If you’ve ever wanted to transfer currency while keeping your privacy intact and not having to pay exorbitant service fees, you would have basically desired cryptography. Cryptography is simply the practice and study of techniques that aid secure communication. Cryptocurrencies are a subset of cryptography and therefore we define cryptocurrencies as a digital asset that acts as a medium of exchange to transfer money through the use of cryptography. The medium of exchange is therefore intrinsically secure and has no extra fees of any kind!
What are Cryptocurrencies?
There are multiple ways that cryptocurrencies differ from a typical currency. The first one being that this currency is digital in nature and not based on paper as every other currency. Cryptocurrencies use decentralized technology to allow users to make secure payments online.The owner of these currencies need not have a bank or even provide his data.
This is accomplished through the presence of a public ledger called a blockchain that keeps a record of the transactions all currency holders have made. This blockchain is the only existing trace of the existence of these currencies and a proof that any transaction ever took place.The second way cryptocurrencies differ from a typical currency is that they are not created by any government or government institution. They tend to be made by private organizations and also simply by people as well. Seeing as cryptocurrencies have risen out of a need for privacy it makes sense that they’re not made by the government. The third and fairly obvious difference is that there is no physical form to cryptocurrencies. The currency is entirely digital in nature.
Units of cryptocurrency are “created” through mining. Mining is a process that uses powerful computer processors and graphical processing units to solve complicated mathematic problems. This eventually results in the creation of currency units. The other method of acquiring cryptocurrency would be to just buy them through online brokers.
Bitcoin was the first cryptocurrency which was first created in 2009. It is currently the most commonly traded cryptocurrency to date and has a market capitalization of $45 billion as of July 2017. We’ve all seen pictures on social media about how if we’ve bought bitcoin when it started we’d be millionaires but let’s put a number to that so it’s clear.
Just this year, had you bought one bitcoin at the end of April for the then price of $1200 and then had you sold it 25 days later you’d have made a profit of $1600 ($2800 at 25th of May)!
Bitcoin is valued higher and used more than most other cryptocurrencies. Other common cryptocurrencies include Ethereum, Ripple and Lite-coin but you can add the total market value of all three together and you’d still have a figure that’s a fraction of the total market capitalization of Bitcoin.
Why Use Them at All?
Using cryptocurrencies results in transactions that are quicker, cheaper and more reliable. Cryptocurrencies are known for being secure with as much anonymity as humanly possible right now. Transactions cannot be faked and you also have to pay no fees for them. One downside however is that once a transaction has been made, they cannot be reversed so if you make a mistake you can’t take it back.
The Dark Side of Cryptocurrencies
Based on ongoing trends it’s easy to see why it would be lucrative to invest in cryptocurrency. You could buy now and then sell when they’re far more expensive but sadly it’s not just as simple as that.
Cryptocurrencies are financially nascent as of now. Many countries have tried to introduce cryptocurrencies and have just as fast had to remove them because they never took off. The market for cryptocurrencies is still in infancy so you could get very lucky and just as unlucky in a matter of days. If you do want to invest, wait it out a little before the market gets better regulated.
One of the reasons why you shouldn’t invest in cryptocurrencies and also why their market is very volatile is the nefarious nature for which these currencies are used for. Because they grant anonymity, cryptocurrencies are primarily used for illegal activities. It’s hard as it is to track transactions from cryptocurrencies but when you add the fact that their numbers are increasing it becomes even harder to track them. Cryptocurrencies are already being used on the Dark Web and on the Black Market. All this has attached a negative connotation with cryptocurrencies which is why people seem hesitant to buy them.
Cryptocurrencies are still in their infancy. There is a lot of development that’s still left and also a long time before they will become mainstream for the general public. As it stands now statistically these currencies are bought primarily by white males who belong to the highest income sectors.
If you do want to invest in crypto currencies our advice would be to wait out the tide and invest when it’s safer to do so.
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