What is Cryptocurrency?

Cryptocurrency

Technology has revolutionized the way people communicate, work, shop, and even pay for goods. However, consumers don’t always prefer cash. Instead, you can pay for items with a quick wave of your smartphone using contactless payments like Apple Pay. Now, a new mode of payment is emerging: Cryptocurrency.

Crypto or Cryptocurrency is a digital currency secured by cryptography. The word “Crypto” is derived from various cryptographic encryption techniques used to secure the network, such as public-private key pairs and hashing functions.

Cryptocurrencies are decentralized networks managed by peer-to-peer networks of computers running open-source software based on blockchain technology. A blockchain is similar to a bank’s ledger or balance sheet. Any central authority does not control or issue cryptocurrencies. This decentralized structure enables them to exist outside the control of governments, central authorities, and manipulation.

Bitcoin is the first and well-known blockchain-based cryptocurrency. As of June 2021, the aggregate value of all the cryptocurrencies is around $1.6 trillion – Bitcoin currently represents more than 41% of the total value. Today, there are thousands of alternate cryptocurrencies – “altcoins” with various specs and functions.

Advantages of Cryptocurrency
  • Cryptocurrency makes it possible to transfer funds online directly between two parties without involving third parties like a bank or credit card firm.
  • Crypto transfers are secured by different incentive systems, like Proof of Work or Proof of Stake.
  • Fund transfers are completed with the least processing fees, allowing users to avoid high fees imposed by banks.
  • You don’t need to provide your personal information, which means your data is protected from being shared with third parties like advertisers.
  • There is minimal risk of your identity being stolen.
  • Unlike credit card payments, cryptocurrency payments can’t be reversed, which reduces the possibility of being defrauded.
Disadvantages of Cryptocurrency
  • The anonymous nature of cryptocurrency transactions is used to exchange money in many illegal activities, such as tax evasion and money laundering.
  • Mining cryptocurrencies require a lot of electricity and computational power.
  • If someone mistakenly sends funds to the wrong wallet address, the sender cannot recover those funds.

The cryptocurrency market is very volatile, so be prepared for ups and downs. If your investment portfolio can’t handle that, cryptocurrency might not be a wise choice for you. Therefore, it is crucial to know what cryptocurrency is? What are the advantages and disadvantages of crypto?. If you are planning to invest in crypto, please do your research before investing.