A cryptocurrency is a decentralized virtual currency based on blockchain,cryptocurrency units are referred as coins or tokens,Bitcoin,

What Is Cryptocurrency how does cryptocurrency works benefits of cryptocurrency
What Is Cryptocurrency? how does cryptocurrency works. benefits of cryptocurrency

what is cryptocurrency?

 A cryptocurrency or crypto is a decentralized virtual currency which protected by cryptography and based on blockchain technology, which making fake and double-spending practically impossible.

Cryptocurrency can circulate without the intervention of a central monetary authority such as a government or a bank. Cryptocurrency works on digital payment mechanism that does not depend on banks for transaction verification.

It is a peer-to-peer system that allows anyone to send and receive payments from anywhere. Cryptocurrency are store in digital wallets or in crypto wallets.

 cryptocurrency units are referred as the coins or tokens system. Some are meant to be units of exchange for products and services, while others are value storage. Bitcoin was the first cryptocurrency which was founded by Satoshi Nakamoto in 2009.

Cryptocurrencies vs Traditional Currencies

Traditional Currencies

Traditional Currencies are in the form of physical money or electronic representations, such as bank credit. The government controls the supply, and you can use it to pay your taxes. Paper currency, banknotes, coins, bills, and other traditional currency are work as a medium of exchange to purchase goods and services.

Since the introduction of fiat money, the role of central banks in the economy has grown, as they now regulate currency printing. The monetary value is determine by the forces of consumer demand and supply. Some of the biggest worldwide fiat currencies are the Pound, the US Dollar, the Euro, the Yen, and the Rupees.

Cryptocurrency

Cryptocurrency, unlike traditional currencies, is a decentralised, digitally encrypted currency that is not tied to or governed by any government or central bank. It is built on the distributed ledger foundation blockchain technology.

 Blockchain is a distributed ledger that is maintained by a network of computers that keeps an exact duplicate of the database and changes its entries using pure mathematics consensus. Bitcoin and Etherium are two popular cryptocurrencies.

Dash, Ripple, and Litcoin We don’t need an intermediary to acquire or sell these because they are not backed by any government.

How does cryptocurrency work?

The vast majority of cryptocurrencies operate independently of a central bank or government. Rather than relying on government authority, cryptocurrencies are powered by a decentralised technology called blockchain.

Cryptocurrencies don’t come in the form of bills or coins. Instead, they exist entirely online. Consider them virtual tokens, the value of which is determined by market forces caused by buyers and sellers.

Cryptocurrency is formed by a process known mining. Mining, which requires using computer processing power to solve complicated mathematical problems in order to earn coins, this is how cryptocurrency is created. Users can also buy the currencies through brokers, which they can then store and spend with the help of encrypted wallets.

What are the benefits of cryptocurrency

1. Transactions are simple

Crypto transactions are simple, fast, and more private than most other types of transactions. Anyone may send and receive cryptocurrency using a simple smartphone app, hardware wallet, or exchange wallet.

Bitcoin, Litecoin, and Ethereum, among other cryptocurrencies, can be purchased with cash at a Bitcoin ATM. To utilise cryptocurrency, you don’t always need a bank account. Someone may use cash to purchase bitcoin at an ATM and then send the currency to their phone. One of the main advantages of cryptocurrencies may be that it provides access to people who do not have access to regular financial systems.

2. Impressive Safety

Decentralized cryptocurrencies are secure forms of payment since they are built on cryptography and blockchain security. One of the most certain advantages of cryptocurrencies might be this.

The hash rate is a big factor in crypto security. The more computer power required to breach the network, the greater the hash rate. By far the most secure cryptocurrency, Bitcoin has the highest hash rate of any network.

However, using a crypto exchange is only as safe as the exchange. The majority of crypto hacking cases involve exchanges or individuals making mistakes.

3. Quick Industry Progression

The cryptocurrency sector has been one of the most rapidly growing markets in most of our lives. Being involved now may be comparable to being involved with companies at the forefront of the internet in the 1990s and early 2000s.

