Seven Things to Know About Cryptocurrency
A cryptocurrency is a digital currency or virtual that is protected by cryptography. It works as a medium of exchange. As it is secured by cryptography, this prevents it from getting counterfeit or double spend. It is a new form of digital asset based on a network distributed across a large number of online platforms. The term ‘cryptocurrency’ is based on the encryption techniques which are used to secure the network.
These encryption algorithms safeguard these entries like elliptical curve encryption, public, private key pairs, and hashing functions. These are the systems that make it possible for you to go for secured payments online. These are denominated in terms of virtual “tokens.” These tokens can be traded for the good or the service that the company provides. You will need to exchange real cash for the cryptocurrencies to access the service.
Here are 7 facts about cryptocurrencies that you must know.
1. Types and worth of cryptocurrencies
There are about 3000 types of cryptocurrencies on a global trade platform, Bitcoins being the most popular digital currencies. . The value of all the cryptocurrencies in the year 2019, was about $246 billion and the total amount of the bitcoins was pegged at about $136 billion.
Cryptocurrency has a tremendous potential to rise and is gaining traction in 2020. People are increasingly becoming aware of the vast potential digital currencies have in store.
2. How does this work?
Cryptocurrencies make use of decentralized technology, which allows you to make secure payments or store your money without using your name or going through a bank. They operate on a distributed public ledger, which is known as the Blockchain. The Blockchain is a record of all the transactions updated and held by the currency holders.
3. Are they a good investment?
One of the most important things to be noted about a currency is that it should be stable. Though cryptocurrencies are an effective way of transmitting money, they are not durable. Their value keeps on rising and dropping. This price volatility creates a problem.
4. Why are they so prevalent in today’s date?
- Since prices of cryptocurrencies are being traded in the market, they allow people to invest and engage in arbitrage. These give higher returns as compared to other investments. That’s why many people are tapping into the crypto market.
- They operate under a technology known as the Blockchain. Thus transactions are decentralized and have no involvement from any bank or the government. Information regarding sales and exchanges are up-to-date, in real-time only when both parties accept the agreement.
- It requires no human involvement. The blockchains facilitate cross border payments. It also executes agreements with “smart contracts.” So there is no need for human beings. Everything is online.
- Since cryptocurrency runs on a blockchain, one of the advantages is the prevention of payment scans.
- Private and fast transactions.
- An efficient and secure way of transacting money.
5. How can you buy cryptocurrencies?
To buy cryptocurrencies, you need to have a “wallet,” an online app that holds your currency. Here you have to create an account on an exchange, and then you have to transfer real cash to buy cryptocurrencies such as bitcoin or ethereum.
6. Are they legal?
Whether cryptocurrencies are legal or not, depends on the individual country. For example, it is legal in United States. On the other side, China has banned the use of cryptocurrencies. So every country has its own rules and regulations regarding them.
7. It is essential to protect yourself.
If you are looking to buy cryptocurrency in an ICO, then look for specific information before purchasing.
- The name of the company’s owner. An identifiable owner is a positive sign.
- Look for whether other major investors are also investing in it. If yes, then it is a positive sign.
- Try to determine whether you will own a stake in the company or the coins and the tokens.
- Look for whether the company already has a developed currency or the company is looking forward to investing money to make currency.