What Is Cryptocurrency Technology and How Can You Understand It?
Our generation is quite fortunate. This is because we have been exposed to a technological revolution which has changed our lives for the better. One such technology is cryptocurrency.
This digital technology is a force to be reckoned with in the financial market. It comes as a surprise that there are masses that are unaware of this beneficial technology. Instead, they tend to view it as a suspicious platform.
Owing to the array of advantages and convenience that they manage to offer, cryptocurrencies are slowly making their way to the spotlight and might soon become a worthy competition to the concept of the internet.
WHAT IS CRYPTOCURRENCY?
It is a term which is used to describe any decentralized asset which is digitalized in nature and uses cryptography as a tool to securely conduct transactions. These activities do not involve interaction with the central banking system.
Cryptocurrency makes use of blockchain to achieve this process. “Satoshi Nakamoto,” which is the pseudonym for the mastermind behind the creation of Bitcoin, is also the one who made blockchain famous.
From the time of its inception, the cryptocurrency market has undergone quite a transformation owing to the surge in its popularity. For this reason, you will find various types of cryptocurrencies like Litecoin, Dogecoin, and Ethereum Classic. While these varieties have not yet garnered the same recognition as Bitcoin, their popularity has witnessed a polarizing increase in the past few years.
RISK OF CRYPTOCURRENCIES
When you consider the rapid pace with which this technology is raging through the market, you are forced to wonder why it has not yet been established as a stable form of carrying out transactions. Many critics have also raised this point and are doubtful about whether this technology is here for the long run.
The fact that trading using Bitcoins or other forms of cryptocurrencies is still risky substantiates this fact. Regardless of who you ask, they will tell you that you should never invest in assets which threaten your financial stability. This is because cryptocurrencies are quite volatile and are prone to crashes in value. This deterioration in market value comes at the most unexpected times.
One such instance occurred recently when a hoax report of the death of the founder of Ethereum led to a frenzy in the market and the devaluation of the currency’s value. This caused a cumulative loss of $4 billion.
THE BRIGHT SIDE
It is true that this market is very unpredictable and is prone to sudden changes. However, this has not stopped the rise of these currencies. It has also paved the way for the creation of “ICO.” ICO serves to be a type of transaction and stands for Initial Coin Offering. If you are a beginner to the world of cryptocurrencies, you can understand this matter if you compare it to IPO. Just like in an IPO, you raise money for your business by putting your shares out for the public to buy, in an ICO, you make use of cryptocurrencies as digital coupons to fund your business.
You might wonder, what is the benefit of an ICO and why should you invest in it instead of an IPO?
One of the major advantages consumers have is that unlike shares bought in an IPO, an ICO is easily convertible to cash and can also be traded whenever you feel the need to. This is because since it is a new concept, regulations and laws regarding cryptocurrencies have not been put into place yet.
However, this advantage is being threatened since the SEC has recently released a report which highlights the consequences of using ICOs to raise funds.
ENDING REMARKS
To this day, the fact remains that ICOs are devoid of any legal limitations. Since they are marketed as pre-sale tokens, they manage to uphold this feature. While you might think that the lack of regulations in cryptocurrencies is a thing to be threatened by, it is not all bad news. This is because the lack of laws provide room for this technology to innovate and, hence, provide the best experience to the users.
However, at the same time, it also means that the chances of being a victim of fraudulent activities are very high. It speaks wonders about cryptocurrencies that despite this disadvantage, many continue to use this platform.
