Cryptocurrency – Meaning and Definition–
Crypto-Currency or “Crypto”, is a type of currency which exists digitally or can say exists virtually which uses cryptography (Encryption) to secure a transaction in online world. Cryptos do not use centralized system or can say there is no regulating authority or central issuing authority for cryptocurrencies rather it uses a decentralized system based on blockchain technology to record transactions and issue new coins or units.
What is Cryptocurrency and How It Works-
Cryptocurrency is digital payment system secured by cryptography which makes crypto transactions secured. Crypto transactions do not depend on banks or any other institute to verify transactions because it is a decentralized network based on blockchain technology. Crypto payments are different from physical money, crypt payments are completely digital and recorded in an online database. When someone makes a transaction then it is recorded in public ledger. Crypto are stored in digital wallets.
Crypto-currency’s Crypto taken from word cryptography which means encryption and it makes Crypto transactions secured.
History of Cryptocurrency-
There is no name of inventor who found cryptocurrency, but cryptocurrency was invented in 2008 but some people say that it was invented by “Satoshi Nakamoto”. Cryptocurrency was invented in 2008 and began use in 2009 and it was released as open-source software. The first Cryptocurrency was Bitcoin which was founded in 2009 and still the market rank of Bitcoin is at number 1.
How Cryptocurrency Works?
When it comes on creating new coins or units so new units are created through mining process which uses computer hardware and power to solve a mathematical problem and hence new units are generated through this process. Mining is a difficult and time consuming process to create new units so if someone wants to purchase cryptocurrencies then there are several brokers in the market, can buy from brokers and store them in cryptographic digital wallets and could also spend them using broker’s app.
Cryptocurrency is emerging in financial terms and applications of blockchain technology is also emerging and uses of cryptocurrencies are expected to be much higher in the future. These days, stocks and other financial assets could also be traded through cryptocurrency. There are sellers who are accepting cryptos to make purchases.
Understanding Cryptocurrency-
As crypto transaction uses cryptography to keep its online transactions secured without using third-party intermediaries. It uses various encryption algorithm and other cryptographic techniques such as hashing functions, public private key pair etc.
Anyone can earn or make new crypto coin using a process called mining which uses a computer’s hardware and its energy to do so.
Cryptocurrency Examples-
There are hundreds or thousands of cryptocurrencies in the market but will discuss about some of the best Cryptos which include:
Bitcoin:
Bitcoin is the first Cryptocurrency which was founded in 2009 and still one of the most traded cryptocurrency. As Bitcoin’s founder name is not clear but some people say it was founded by Satoshi Nakamoto.
Ethereum:
It was developed in 2015 and founded by Vitaly Dmitrievich Buterin and is a decentralized blockchain with smart contract functionality and it is most popular after Bitcoin.
Litecoin:
It was founded by Charlie Lee and released in 2011. It seems similar to Bitcoin and shares features with it but mining algorithm of this coin is different. It is a peer-to-peer currency to make instant and near zero cost payments to anyone in the world.
Dogecoin:
It was created by Billy Markus and Jackson Palmer in 2013. It is also most popular cryptocurrency in the market and now ranking at 8th position and it was created as an alternate to cryptocurrencies like Bitcoin. Elon Musk has also invested millions of dollars in Dogecoin.
How to buy cryptocurrency?
There are some of ways to buy cryptocurrency, lets discuss:
Step 1: Choose A Platform
- Traditional Brokers: If you want to buy cryptocurrency then there are several brokers in the market, you just need to have an account with them and purchase cryptos easily at a lower price and you can manage them through broker’s app easily.
- Exchanges: Another way to purchase cryptocurrency from exchanges. There are bunch of cryptocurrency exchanges out there in the market you can purchase cryptos from but before purchasing them you need to verify price of each exchange so that you can find a best one for yourself.
Step 2: Add money to your wallet
After creating an account with one of the above platforms, you need to add money to your wallet. To do that you need to link your bank account to your crypto account so that you can add money to your crypto wallet.
Some of the exchanges don’t allow purchasing of crypto through credit cards. There are only a few options to add money are Bank Account transfer or any regional transaction ID.
Step 3: Placing an order:
After you have recharged your wallet, you need to go to your broker’s app or web platform and login with the credentials and choose the cryptocurrency that you want to purchase. Before purchasing any cryptocurrency, ensure to check all the charges and fee which a broker charges you.
