Technology and development have come a long way and still progressing at an alarming rate. Similarly, finance has also come a long way. Blockchain technology is taking over the world with its alluring advantages. Cryptocurrencies are a relatively new concept, but their popularity is growing every year. But what exactly is cryptocurrency? And how exactly is it taking over the world of finance? Here is how.
What is Cryptocurrency?
Cryptocurrency is a form of digital currency that exists entirely online. It is also known as virtual currency because you can use it to purchase items in the digital world. Unlike physical money, cryptocurrencies aren’t printed on a piece of paper or hard metal.
Cryptocurrencies are a technology that exist for the sole purpose of creating an alternative to flat currencies like the dollar and euro. Since its inception in 2009, cryptocurrency has proven to be a reliable form of currency that is both anonymous and transparent.
How does cryptocurrency works?
Cryptocurrency makes use of Blockchain technology. This system is designed to allow information to be distributed, but not copied or modified and unable to be used without the permission of the sender. It is a kind of digital currency that uses strong encryption techniques and cryptography methods to regulate and monitor the generation of units of currency and verify the transfer of funds, all while operating independently of any third entity like a central bank or other institutions.
Advantages of cryptocurrency
Through the use of cryptocurrency, a producer and consumer can do the exchange of goods and services directly without processing the transaction through a third party like banks or a centralized institution. Cryptocurrencies use the technique of cryptography in order to secure and verify all the transactions happening between the producer and consumer as well as control the formation of additional units of the currency. Cryptocurrencies also protect from inflation, are decentralized and self-governed, and secure and private.
Risks involved with cryptocurrency
Cryptocurrencies are completely digital money designed to be secure and anonymous. Because of this, they have become popular with people who want to make illegal deals or hide their profits from the government. While in-person transactions are a lot safer, there’s still a substantial risk when accepting cryptocurrency in person because it is entirely digital. There is also the risk that you will not receive any cryptocurrency at all, or your buyer will send you less than what he paid for.
Types of cryptocurrencies
There are over 1300 cryptocurrencies in circulation today, with new ones being created daily. While many cryptocurrency users can tell the difference, some traders and investors might not notice the difference as all the crypto exchanges happen in the same way. Some of the prominent cryptocurrencies are:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Cardano (ADA)
- Dogecoin (DOGE)
The cryptocurrency market is growing at a rapid rate and as of now, the total value of the entire cryptocurrency market stands at $200 billion USD. There are many types of cryptocurrencies available out there and if you are interested in getting started in trading or investing in it, there are plenty of opportunities for you to do so.