Understanding Cryptocurrency — What Is Crypto & Should We Invest In It?
We all have witnessed a massive upsurge in the crypto dimension in 2021. Even though Bitcoin, the most popular cryptocurrency, was made public in 2010, it is still rigorously Googled even today. The popularity of cryptocurrencies goes high when their worth increases and consequently, brings profit to their investors. This attracts more new investors and encourages them to invest in cryptos for themselves, thus, making it a most-searched item on Google. Now, to begin with, the basics, let us first understand what crypto is.
What Is Cryptocurrency?
As the name suggests, crypto is a digital currency that allows you to buy goods and/ or services. It can also be traded as several crypto companies have issued their currencies for trading in the form of tokens. One needs to exchange real currency to purchase or trade cryptocurrency. The worth of any cryptocurrency is identifiable in terms of real currencies.
Cryptocurrencies use a technology named Blockchain which is a decentralized technology.
I know what you are wondering now, here it is.
What Is Blockchain & Decentralization?
In simplest of words, decentralization is the process of removing any powers or authority from a centralized body of government. This is the reason why the cryptocurrency is often referred to as decentralized currencies. A government can neither allocate nor exercise its authority on such currencies.
On the other hand, Blockchain is basically a digital ledger that consists of all the records of such decentralized transactions. These are sets known as blocks. It is entirely copied and distributed across a network of computer systems in encrypted blocks of data. These blocks are chained together in a chronological proof of data forming blockchains.
What Are The Most Popular Crypto Currencies?
Well, one cannot talk about crypto without the reference of Bitcoin. Until a few years ago, people often used the terms crypto and Bitcoin as synonyms. Bitcoin was the first cryptocurrency based on the blockchain technology. It continues to be the most popular and the most valued cryptocurrency in the world. It was launched in 2009 and was made public in 2010. Till March 2021, around 18.6 million bitcoins were circulating.
At present, there are numerous cryptocurrency tokens in circulation, some are clones or forks of existing currencies and some are built from scratch. Some popular competitors spawned by the growing success of Bitcoin are Etherium, Litecoin, Peercoin, and Namecoin.
Besides these popular cryptocurrency tokens, several other tokens are of not much worth in real currency but have delivered steady profit to the traders. Dogecoin was the highlight of the saga in 2021 and it had its own wobbly ride in the market cap. This brings us to the next and the most important part of cryptocurrency — its advantages and disadvantages.
How Is Cryptocurrency Advantageous?
Cryptocurrencies were created in 2008 at the time of a global financial crisis with a purpose to let people have control over their money. It was created to avoid having to rely on banks, companies, financial institutions and the government.
These currencies promised to facilitate transfer of funds between two parties without the indulgence of a third party. These transfers are protected by public keys and private keys.
Crypto currencies are not widely accepted as a currency for exchange of goods and services; however, they are largely used as digital assets. People from all around the world are investing in crypto currencies and churning out lucrative profits.
Why Is Cryptocurrency Risky?
If looked at from the perspective of a usable currency, the partially anonymous nature of cryptos can encourage crimes like money laundering and tax evasion. A myriad of illegal activities can be executed with unpopular crypto currencies.
However, if one has to judge it from an investment perspective, it is as risky as any other investment option. It is agreeable that the high volatility of crypto tokens make it highly risky but then again, one must never invest without thorough research.