Cryptocurrency is a currency of a digital nature that can be used to purchase goods or services online. It is secured by cryptography which employs a decentralized network to run various crypto ledger transactions.
Cryptocurrency has become widely accepted and prevalent across numerous countries, with almost everyone being conversant or at least familiar with the term.
The name cryptocurrency is derived from the encryption techniques that ensure the network is not easy to breach. The cryptic nature of its existence and parts of its function gave rise to the term “cryptocurrency.”
To own cryptocurrency, you could buy BNB with regular currency and exchange it for fiat currencies or trade it for any other digital currencies that exist. With this digital currency, you can invest in cryptocurrency by making various trades with other digital currencies.
Globally, virtual currencies are unregulated by a particular body, and it’s used to trade for profit in their different forms. Unlike the conventional banking system, where a central authority defines and regulates activities in the financial market, cryptocurrencies take a different turn. For example, digital currencies run a decentralized blockchain system that gives everyone full control over their finances.
It is almost impossible to learn about cryptocurrencies without understanding what blockchain is and how it functions.
What is Blockchain Technology?
As earlier established, cryptocurrency is a virtual currency available to everyone globally. As you have physical currency notes, you can buy a virtual currency and use it to trade other currencies or spend it in shops and stores that accept them. Central bodies govern traditional currency and are under the control of the government; hence it is subject to interference, influence, and security breaches.
Cryptocurrencies circumvent this by creating a secure and independent monetary platform that has grown over the years. The successes recorded by many digital currencies are a result of the foundation set by blockchain technology. Blockchain technology refers to a decentralized system that distributes ledgers prepared and stored by a network of computers.
Blockchain is a unique database that records transactions through a systematically linked process. Data is stored in blocks that are, in turn, connected by chains from one block to another. The data storage process guarantees safety and security as each information stored on a block directly functions as a storage for the next.
What Are the Forms of Cryptocurrency? How Much Are They Worth?
The first-ever blockchain-based cryptocurrency created was Bitcoin in 2009 and was not valued so much then. Today, one Bitcoin is worth a lot of money, and there are over 11,000 cryptocurrencies currently in circulation, each coming with different specifications and prospects.
It is no surprise that Bitcoin gets on the headlines when cryptocurrency is being mentioned anywhere. Bitcoins’ significance is so huge that every other coin apart from Bitcoin is called alternative coins or Altcoins. Since its inception in 2009, many other cryptocurrencies have become very popular but still haven’t surpassed Bitcoin in market value.
Besides Bitcoin, there are other popular digital currencies like Ethereum, Binance Coin, Dogecoin, Ripple, and Litecoin. All these coins are valued differently depending on the many activities of traders in the cryptocurrency market. The first is Bitcoin, with over $68,000 in value and a market cap of about $1.3 trillion. Bitcoin price can be very volatile compared to many of the altcoins that exist.
Ethereum is the second most popular cryptocurrency in the market, especially because of smart contracts. It is valued at about $4,800 with a market cap of over $500 billion.
Then, there is the Binance coin, also known as BNB, which comes third on the list with a $50 value and a market cap of over $100 billion.
BNB is issued by Binance, which is one of the leading cryptocurrency exchanges in the world. It was created as a token to pay for discounted trades, but now, you can buy BNB and use it for various financial payments.
Other cryptocurrencies worth investing in include Solana and Cardano, with prices ranging from $2 to $45 and a market capitalization of about $74 – $75 billion, respectively. One of the coins Elon Musk talks about, Dogecoin, is another cryptocurrency worth investing in. Though a meme coin, it has a market cap of about $36 billion; however, unlike most other digital coins, Dogecoin has unlimited issuance.
Out of the thousands of cryptocurrencies available, about 15,000 are traded publicly, according to a survey. The sum of all cryptocurrency trading as of November 2021 surpassed $2.5 trillion, and out of that value, Bitcoin, the most popular cryptocurrency, made up about $1.1 trillion.
Why Are Cryptocurrencies So Popular?
Cryptocurrency has become popular for numerous reasons, the first being because it is an avenue for investing and making profits. Buying cryptocurrency and selling it at a later date can yield significant amounts of profits if done accurately. However, losses can occur when you invest at the wrong time or with the wrong strategy.
Also, many individuals are relieved that cryptocurrency eliminates middlemen such as central banks or government institutions from controlling the money supply and reducing the value of money through inflation. This makes them quite an attractive alternative to using regular currencies and banks.
Are Cryptocurrencies A Good Investment?
Although there is a general belief that most cryptocurrencies will increase in value sometime in the near or far future, this isn’t a certainty because several factors affect the price of digital currencies. Most individuals new to crypto rush into buying cryptocurrency with the hope of making quick money.
However, like fiat currencies, cryptocurrencies do not generate cash flow. To increase in value, someone has to be willing to pay more and invest in cryptocurrency than you will. Unlike a well-managed business with gradual growth in value through cash flow, cryptocurrencies lack stability.
With all these discrepancies, cryptocurrencies still yield outstanding profits through timely investments. Despite the perceived potential of challenges in the cryptocurrency market, digital currencies have proven to provide a good investment platform for many individuals. For example, investors make money by mining Bitcoin while others buy and store a coin until it increases in value.
How Do I Buy Cryptocurrency?
Many cryptocurrencies are available online for purchase with fiat currency. Some others accept purchase payments with Bitcoins or other cryptocurrency forms. For example, getting into the cryptocurrency market requires a wallet. As you have physical wallets for physical currencies, digital wallets exist for storing digital currencies. As such, you have to decide whether you want a cold or hot wallet and what platform will be best for you.
A cryptocurrency wallet is an online application that helps you store digital currency. You buy cryptocurrency by creating an account on an exchange, paying fiat currencies, and converting it to coins like Ethereum, Bitcoin, and Dogecoin.
Are Cryptocurrencies Legal?
The legality of digital currencies has been on the news for a long time. While some countries like China are expressly against it, others like El Salvador fully support digital currencies. Then, we have those countries that are silent about the activities of crypto traders.
If cryptocurrency-related activities are legal in your country, you should have no problems making trades or carrying out transactions. The most important thing to be wary about are fraudsters who seek to use the cryptocurrency market as an avenue to commit crimes. You should ensure your account information is always secure and avoid sharing it with third parties.
Cryptocurrency pools divided opinion amongst various business experts. Aside from criticisms relating to volatility and its use for illegal activities, cryptocurrencies remain largely beneficial, and it has been lauded for their transparency, decentralization, and security.