In 2013, the overall market capitalization of the cryptocurrency market was around $1.6 billion. It had risen to nearly $1.4 trillion by June 2021.

4. High Profits

Bitcoin has been the best-performing asset over the last 12 years without a doubt. Bitcoin has almost no value once it started in 2009. It would climb to a fraction of a penny, then tens of thousands of dollars over the next few years. This translates to millions of percentage point increases. In comparison, the S&P 500 index of stocks returns around 8% each year on average.

5. Transactional Flexibility

One of the most significant advantages of crypto is that it may be used to transfer value between two parties. This can be done without the involvement of a third party, making the transaction more open and resistant to censorship.

For whatever reason, banks or other payment processors might refuse to provide services to anyone. For certain journalists, political dissidents, and others working in countries with oppressive authoritarian regimes, this can be tough. Because Bitcoin and most other cryptocurrencies are governed by no central authority, it is extremely impossible to prevent anyone from using them.

6. 24/7 Markets open 

In the case of the New York Stock Exchange, stock markets are only open on weekdays during regular business hours of 9:30 a.m. to 4:30 p.m. Eastern Time (NYSE). The majority of traditional financial markets are closed on nights, weekends, and holidays.

Crypto markets, on the other hand, are open for business 24 hours a day, seven days a week. A power outage, internet failure, or centralised exchange outage are some of the only things that could prevent someone from trading cryptocurrency.

7. Transparency is a virtue.

All cryptocurrency transactions are recorded on the publicly available blockchain ledger. Anyone can use tools to search up transaction details, such as where, when, and how much cryptocurrency someone sent from a wallet address. Anyone may see how much cryptocurrency is held in a wallet.

This kind of transparency has the potential to reduce fraudulent transactions. Someone can demonstrate that they transferred money and that it was received, or that they have the cash available for a transaction.

Disadvantages of cryptocurrency

1 ) Illegal transactions:

As cryptocurrency transactions are so private and secure, it’s difficult for the authorities to track down users or monitor their data using their wallet addresses. Bitcoin has previously been used as a means of payment (exchanging money) in a variety of criminal transactions, including the purchase of drugs on the dark web. Some people have also used it to convert their illegally obtained money through a trustworthy middleman in order to conceal the source of their funds.

2 ) Financial losses due to data losses :

The developers intended to construct completely untraceable source code, powerful hacking defenses, and impenetrable authentication processes because data losses can result in financial losses.
Putting money in cryptocurrency, rather than actual cash or bank vaults, would be safer. However, if a user loses their wallet’s private key, there is no way to recover it. The wallet, as well as the number of coins within, will be kept secure. The user will suffer a financial loss as a result of this.

3 ) Cryptocurrencies seems to be a very risky investment.

While the price of a cryptocurrency can rise to unimaginable heights (with attendant rewards for investors! ), it can also plummet to terrible lows in the blink of an eye. If you want to make consistent returns, this isn’t the ideal option. The cryptocurrency market is based on speculation, and because of its tiny scale, it is more susceptible to price volatility. One of the primary downsides of cryptocurrencies is that it can cause havoc with the value of coins.

4 ) No refund or cancellation:

If there is a disagreement between the parties involved, or if funds are sent to the wrong wallet address, the sender will be unable to collect the coin. Many people may be able to use it to defraud others of their money. Because there are no refunds, one can simply be formed for a transaction for which they never received the product or services.

How to invest in cryptocurrency

you’ll need somewhere to buy it and somewhere to store it. Cryptocurrency exchanges are the most popular place to buy cryptocurrency.

There are various different exchanges to choose from, with Coinbase, GDAx, and Bitfinex being the most popular. With these exchanges, you can buy Bitcoin and Ethereum with your debit card. You may buy fractions of a coin using most popular currencies, including Bitcoin, so you don’t have to invest thousands of dollars to get started.

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