How To Store Cryptocurrency:
If you have purchased cryptocurrency, you need to store it safely from hackers because cryptos are digital and virtual so there is always a fear of getting hacked. Cryptocurrencies are generally stored in wallet and your broker allows you to provide private key to them like codes and these days brokers also provide two-way authentication and sends you an OTP when you withdraw money from your wallet which is an amazing feature.
Types of wallets
There are two types of wallets to store your cryptocurrency:
- Hot Wallet: Hot wallet is an online wallet which uses online software to protect your private keys which belong to your assets. These types of wallets do not charge fee.
- Cold Wallet: Cold wallet is a offline wallet which uses a hardware or physical device like USB stick. These are far safer than Hot wallets. These types of wallets charge fee.
As we know that Bitcoin is a very popular coin and it is one of the expensive coin out there in cryptocurrency market then Cold wallet is a good option to store your Bitcoin.
Can We Purchase with Cryptocurrency?
When Bitcoin was introduced, it was intended to purchase every small thing with it and most of the cryptocurrencies are intended to do so in day-to-day life transactions. Still cryptocurrency are not everywhere accepted but acceptance of cryptos is increasing.
There are several things you can buy with the cryptocurrency in your wallet:
Smartphone: You can also buy smartphone and earbuds with your cryptocurrency wallet, a smartphone company “Nothing” accepts cryptocurrency to purchase their products online.
Technology and e-commerce sites:
There are several companies which accept cryptocurrency to sell their products on their websites like AT&T, Microsoft Overstock etc.
Luxury Cars: Many of the Car brands accepts cryptocurrency to sell their products such as Audi, Some of BMW Dealers, Nissan dealership in Daytona.
Gift Cards: You can also buy gift cards from retailers like Hollister and American Eagle.
Luxury Watches: You can also buy luxury watches from famous brands such as Rolex, Cartier and Omega.
Real Estate: As the Bitcoin is getting popular and most of the big brands are accepting it, there are also some companies in real estate those are accepting cryptocurrency.
Is Cryptocurrency Safe, how?
Making your cryptocurrency safe, is an essential part of your crypto wallet as it is everything for your cryptocurrencies which you have purchased. These days brokers provide two-way authentication facilities which required two codes to confirm your identity, one is your pin or private key and second is OTP on your email, so never ever share your private and email password to anyone to secure your cryptocurrency.
Another way to protect your cryptocurrency is to have a cold wallet as cold wallet is offline and Cryptos are stored in a hardware device like USB stick.
Tips to invest in cryptocurrency securely:
As we know to Cryptocurrency is risky and volatile, price go down and high all of sudden a sometimes, so there are few tips which can help you in investing in Cryptocurrency safely.
Research Exchanges: Before investing in cryptocurrency, make sure you have researched about the best exchanges available out there in the market. Check about the fee and charges and customer reviews about the broker or exchanges.
How to store your cryptocurrency: When you buy a cryptocurrency, it is always in digital form so you need to store in wallet so there are different types of wallets as we discussed above, choose it wisely and chose your storage choices as well before making any investment.
Invest in Multiple cryptocurrency: It is a good choice when you plan to invest in multiple cryptocurrencies. Avoid putting all your money into one coin like Bitcoin because if Bitcoin go down then the value of your money will also go down. If you have multiple Cryptocurrencies which you have invested in so there are chances that if one cryptocurrency is going down, then another cryptocurrency can cover it for you.
Ready For the Risk: As we know that cryptocurrency is volatile, we have no idea when it could sink and when it can jump. It can provide you huge profit or it can also lead you to a huge loss, so you need to be ready for that also. Make sure you don’t invest all your savings into cryptocurrency, just invest the amount you can bear.
1 Advantage and 1 Disadvantage of Cryptocurrency:
1-Advantage: A big advantage of cryptocurrency is that the cryptocurrency is volatile and it could rise in less time and make you a huge amount.
1 Disadvantage: The disadvantage of cryptocurrency is just opposite of its advantage: As cryptocurrency is volatile so you need to invest in cryptocurrency very carefully, you need to have good research before investing otherwise you can loss a big portion of your money.
By apkiduniya
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