Everything you Need to Know About Cryptocurrencies
Cryptocurrencies are a relatively new trend in the financial scene. The currency is swooping over industries and provides some impressive perks to the digital age. Despite the increasing popularity, most people find it challenging to understand how cryptocurrency works. Here is a simple break- down of essential aspects of cryptocurrencies;
Cryptocurrency is virtual money, safeguarded using cryptography, based on blockchain technology, a database that stores information in blocks then chains them together. In the case of decentralized blockchains, a network of computers has control, thus decentralization. Therefore, there is a permanent record of transactions that anyone can view. Furthermore, unlike the conventional fiat currency prone to government manipulation and economic turbulence, cryptocurrency is independent. No central authority regulates the value.
Types of Cryptocurrencies
Bitcoin was the first digital currency and is still the most famous. Satoshi Nakamoto launched the money in 2009. By March 2021, more than 18.6 million bitcoins were in the market. The impeccable performance by Bitcoin spawned the development of alternate cryptocurrencies. Some were Bitcoin clones, and others were original currencies. Some altcoins include; Ethereum, Litecoin, Namecoin, Cardano, among others. Bitcoin takes up the most significant percentage of cryptocurrencies ( about 60%).
Benefits of Using Cryptocurrency
Cryptocurrencies have made the money transfer process seamless. Individuals do not have to rely on a third party such as a financial institution. Transactors have complete control of the process through private keys, e-wallets, and other provisions. Additionally, transaction fees while using crypto are lower compared to banks. Cryptocurrency also allows users to achieve impressive levels of confidentiality. Using bank transfers involves a lot of records, meaning there is a trail of all your activities. However, with cryptocurrencies, every transaction is unique, and you get control over the information you want to disclose to the recipient.
The Risk Factors
Cryptocurrency depends a lot on computers and other digital gadgets. This subjects users to malicious actions by hackers, which may lead to loss of funds. Cryptocurrencies do not have an inherent value. Thus, their price is volatile, making it a risky investment. However, as more people adopt cryptos, the currency is gaining more stability. When people link crypto currency with assets, the volatility nature reduces. Another primary concern with cryptos is regulation. Numerous countries are yet to recognize cryptocurrencies or even regulate their use. As long as cryptocurrencies remain unregulated and unadopted by governments, the risk margin will remain high. Lastly, scalability is also a considerable concern with cryptocurrency. Infrastructure that supports conventional money transfer players like VISA or Mastercard is scaled. Transactions through traditional means are also faster.
The Takeaway
Despite the drawbacks associated with cryptocurrencies, they are here to stay. We cannot ignore the various benefits virtual currency offers. Currencies such as bitcoin are continually barreling through new highs. First-world countries such as the United States are positive towards cryptocurrencies and are keen on regulation. Huge companies like Microsoft, Starbucks, Home Depot, etc., also started accepting bitcoin as a form of payment. Adopting cryptocurrencies at an early stage is the right way to go. After all, it is the digital money age!
