Cryptocurrency seems to be taking the world by storm. But what are cryptocurrencies, and where do you start as a newbie to the market? Bitcoin is thought to be the first cryptocurrency, and it's definitely the first to break into the mainstream market. That was back in 2009, and though there's some evidence that there were earlier cryptocurrency attempts, they were much less successful. Nevertheless, Bitcoin is the original cryptocurrency that started a phenomenon that would continue to change and shape the digital currencies we know today.
Even if you've not got your finger on the pulse of cryptocurrencies, there's no doubt that you would have heard of them. But as a newbie, the jargon involved in understanding the market can leave you confused.
Here you'll discover everything you want to know about cryptocurrencies, including how they operate, the advantages of using them, and how exactly you can get started.
Put simply, cryptocurrency is a digital asset. Like any asset, patrons can use it to trade and pay for things. But because it's not based on a physical asset, it essentially has no intrinsic value. Instead, the value of cryptocurrency is derived from supply and demand. So fundamentally, it is worth what the buyer is willing to pay for it. And because of that, cryptocurrencies are hard to value appropriately, making them unpredictable.
Cryptocurrency is secured by cryptography; that's where the 'crypto' in the name comes from. And cryptography for the digital asset essentially means that all data stored and moved is encrypted. So the only people who can read it are the sender and the receiver. There are lots of encryption and cryptographic techniques used to keep the information safe. Using this technology means that the cryptocurrency network and transactions are thought to be safer than more traditional payment methods.
A feature that defines cryptocurrencies is that a central authority doesn't control them, like a bank or government. Instead, transactions are done peer-to-peer on an open network. They primarily work on something called a blockchain. Blockchain technology is a type of database in essence. The blockchain database is a shared one, and a global network of computers manages it.
It uses distributed ledger technology, which sounds fancy, but it is pretty easy to get your head around. This tech keeps a public record of all transactions that are done through a decentralized database. All of this data is synchronized and shared globally to stop cryptocurrency from being spent more than once. Blockchains ensure integrity in the transaction data and are an essential component for many cryptocurrencies.
As cryptocurrencies use this tech from a decentralized network rather than one centralized by a government or bank, it means they're immune from government tampering or manipulation, in theory.
Cryptocurrency is entirely legal, but it's not legal tender yet. And some countries require you to pay tax on them, so it's worth checking the requirements wherever you're based.
It's important to remember that blockchain technology and the cryptocurrency market are still in their infancy. They've come a long way and have a long way still to go. So expect to see rapid changes in the way they're used in the near future.
When you're learning anything new, it's important to take in as much information as you can. And with something like blockchain that requires a lot of reading to understand it fully, you should get some training before you embark on your cryptocurrency adventure. Unblocktalent.com is an excellent source of information on blockchain and courses available to extend your knowledge further.
There are more than 4,000 cryptocurrencies in existence; as of January 2021. That's a lot to get through, so don't expect to find a comprehensive list somewhere. Not only is there a lot in existence, but most of them also have a very minimal following or trading possibilities.
The most popular cryptocurrency has to be Bitcoin. It's the one that people have heard about, even if they have no idea about what it is. Unfortunately, the performance of cryptocurrencies can be incredibly fraught and unstable. They'll experience great highs and crushing lows. But currently, Bitcoin is worth under $40,000, so it's not doing too badly right now.
Bitcoin continues to excel, going from strength to strength, but why is it so much more valuable than others? It can be hard to pinpoint because Bitcoins' goal is to operate as money, yet it doesn't serve the functions of money well at all. It has no intrinsic value, it's highly volatile, and only a handful of merchants actually allow you to use it with them as currency. So, where does its value come from?
It may be that recently financial institutions have had significant interest in the currency. But it could also be down to the genius of the blockchain technology surrounding it and that big business could use it in many ways (not just cryptocurrency). When it comes down to it, value is placed on cryptocurrency by people. And for some reason, people have chosen Bitcoin to trust.
There are cryptocurrencies other than Bitcoin that are worth looking at, however. For example, Ethereum, which was created based on the idea of being accessible to anyone in the world, no matter who they are or where they come from. There's also Litecoin which is similar to Bitcoin but has a faster transaction confirmation time thanks to more rapid block generation. So going off the beaten track and trying something besides Bitcoin can be worth your time.
There are always advantages and disadvantages, even if the technology is particularly good. And the same goes for cryptocurrencies. So before you get stuck into it, you'll need to have some awareness of the benefits you can reap and the risks you take when entering the market.
