What is Cryptocurrency
Cryptocurrency, frequently known as crypto, crypto-currency is a virtual or digital currency formed as a way of exchange with the help of a decentralized network. There is no particular authority or government that can administrate and authorize this currency. The Cryptocurrency system works under blockchain technology and is secured by cryptography.
To maintain all the data and records, a digital ledger is used that can be authorized by its authentic users and this digital ledger keeps all the data secure under strong cryptography so that no one intrudes the system.
There is no physical existence of cryptocurrency, it means you can’t have it in paper or coin modes. And, there is no central authority or power to issue this currency as other currencies are issued by the governments. This currency is controlled by a decentralized power that is just opposite centralized money like paper money. In a decentralized currency, no particular authority upholds the administration power.
There will be no particular authority to decide on the creation of additional money, this will be performed by the blockchain system. The group of networks will decide what to produce and what to verify. This currency is considered a tradable asset that only exists online.
In this article, we are going to discuss the following topics
Cryptocurrency, how does it work? Types of cryptocurrencies, how to buy cryptocurrency, Advantages, and disadvantages of cryptocurrency.
How Does Cryptocurrency Work?
Cryptocurrency is not produced by any central bank or government authorities; this currency is featured on a distributed ledger that is called a blockchain. The very first thing to create a cryptocurrency is mining, with the help of mining a cryptocurrency can be crated.
This mining process needs some mathematical puzzles to be solved with the help of advanced computer systems. After solving these crucial mathematical puzzles, you can mine a cryptocurrency. It is estimated that it takes estimated 30 days to mine a bitcoin in practical life.
You can buy it from a broker, exchange companies, and individuals who own currency. You can store, sell, and spend the cryptocurrency with the help of cryptographic wallets.
When you purchase a it you do not purchase anything in tangible form. You can just transfer it from one person to anther person as a currency. The bought cryptocurrency can be kept only in digital wallets.
There are two types of digital wallets, first, Hot and second, Cold. A wallet that makes doing transaction easy and convenient is called Hot Wallet but this type of wallet is not secure, there are few chances of thefts and frauds. The later wallet, Cold is considered more secure wallet but it is harder in transaction than the previous one.
You can buy cryptocurrency for the following reasons
- You can use this currency in shopping
- You can use this currency in trading
- Or, you can convert it into cash
Cryptocurrency can be used for buying products and services. If you want to buy anything using Bitcoins, you should use it as a debit card because it is quite simple to purchase with this type of card and withdraw cash easily. Peer-to-peer transactions are also used to convert cryptocurrency into cash.
How To Buy Cryptocurrency
To buy a cryptocurrency, you must keep some steps in your mind before applying for this. You should take into consideration various issues like security, convenience, type of this and many more. You can follow these steps before buying a it.
The Source, Where to buy
There are several ways to buy a cryptocurrency and a variety of options make it tough to decide where to buy this type of currency. You need to think about different aspects before choosing a platform to buy this currency. If we think about the easiest access to a platform then it is a centralized exchange. Every new buyer likes and trusts this method of buying cryptocurrency. Centralized Exchanges assure people that they will get what they have paid for.
If you are used to brokerage, then there are lots of brokers who sell their service online and offer cryptocurrencies as well as stocks.
If you are a veteran in this field, then you should go for decentralized exchanges where you get cheaper offers than a centralized exchange. In addition to prices, you get more advanced security also here.
If we talk about a particular method then we find that centralized exchange is an easier method to buy a cryptocurrency.
Advantages And Disadvantages of Cryptocurrency
No Administration Authority – There is no administration authority that administrates or maintains cryptocurrency as other authorities and central banks do to administrate their currencies. All transactions are stored and maintained by the network of its users and it works on a blockchain system.
More Secure – The distributed ledger is based on mathematical puzzles that are more secure and hard to intrude into it. This way, cryptocurrency becomes more secure than other online transactions. Pseudonyms are used in cryptocurrency to provide higher security and privacy.
Easy Exchange – There are various transaction options available in the market that make it easy and convenient for its users to make transactions. Different types of wallets and exchanges help you to trade in cryptocurrency. You can buy cryptocurrency using any nation’s official currency.
Decentralized – It is not centralized or controlled by any authority or institution. Mainly cryptocurrencies are controlled by the people who are using them or developing them. This is the key advantage of this currency because no authority can affect the value and flow of currency, this aspect increases the security and stability of this currency.
Inflation Free – This is another major advantage of this currency that it is not affected by inflation. Most countries have ever faced a great decline in their currency rate. The value of cryptocurrency goes with the market and it does not affect inflation because any cryptocurrency is mined with a fixed amount.
Not So Popular as Paper Currency – Cryptocurrency is a new concept for the world and it takes too long to adopt a new way of money exchange. We can’t consider this type of currency common currency.
Illegal Transactions – As cryptocurrency is highly secured, it is quite tough for the government to track the people who are using this type of currency in illegal activities like drugs and the dark web.
Data Lost, Everything Lost – If a person lost the data that can be used in wallets, all the money that has been stored in the wallets will be lost by that person. The developers are trying to make it highly secured but this will be worthless for a person who doesn’t have enough data to retrieve his coins.