Cryptocurrencies-All you need to know

The cryptocurrency craze has taken the world by storm. A taste of the future for most –an efficient and decentralized way of payment, which would one day replace real money- cryptocurrency is all the rage in the market. People rushing out to spend their dollars and buying the ever-appreciating, extremely profitable Bitcoin.

However, Bitcoin and cryptocurrency are not the same. Bitcoin is a type of cryptocurrency, and without a doubt, the most profitable and expensive one on the market. To give you an idea of how large the cryptocurrency market is, there are almost 10,000 cryptocurrencies in use as stated by CoinMarketCap.com, a market research website.

Bitcoin, however, leads the cryptocurrency market. It sets the board and the rules of the game, and it almost always comes out on top. However, there is a lot more to the cryptocurrency world than just bitcoin, and for this blog, we will be discussing it as a whole. Starting from what cryptocurrency is, how it works, if you should buy it, and if yes, then how?

Cryptocurrency is in simplicity a digital currency. Like owning chips in a casino. Such coins are seen almost on every website or apps, however, while coins like these are limited in use for said platforms, cryptocurrencies can be used to purchase almost anything. The concept is, you purchase coins by paying “flat money” or real money- usually US dollars- and get coins under your name. The monetary value of this currency is undefined and fluctuates constantly, seeing very big decreases and increases over the years.

The cryptocurrency was introduced to the world in 2009 when the so-called Satoshi Nakamoto- whose identity is still not known- launched the first-ever cryptocurrency- Bitcoin. There have been speculations over the years such a man never existed, and the name was simply an alias for someone else, or perhaps a group of programmers. But while bitcoin was launched in 2009, it was not in fact, the first innovative thought of digital currency. 20 years its ancestor, the thought was implemented in the fuel stations of the Netherlands, where tired of robberies, fuel stations had come up with a smart card. A card, truck drivers could carry on them, and pay with. A way of a digital transaction. No cash involved.

The idea was seen again with American cryptographer David Chaum, who came up with the idea of a “blinding formula”, a different form of electronic cash. To put his concept into practice, he founded DigiCash. Even though DigiCash went broke in the year 1998, but the concept it had put forward, and its methods of encryption, have set the field for future digital currencies.

Finally, Bitcoin came into the picture, and the first bitcoin transaction took place on 12 January 2009, when founder Satoshi Nakamoto, sent programmer Han Finley 10 bitcoins.

Now, how do cryptocurrencies work? To put it simply, coins are transferred through encrypted mediums from the wallet of one user to the other. Digital commerce- free from the restraints of currency exchange rates between countries, and international fund transfer problems. However, has cryptocurrency managed to replace real money?

No. Because no matter how much ease of commerce it provides, the unreliability of cryptocurrency makes it an extremely risky method of trade. The coins have no real value. Let’s take an example, a dollar will always be a dollar, but a coin that is 500 dollars today might turn out to be 2 dollars tomorrow if the market price changes.

So, what stabilizes the price of national currency? The answer is a government guarantee. The government has assets, taxes, investments, and other sources that serve as a guarantee for the value of its currency. But the value of any cryptocurrency is based on how much in demand it is.

If a lot of people want to buy coins, the value rises to new extremes. The moment people stop wanting or buying coins, the coins might be as valuable as a pile of stones.

Another problem is cyber threats. Cryptocurrency transfer is done through secure channels that are encrypted end to end. However, nothing is invincible. What can be made, can also be broken. The process is digital, which means the risk of hackers and malware is ever-present. If a cryptocurrency exchange is hacked, thousands of accounts and digital wallets are vulnerable and can be exploited.

However, despite all these risks, why are people buying cryptocurrency? And should you?

Cryptocurrency in today’s market is treated as an investment. People use coins as short-term investments, essentially buying coins, and selling them when the price increases, and thus making a profit. They aren’t usually used for buying or selling items, because owners are hesitant to lose their coins, just on the chance they might increase in value. On the other hand, sellers are unwilling to accept coins as payment because their value might depreciate.

Let us take another example. You sell someone something worth 10 dollars, and he pays you in 5 bitcoins worth 2 dollars each. But then the value of the coin decreases from 2 dollars to 1 dollar each. Now, the value of the coins you got from that trade is 5. Which gives you a loss of 5 dollars.

Now multiply that number, and imagine larger transactions and larger losses.

Cryptocurrency is a good investment, but short-term, and it is something that requires a lot of common sense, and a good knack for understanding which way the trend is going to go.

So, let’s say you’ve decided to invest in cryptocurrency. And have managed to somehow pull through the entirety of what I’ve written above, how would you buy coins. First, you need to decide which currency to invest in, and here’s something that can help you with that. Below mentioned are some of the most commonly used cryptocurrencies with their worth.

Data current as of May 27, 2021

Once you decide which currency to buy and invest in, you need to join a cryptocurrency exchange. An exchange is where cryptocurrency buyers and sellers meet to trade. You enter your bank account or credit/debit card information- we suggest a bank account for large transactions because the transfer rate for cards is higher- and you can then build yourself a wallet and own your currency of choice.