Even if you have used it or not, changes are quite high that you might have come across the word crypto or cryptocurrency at some point. With the development of different technologies, quite a lot of aspects of our life have also changed and the way through which we use and handle money has also changed.
This development has also paved the way for online or digital money and can be said to be one of the bases on which the idea of cryptocurrency is built. The world of crypto now holds a huge role in economics and financial stability too. So, if you are someone new to the concept, here is everything that you need to know about cryptocurrencies and how they work.
What Is CryptoCurrency?
One of the biggest aspects of cryptocurrencies is the fact that it is a digital form of money and it eliminates the need to carry physical money that we are used to. Due to its digital nature, the currency is mainly used for online transactions but this does not limit using it from making physical purchases.
As opposed to the popular physical currencies which are printed by the government by following certain standards, cryptocurrency is sold by different companies all over the world. The difference also strikes when it comes to regulations. The world of cryptocurrency is almost completely free from the regulations of the government but it is a topic of hot debate and crypto assets are taxable too. The value of a cryptocurrency is the same when it is sold or does not change according to the asset that it is attached to.
As mentioned, one of the biggest differences between the traditional currency that we use and cryptocurrency is the fact that unlike the traditional currency, the government, bank, or any kind of financial institution does not have any control over cryptocurrencies and they are also not governed or controlled by any agency. When it comes to the storage of cryptocurrency, like banks, they are stored in digital wallets.
Different Types Of Cryptocurrencies
The two major forms of cryptocurrencies are coins and tokens. While there are a few differences between these two forms, the major one is between the forms of existence for these currencies. Coins, on the one hand, can be virtual, digital, and tangible. They resemble traditional money more in different aspects and also have their blockchain.
Tokens on the other hand exist on a blockchain and they can also be used either to represent any asset ownership or just as currencies. Among the different cryptocurrencies that are available now, Bitcoin is the most popular and the first cryptocurrency which is currently the most valued one too. Following Bitcoin, Ethereum is the second most valuable cryptocurrency. Some of the other most popular cryptocurrencies include names like Dogecoin, Solana, XRP, Cardano, and so on.
Advantages of Cryptocurrencies
One of the biggest factors behind the popularity of cryptocurrency is the fact that it has a few advantages over traditional currencies. One of the biggest advantages that cryptocurrencies have over traditional currency is privacy. Unlike the purchases made using traditional currency you do not need to provide any sort of personal details when the payment is made using cryptocurrency.
This will help you to avoid the issues of identity theft or any other fraud to an extent. Another major advantage of cryptocurrency is the fact that it is global. They are not bound by the issues of foreign exchange rates but keep in mind the fact that cryptocurrencies are illegal in some countries. The different issues associated with bank account restrictions and ATM withdrawal limits do not affect cryptocurrencies.
How Does Cryptocurrency Work?
Each unit of cryptocurrency is created through a process known as mining. The process of mining is carried out using the help of different software to solve complicated mathematical problems which eventually help to generate coins. The idea of owning cryptocurrency does not mean that you own an asset that is tangible but whether it means that you own a key that allows the transfer of a unit of measure from one person to another.
Even though cryptocurrencies have been around for more than a decade, it is still popular in a very limited circle, and quite a share of the population is still not certain or well aware of their characteristics, features, or even uses. But looking at the growth of cryptocurrencies from its introduction, it can be easily estimated that the transactions of different financial assets will take place through cryptocurrencies in the future.
Is cryptocurrency safe?
The issue of security and safety is yet another factor that determines the popularity of cryptocurrencies. Being a digital form of currency, the changes are high or it can be tampered with. The technological processes behind the creation and transactions using crypto are also quite technical.
Almost all the transactions made using cryptocurrency are done through a 2-factor authentication process but this also does not mean that cryptocurrencies are completely safe from the process of hacking. The fact that cryptocurrencies are far less regulated and monitored than regular traditional currency is also a factor to be considered.
With the growing popularity and the value of different cryptocurrencies, it has been getting more and more popular every day. The emergence of different points in the recent past is a very strong indicator of this fact.
Even though the field of cryptocurrency has faced quite some backlash in the recent past, there are also strong reasons to support them. The field of cryptocurrency is a vast ocean and we have merely scratched just the surface and hope there is plenty more good to come from it.