What is cryptocurrency , and how does it work?
Cryptocurrency : meaning and definition
Cryptocurrencyalso referred to crypto-currency also known as crypto is a form of currency that exists electronically or virtually and employs cryptography to ensure transactions. There isn’t a central authority for issuing or regulation but instead use a decentralized system to record payments and issue new currencies.
The definition for cryptocurrency is:
Cryptocurrency is a digital payment method that doesn’t count on banks to validate transactions. It’s a peer-to peer system that allows anyone, anywhere to make and receive payments. Instead of being tangible money being carried around and exchanged in the real world are only digital entries into an online database which records specific transactions. When you transfer cryptocurrency money that are transferred, the transactions are documented in an open ledger. Cryptocurrency can be stored in digital wallets.
Cryptocurrency got its name because it makes use of encryption to verify transactions. This is because advanced coding is involved in storing and transmitting cryptographic data between wallets, as well as to public ledgers. The purpose of encryption is providing security and protection.
First cryptocurrency to emerge was Bitcoin and was first introduced in 2009 and is still the most popular today. A large portion of the fascination in cryptocurrency is in trading to earn money, with speculation at times pushing prices upwards.by link All about bitcoin website
What exactly is cryptocurrency?
Cryptocurrencies run on a distributed public ledger known as blockchain, that keeps track of every transaction updated and held by currency holders.
Bitcoin and other cryptocurrency coins are created via a process known a mining, which uses computer power to solve mathematical problems, which generates coins. The users can also purchase the currencies from brokers, then save and use them with digital wallets.
If you have cryptocurrency, you don’t have anything tangible. The thing you own is a token that permits you to move a record or measure through one party to the next without the assistance of a third party.
Although Bitcoin has been around since 2009, cryptocurrency and applications for blockchain technology being developed in terms of finance, and more applications are anticipated in the future. Transactions that involve bonds, stocks and other financial instruments could one day be traded using blockchain technology.
Cryptocurrency examples
There are a variety of cryptocurrency. Some of the best known include:
Bitcoin:
In 2009, the company was founded. Bitcoin became the first cryptocurrency created and is currently the most widely traded. The currency was developed by Satoshi Nakamoto who is considered to be a pseudonym for one or a group of individuals whose exact identity is unknown.
Ethereum:
In 2015, the Ethereum platform was developed. Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) and Ethereum. It is the most popular cryptocurrency, following Bitcoin.
Litecoin:
This currency is most similar to bitcoin however, it has moved faster to implement new advancements, such as faster transactions as well as processes that enable more transactions.
Ripple:
Ripple is an electronic ledger system distributed across the globe which was created in 2012. Ripple can be used to track various kinds or transactions. Not only cryptocurrency. In the past, its company worked with various banks and financial institutions.
Non-Bitcoin crypto currencies are collectively referred in the context of “altcoins” to distinguish them from the primary.
How to purchase cryptocurrency
You might be thinking about how you can buy cryptocurrency without risk. There are generally three steps to follow. These are:
Step 1: Selecting one platform
The first step is to decide which platform to select. You can generally pick between traditional brokers or a dedicated cryptocurrency exchange:
- Traditional brokers. These are brokers on the internet that offer options to buy and sell crypto, as well as other financial assets such as bonds, stocks and ETFs. They typically have lower costs for trading, but they lack digital features.
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Cryptocurrency exchanges. There are a variety of cryptocurrency exchanges to pick from with different cryptocurrency options and wallet storage options, interest-paying account options, and so on. Some exchanges have asset-based fees.
When you compare different platforms, look at which cryptocurrencies they offer, what fees they charge, their security features, alternatives for storage and withdrawals, and any educational tools.
Step 2: Funding your account
After selecting your platform, the following step is to fund your account so you are able to begin trading. The majority of crypto exchanges allow customers to purchase crypto using fiat (i.e. official government issued) currencies like the US Dollar, the British Pound, or the Euro by using credit or debit card, although this varies by platform.
Purchases made using credit cards are considered risky, so some exchanges don’t support these transactions. Some credit card companies don’t allow crypto transactions either. The reason for this is that cryptocurrencies can be highly volatile, and therefore, it’s not prudent to run the risk of entering credit — or even paying large fees to use credit cards — for certain assets.
Some platforms may also accept ACH wire and transfer. The accepted payment options and time taken for deposits or withdrawals are different for each platform. Also, the time required for the deposit to be cleared with the payment method.
One important aspect to take into consideration is the cost of fees. They can include deposits and withdrawal transaction charges, as well as trading fees. Fees can vary based on payment method and platform, and this is something you should research prior to committing.
Step 3: Placing an offer
You can place an order through the website of your exchange or broker or mobile platforms. If you’re looking to purchase cryptocurrencies it is possible to do this by selecting “buy,” choosing the order type, entering the amount of cryptocurrencies you’d like buying, and confirming the order. The same procedure applies to “sell” transactions.
There are other options to invest in cryptocurrency. There are payment platforms like PayPal, Cash App, and Venmo, which allow users to purchase, sell, or even hold crypto. In addition, there are these investment options for investors:
- Bitcoin trusts: You can buy the shares in Bitcoin trusts with a standard brokerage account. These trusts offer retail investors exposure to crypto through the stock market.
- Bitcoin mutual funds: The Bitcoin mutual funds are available. Bitcoin ETFs and Bitcoin mutual funds to choose from.
- Blockchain stocks or ETFs Also, you can indirectly invest in crypto by investing in blockchain companies that are specialized in the technology that underlies the crypto industry and cryptocurrency transactions. You can also purchase ETFs or stocks of companies that use blockchain technology.
The best solution for you is based on your investment goals and your risk tolerance.
Are cryptocurrency and bitcoin safe?
Most cryptocurrencies are created using blockchain technology. Blockchain is the process by which transactions are recorded into “blocks” as well as time stamped. It’s an extremely complex technical process, yet the result is a ledger of transactions made in cryptocurrency that’s extremely difficult for hackers to hack into.
Furthermore, transactions require an two-factor authentication procedure. For instance, you might be asked to enter a username and password to begin the transaction. In addition, you may be asked to use an authorization code that has been sent via text to your personal mobile phone.
Although securities are in place, that does not mean that cryptocurrencies cannot be hacked. Many high-dollar hacks have impacted cryptocurrency start-ups huge. Hackers targeted Coincheck for $534 million, and BitGrail with $195 million. This makes them two of the biggest cryptocurrency hacks of 2018.
Contrary to the government-backed currency, the value of virtual currency is determined solely by demand and supply. These fluctuations can trigger wild swings that produce significant gain for investors or massive losses. Additionally, cryptocurrency investments are subject to a lesser degree of protection under the law that traditional financial products such as stocks, bonds, and mutual funds.
