- What is Cryptocurrency?
- Characteristics of Blockchain Platform
- Cryptocurrency Types & Uses
- Cryptocurrency Pros & Cons
The world is still trying to figure out, what to do with newly popular cryptocurrencies that have emerged and taken everyone by storm. As prices of cryptocurrency have drastically increased in the past few years, all sorts of investors are trying to jump into the crypto market to gain profits. But before jumping into the market it is wise to understand the basics of cryptocurrency.
What is Cryptocurrency?
Cryptocurrency can be defined as a digital token or asset designed to work as a currency. It utilizes blockchain technology and is based on peer-to-peer networking and decentralization. Among all the cryptocurrencies, the most popular and first is Bitcoin, which was created in 2009. Other than Bitcoin there are over 2400 cryptocurrencies in the market today.
Some people have also jumped into “mining” Bitcoin and other cryptocurrencies. In a blockchain, all the transactions are required to be validated by miners. Miners modify their computers to validate the transactions, and in this process solve complex mathematical problems. For their time and resources, miners are rewarded with cryptocurrencies. To capitalize on this revenue-generating opportunity, a complete business model has been established, which provides people with the necessary knowledge and tools to get started. People are also pooling resources with one another and commercial organizations are being set up to take advantage of this opportunity.
Besides being used as a currency to carry out transactions, cryptocurrencies are also used for investments, similar to the stock market. This has made the prices of the cryptocurrency very volatile.
Characteristics of Blockchain Platform
- Secure: Strong cryptography makes it completely secure.
- Anonymous: No Crypto accounts or transactions are connected to any real-world identities, making it completely anonymous.
- Irreversible: Once a transaction is confirmed, it cannot be reversed.
- No Gatekeeper: The software is open source and once downloaded, can be easily used to execute transactions.
- Speed: The transactions are completed within a few minutes. It also allows cross-border transactions, without the involvement of a third party for validation and verification.
Cryptocurrency Types & Uses
Apart from Bitcoin, some other widely used cryptocurrencies are:
- Litecoin (LTC): It was created in 2011 and can process transactions faster than Bitcoin.
- Ethereum (ETH): After Bitcoin, it is the second most popular cryptocurrency. It was created in 2015. It offers smart contracts and various other applications.
- Zcash (ZEC): It was launched in 2016 and provides users with an extra security feature for their transactions.
- Ripple (XRP): Established in 2012, allows banks to process cross-border transactions in real-time and at a low cost.
- Monero (XMR): Established in 2014, it offers secure and untraceable currency.
Cryptocurrency Pros & Cons
The pros and cons associated with cryptocurrency are:
- Access: Accessibility of cryptocurrencies is very easy, as a user just requires to be connected to the internet. Trading in cryptocurrencies can be done 24*7 from anywhere.
- Low transaction fees: Digital currency can be transferred easily within a few minutes at very low fees, compared to banks.
- Privacy and security: The blockchain platform uses cryptographic technology to keep transactions secure and private.
- Peer-to-peer: Users have control over their holdings instead of a bank. If a user loses access to his wallet he may not be able to recover the money, stored in the wallet.
- Acceptance: Many vendors especially small vendors are not set up or are educated enough to accept cryptocurrency as a medium of exchange.
- Volatility: The uncertainty in the prices of cryptocurrencies affects their worldwide adoption.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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