● Limiting Corruption - One of the biggest advantages of using cryptocurrency has to be that it helps in the reduction of corruption. This is because cryptocurrency gives power to many people, and in some cases, to all people. And that's thanks to its clever use of blockchain. That means power isn't held by one person or institution, so it can't be corrupted easily.
● Giving People Agency Over Their Money - When a currency is used in the traditional way, banks and governments have the power over your money. They have all the control. With cryptocurrency, that control is back in your hands, so your account won't be blocked without your express knowledge first.
● Eliminates Excessive Money Printing - Central banks can print more money when there's an economic crisis. Printing more money means governments can devalue their currency or even bail themselves out of debt. But it doesn't solve the problem and likely will cause more troublesome ones for the man - like inflation. With cryptocurrency, there's a set amount of it available. When it's all in circulation, there's no easy way to create more.
● Cuts Out The Middleman - With traditional transfers, the bank will generally take a cut. With cryptocurrency, that middleman is cut out because it's easier to transfer funds directly from peer-to-peer. Not only is this simpler, but it also means you get around steep transfer fees that banks impose.
● It's Thought To Be Safer - Using blockchains and the encryption that makes cryptocurrency 'crypto,' there are more safety nets than traditional banking methods. Of course, nothing is impenetrable, but it's notably safer than inputting card details on websites you're unsure of.
● Opens A Door - Cryptocurrency gives people who don't have a bank account the opportunity of access to digital commerce, as long as you have a mobile phone at the least. And it turns out; more people have mobile phones than they do bank accounts these days.
● It's Well Suited For Illegal Activity - Cryptocurrency allows you to retain a certain amount of anonymity. Because of this, it attracts people who want to engage in illegal activity. There are benefits to that anonymity, however. It gives privacy and protection for people living in oppressive government states.
● There's No Regulation - This disadvantage feeds into the fact that it makes a good base for criminals. The world of cryptocurrency is a little like the wild west because there are no real regulations. And regulations would help to reduce criminal activity while retaining privacy for users.
● The Market Is Volatile - If there's one thing that's true about cryptocurrency is that it's unstable. As it derives its value from people and where people decide that value lies, it's volatile.
● Like Everything, It's Subject To Cybersecurity Issues - As with any digital technology, it can fall into the wrong hands. Those hands being hackers. To be able to mitigate this and become a viable currency in the future, money will have to go into constantly building and improving its security infrastructure.
● It's Difficult To Scale Up - Even though there are many cryptocurrencies available, that figure is still tiny compared to the number of Visa transactions that take place. To be able to scale up, it needs to be able to compete with big guns like Mastercard. So people need to buy into it as a good currency solution.
With anything new, you need to know what you're doing. So investing in knowledge and courses like those Unblocktalent.com offers will stand you in good stead to start trading. After all, knowledge is power. And it would be best if you made concerted efforts to understand the differences in how the market works depending on your home country.
Once you have the information you need, and you're committed to the idea of jumping in at the deep end, you should understand the risks because crypto is fraught with them. While these risks will reduce as more people use it and more money is invested into the systems that create its ecosystem, not being aware of the risks will leave you and your cash liable to mistakes. You don't want to invest all of your capital, and you'll want a solid escape plan.
Finally, you'll have to decide which currency you want to invest in. As we've stated, there is a lot for you to choose from. So a great jumping-off point is defining what you want from your cryptocurrency. Think about security, privacy, usage, and the long-term trajectory of the currency and your money. Don't forget to consider the strength of the community, too, because that's what cryptocurrency thrives off.
Once more mainstream businesses dip their toes in the cryptocurrency waters; the assets will improve in value because usage will become normalized. That could be quite far off in the future, so prepare to be in it for the long haul.
What certainly started as a fad had managed to burrow its way into the lives of average joes. Even if those average joes tend to be people who have a deep affection for tech, ten years ago, you'd never dream of investing in a currency that isn't backed by the mainstream and doesn't have solid regulations upholding it. But thanks to the genius of blockchain technology, big-money backers, and the need for privacy growing exponentially, cryptocurrency has managed to thrive.
It's most definitely the future of currency. And the technology of blockchain can be utilized across a variety of iterations. So we know it'll be around for years to come, especially as everything we do migrates on to digital for our digital age. There are too many advantages to using cryptocurrency for it to fizzle out into non-existence. And those advantages of privacy, flexibility, and transparency are what consumers want to see in currency today. So while big business will err on the side of caution, we need to see investment from those big names, not just in words, in action. Then we'll see the masses relocate their assets into digital form.
Whether it happens now or in twenty years, if digital assets are something you're interested in, you'll need to be ready. So head to Unblocktalent.com to make the most of the courses and material they've knowledgeably curated for your cryptocurrency journey. You won't regret it.