Find out what is Cryptocurrency, what are its advantages & disadvantages, and what are the popular cryptocurrencies along with some other FAQs answered.
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What is Cryptocurrency?
By definition, “Cryptocurrency is a digital asset designed to work as a medium of exchange. Here individual coin ownership records are stored in a digital ledger or computerize database using strong Cryptography to secure transaction record entries, to control the creation of additional digital coin records, and to verify the transfer of ownership.”
Cryptocurrency typically does not exist in any physical form like paper money or coins. It is also not recognized by any Central government control. Opposed to centralized digital currency or the central banking systems, which is usually used for the paper currency, Cryptocurrency uses the decentralized control. Bitcoin is the first decentralized Cryptocurrency or any currency, and it was released as open-source software in 2009. After the release of Bitcoin, there were over around 6000 Altcoins created. Altcoins, in layman terms, can be defined as the alternative variance of Bitcoin.
Advantages and disadvantages of Cryptocurrency
- Cryptocurrency promises to make the transfer of funds between two parties easy. The two parties do not need a trusted third party like a bank interface or a credit card company to transfer the funds. Usually, in such transfers, public keys and private keys are used.
- The Cryptocurrency users have a wallet for account address which works as a public key whereas, the private key remains private or a secret, known only to the owner, which the customer uses to sign transactions.
- The transaction fee in case of Cryptocurrency is significantly low as compared to regular transactions. This is because the transaction involving Cryptocurrency can take place only with the help of a blockchain in which the account holder just needs and access to his computer and internet connection. He can then transfer the money without any cost. As mentioned in earlier points, since there is no involvement of any third party, like a bank or credit card company, no transaction fee is to be paid by the holder. However, the only cost he has to be here is to convert the virtual currency into the real one. And this is minimal.
- The most crucial advantage of Cryptocurrency is that nobody can manipulate or fabricate Cryptocurrency transactions. This is because some strong cryptographic techniques secure Cryptocurrency wallet.
- One of the most important disadvantages of Cryptocurrency is that Cryptocurrencies are highly volatile. Let’s take an example of Bitcoin. The value of Bitcoin rose from $2000 to $20,000 in the year 2017. Then suddenly dropped to $13,000 by the end of the year. Since the end of 2017, the value of Bitcoin is rising and dropping unexpectedly, on day to day basis. And the same thing happens with many other Cryptocurrencies.
- Cryptocurrency holders are extensively vulnerable to security threats. The threats have been increasing day by day in recent times. And the biggest problem regarding the thread for the Cryptocurrency is that there is absolutely no solution for this problem.
- Regarding Cryptocurrency, there is no uniformity of law among countries. Different countries have a different way of dealing with Cryptocurrencies. For example, Cryptocurrency is legal in Japan, whereas in China, the government has banned any business to a business transaction using Bitcoins.
- Since Cryptocurrency is semi-minor synonymous in nature, the transaction in Cryptocurrencies is highly preferred for doing any illegal activity like money laundering or tax evasion.
Criticism of Cryptocurrencies
- We all know that the market prices of Cryptocurrencies are entirely based on supply and demand. So the rate at which Cryptocurrency can be exchanged for another real currency can fluctuate rapidly! Again, taking an example of Bitcoin, it has experienced a rapid rise eventual collapse in value, climbing as high as $19,000 in December 2017, followed by dropping to around $7000 in the coming months. Many economists have criticized Cryptocurrencies, calling them short-lived and a merely fascinating bubble.
- Another significant criticism Cryptocurrency receives is that many Cryptocurrency is like Bitcoin are not linked to any material goods. Hence the resource used in making Bitcoin is questionable. However, there are some bizarre claims, where some researchers have said that it takes a lot of energy to produce a Bitcoin. This energy consumption is directly related to the market price Bitcoin is having at that time.
- The other mean criticism received by Cryptocurrencies like Bitcoin is its privacy and transaction security. The blockchain makes sure that privacy relating to Cryptocurrency is very secure,– but the other aspects of Cryptocurrency transactions are not so immune to security threats like hacking. Let us take an example of Bitcoin. In Bitcoins 11 year’s history, many online exchanges and transactions have been a subject of hacking and theft, which even included millions of dollar worth of coins.
What can be done with the help of Cryptocurrencies
Earlier, it was challenging to find a merchant who used to accepted Cryptocurrency like Bitcoin. It was, to be honest nearly impossible to find such a merchant. However, things are changed in the last five years. A lot of merchants, both online and offline, accept Bitcoin as a form of payment. These merchants can either be big online retailers or some small enterprises like shops, restaurants etc. So basically, you can use Bitcoins to pay for hotels, flights for purchases computer parts or even jewellery!
Even a giant in IT industry, Apple has authorized around ten different Cryptocurrencies as a form of payment on its app store.
Experts believe that Cryptocurrencies are one of the best investment opportunities currently available on the market. You can read about many stories of people becoming millionaires just in a span of the day with their Bitcoin investment. Today, Bitcoin is the most recognizable digital currency, and last year, in 2019, one Bitcoin was valued at around $800.
