Cryptocurrency is a term that you must have heard a lot in recent years. Do you understand what cryptocurrency is, though?
Since 2013, he has drawn the attention of the international community. This is due to the fact that many media outlets have begun covering this digital money. But there are both benefits and drawbacks to having cryptocurrency.
Digital money has gained popularity as a result of the growth of the digital world, which mostly uses the internet. Cryptocurrency is a form of exchange that has a value greater than that of any other currency in the digital world. In reality, people started using this currency for real-world transactions.
A cryptocurrency is
The words "cryptography" or "secret code" and "currency" are combined to generate the term "cryptocurrency." Cryptography was utilized in German communications during World War II, and cryptocurrencies use a variety of secret codes with the same goal of being difficult to read and replicate.
Cryptography, which includes cryptocurrency, is a type of digital money that only exists visually and not physically like traditional money does. You might be concerned about the security of cryptocurrencies, but the truth is that they are protected by cryptography, making them nearly impossible to forge.
Cryptocurrency is a currency that is based on blockchain technology, unlike traditional currency that is deposited into a digital wallet. This currency is distributed across various networks, making it impossible for any government or other body to regulate it.
Characteristics of cryptocurrencies
Cryptocurrencies differ from conventional forms of payment or trade due to a variety of features. In comparison to traditional currencies, the following distinct cryptocurrency traits are also benefits.
1. Digital
Cryptocurrency, as opposed to dollars that are stored in a digital wallet, can only exist in the digital realm and cannot be realized in physical form, whether it paper or metal like dollars.
2. Peer to Peer
Cryptocurrencies can be used for transactions between two parties, just like regular money transactions. Of course, the internet network is used or this is done online.
3. Globalization and Decentralization
Cryptocurrency is decentralized and applicable everywhere because it is not controlled by any one entity. Cryptocurrency transactions will transcend geographical boundaries and other economic norms. As a result, the value of cryptocurrencies will be the same no matter where they are.
4. Encrypted
Digital currency known as cryptocurrency has excellent security due to its intricate coding. Each bitcoin owner is unique from other cryptocurrency users and has their own transaction code.
Functions of Cryptocurrency
As its name implies, the main use of bitcoin is as a medium of trade in the online environment. More than that, its rising worth gives it the ability to serve another purpose, notably that of an investment object.
1. Cryptocurrency Serves as a Payment Tool
Several significant global marketplaces, including eBay and Amazon, have adopted cryptocurrency as a form of payment. Foreign businesses and restaurants have also accepted cryptocurrency as legal tender.
2. The Use of Cryptocurrency As Investment Objects
Unlike gold and mutual funds, cryptocurrencies are considered high risk investment vehicles. Despite this, a lot of investors are drawn to buying as many cryptocurrencies as they can in the hopes that they will sell them when the price has doubled in the future due to their tremendous potential.
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Advantages and disadvantages of cryptocurrencies
Although cryptocurrency is not a new concept in the economic world, it must be acknowledged that most people are still unfamiliar with it. Therefore, before using this digital currency, it is important to fully understand its benefits and drawbacks.
The greatest tangible benefit of cryptocurrencies is their increased practicality for transactions. Additionally, the cryptographic security assurances that safeguard cryptocurrencies will increase the security of transactions made with this digital currency. Furthermore, the required exchange rate is the same regardless of whether the transaction includes two different countries.
Banks and other financial institutions won't be aware of transactions made with cryptocurrencies. The fact that it may be completed fast and without conditional phases makes it simpler on the one hand. However, from a legal perspective, this is extremely weak because it can be used for illicit activities including money theft, purchasing illegal items, and evading taxes.
The benefits of cryptocurrencies that protect user privacy are essential for people who reside in areas with oppressive government rules. With careful thinking, using cryptocurrency in this situation is actually quite advantageous for the community.
Mining of cryptocurrencies
Cryptocurrency mining is one of the phenomena that developed later after the advent of cryptocurrencies. One way to obtain cryptocurrency itself is through mining it.
Despite the name "mine," this activity is more about bookkeeping than actual mining. Recording transactions between bitcoin owners and beneficiaries takes place when cryptocurrency mining is done. Mining operations for cryptocurrencies from all around the world will keep track of transactions made with them.
By breaking particular codes, cryptocurrency transactions that take place all over the world are recorded. The procedure makes use of sophisticated machinery, including a powerful computer that consumes a lot of electrical energy. As a result, the registrar needs to get compensation.
The compensation that the recording offenders will receive is in the form of fresh cryptocurrency money. This is where the value of cryptocurrencies will increase. As a result, this activity is referred to as mining.
Frequently Used Cryptocurrency Terms
In the realm of cryptocurrencies, there are numerous terms. The investor's scope may be a factor. The word (which comes more from chatter on online forums). However, the following are some common general terminology.
1. Bull market, a term used to describe rising stock prices.
2. Market bear, a term used to describe falling stock prices.
3. Fear of Missing Out (FOMO), a term used to describe inexperienced investors who are still inclined to mimic other people's behavior.
4. Pump and dump is an investment strategy where investors call for a rising currency price during the pump and a falling currency price during the dump.
5. A whale is a person who owns 5% or more of the assets on the cryptocurrency market.
6. Fear, Uncertainty, and Doubt (FUD), investors' strategy to lower crypto prices, so they can buy them cheaply.
7. "HODL" refers to holding onto assets even when prices decline, which is generally bad. The word was allegedly coined by a typo on a cryptocurrency forum that read hold assets instead of hold assets.
8. The term "rekt" refers to investors who make a bad decision. Rects are those who purchase assets at high prices and then sell them at lower prices.
9. The term "No Coiner" is used to describe people who have sold all of their cryptocurrency.
10. "To the Moon," a phrase used to describe cryptocurrency prices at their highest point.
11. Cryptoses, a term for people who have a lot of interest in cryptocurrencies
Cryptocurrency Examples
Numerous cryptocurrencies have high-security blockchains as their foundation. The first cryptocurrency to exist and currently the most well-known is Bitcoin. Bitcoin represents 68% of the cryptocurrencies in the 214 billion US dollar cryptocurrency market.
Unusually, some people dislike Bitcoin because of the rules that are in place. In response to this distaste for Bitcoin, BitcoinCash, a new cryptocurrency, was created in 2017.
Altcoin is one of the cryptocurrencies that compete with Bitcoin. In addition, there are Ethereum, Cardano, Litecoin, Namecoin, and Peercoin. Some of the most recent and well-known ones are Dogecoin, which was created in 2013, and BitcoinCash, which was developed from Litecoin in 2017.
Read also: Cryptocurrency Business: Definition, Advantages, and Operations
Questions and Answers About Cryptocurrencies
1. What exactly are cryptocurrencies?
Digital money known as cryptocurrency is utilized for online financial transactions. Bitcoin and other cryptocurrencies cannot be turned into tangible forms like coins or paper as rupiah or dollars can, which are made digital.
2. Do cryptocurrencies have legal status?
The legitimacy of cryptocurrency cannot be assessed by any party because it is not governed by any authority. However, the test for the legitimacy of this currency is the mutual acknowledgement of its users. Because of its high level of security, cryptocurrency is widely trusted, and its user base is growing.
3. How do conventional money and cryptocurrencies differ from one another?
The shape and value of cryptocurrencies contrast sharply with conventional currencies. Metal and paper are the physical forms of common cash. Cryptocurrencies, on the other hand, only exist online in visual form.
If used across some national borders, regular currency will experience value fluctuations and be subject to exchange rates. Unlike cryptocurrencies, their value typically rises over time and is not affected by currency rates when used for international transactions.