sign the transactions. Also the fee for all transactions is so much lower than fiats transactions.

Disadvantages

Some illegal activities such as money laundering and tax evasions may become easier by using this kind of currency. Also there are not certain regulators and guarantees for the future and the value of this market is detected by owners emotions which shows that the growth is not always stable.

 

Cryptocurrency as investment

Since the fast growing value of digital currency such as bitcoin, there are more people who want to invest in these kinds of assets. Yet some experts believe digital currency is not a good choice for investing because of its price swings and some finance experts don’t recommend it at all. For example, while bitcoin reached the peak  value of $18000 in 2020 it also dropped to $5000 in the same year. After all, if you want to start investing it is better to research more about this kind of asset beforehand as there are more factors in play.

 

You should do lots of analysis to start investing so there are most important things to know and search for such as: get educated about crypto and know all the phrases, follow markets, do not have fear of missing out, do not trust easily, experiment more, invest money for future, do not expect instant refund. If you are sure to invest, start with a small amount so that if it you were to lose it all it wouldn’t damage your financial situation in anyways, another reason to invest small amounts of money is that you could just let it sit there and it wouldn’t be a significant amount to tempt you to sell it in times of need.

Source: Investopedia.com

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