The second most valued Cryptocurrency is Ethereum. It has recorded the fastest rise ever in its market value more than any other Cryptocurrency. It has witnessed an increase of around 2700% since 2016. And talking about all the Cryptocurrencies in the world, the market price has risen by more than 10000% since the mid of 2013.
However, I should let you know that Cryptocurrencies are a very high-risk investment. The fluctuation in their market value is more than any other asset or investment. And as we have seen earlier, in many parts in the world, it is still regulated. There can be a chance that these Cryptocurrencies can be banned immediately in some countries without any prior notice. And the exchange through Cryptocurrency can also get hacked.
If you happen to be a business owner and you want to increase your customer reach, you can start accepting Cryptocurrencies as a form of payment. This will attract people who prefer making payments using their Cryptocurrencies. Nowadays, with the increase in the use of Cryptocurrencies worldwide, the use of crypto – ATMs have also started dominating. There are around 2000 crypto – ATMs in about 60 different countries.
So, the question arises, how to get started? All you have to do is to let all your customers know that your enterprise accepts Cryptocurrencies. You can do it by simply putting a banner or signing up a cash register. You can accept payments in Cryptocurrency by using some transaction applications like CoinPayments. This particular application accepts more than 75 different digital currencies or Cryptocurrencies. They charge only 0.5 % commission per transaction.
The United States have officially recognized Bitcoin and some other currencies. So you can accept these payments in Cryptocurrency without any issue. It will be similar to accepting payments in the form of cash, gold or gift cards.
Some QnA regarding Cryptocurrency
Why are Cryptocurrencies so popular?
- Cryptocurrencies have started winning followers ever since the release of Bitcoins in 2009. There are numerous reasons for this word letters explore some important ones.
- Many people see Cryptocurrencies like Bitcoins and others as the currency for the future. They expect their value to grow rapidly and have there now rushing to buy them. This is because of the fact that we can gain more profit in future by selling these digital currencies.
- Experts appreciate Cryptocurrency because the transaction of Cryptocurrency does not involve any Central Bank. Removing Central banks from managing the money supply is recognized by a lot of experts. This is because the central banks have a tendency to reduce the value of money through inflation.
- Many people support Cryptocurrencies because some of them are going up in value all the time. According to them, this has a fantastic scope in future to make a lot of profit.
How do I buy Cryptocurrencies
Cryptocurrencies can be bought in the online store only. There is some Cryptocurrency like Bitcoin, which can be purchased with the help of US dollars, but others require the customer to pay through a Cryptocurrency. To buy a Cryptocurrency, you will need an online wallet for electronic wallet, which is an application that can hold currencies or your money. All you need to do in most of the cases is to create an in exchange for some cash and then transfer real money to buy Cryptocurrencies.
Are Cryptocurrencies legal and government approved?
This question has different answers depending upon the country you are living in. In the United States and Japan, Cryptocurrency is legal. And you can make online transactions using these Cryptocurrencies like Bitcoin. However, in many countries like China, Cryptocurrencies are banned. So the legality of Cryptocurrency is entirely dependent on an individual state.
Bitcoin is one of the most famous currencies in the world. By Mile, Bitcoin is the most popular Cryptocurrency in the world. Created as open-source software in 2009, Bitcoin then went on to gain many followers users across the globe: the Cryptocurrency or digital currency of Bitcoin established by a man with the pseudo name Satoshi Nakamoto.
How does Bitcoin work?
Bitcoin allows the users to make a transparent transaction to their peers or friends for acquaintances using the blockchain technology. All the users can view the deals. However, the blockchain secures all these transactions. Unlike the centralized bank; there is no authority over the use of Bitcoin. So the Bitcoin users can control the operation that is sending and receiving money without any supervision or invasion to privacy. So you can make anonymous transactions throughout the world.
Launched in 2011, as an alternative to Bitcoin, Litecoin is also an open-source global payment network which is completely decentralized that is without any Central authority over it. The difference between Bitcoin and Litecoin is that Litecoin has a faster transaction as compared to Bitcoin. The coin limit of Bitcoin is just 21 million, whereas, in the case of Litecoin, uses can have up to 84 million coins. The operational algorithms are also different in case of both Bitcoin and Litecoin.
Ethereum is again one of the most popular digital currencies across the world. It has seen a massive rise in its value since 2016. The rising cost can be around 2700 per cent. Ethereum was created in 2015 and another open-source platform which is based on blockchain technology. It also provides a platform for the application developers to develop their application and pay for the transaction fee and services for using the Ethereum network.
Ripple was created in 2012. IT acts as a both Cryptocurrency as well as a digital payment network for various financial transactions. The main objective of people is to have a fast, secure and low-cost system of the trade for transferring money. Unlike any of the Cryptocurrency is mentioned above, and ripple is connected to banks. Using ripple, you can exchange any kind of currency or Cryptocurrency like Bitcoin, or gold. Ripple is more focus on person to person transactions, rather than large-scale purchases of business level.
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