Beginner’s Guide to Cryptocurrency
For a long time, there have been attempts to create a digital currency that is void of failures, fraud and financial issues. Systems like Flooz, Beenz, and DigiCash had emerged, but they have inevitably failed. Luckily, cryptocurrency has taken the world by storm, and most countries recognize it as a secure currency.
Crypto is primarily limited entries in a database that no one can alter without fulfilling certain conditions. It is the same as the currency you use at the bank where the limited entries in the public physical database but differs in if you physically own the coins and notes. Unlike each country’s currency, crypto is not controlled by a central agency/third parties who keep records of the balances and transactions. Still, instead, you have a mandate to manage your funds how you want.
The founder described crypto as a decentralized network of peers which keep a consensus about accounts and balances. Every time you make a transaction, it notifies the whole network and legitimacy of balances and operations is based on the agreement of all participants. If nodes of the network disagree on a single balance, the system will break down. That’s why there are a lot of rules to ensure that such a thing never happens.
Examples of cryptocurrencies include;
So, why do people prefer crypto?
I. You can trade internationally
First, people are more comfortable transacting with crypto because its accessible in any part of the world, it has no imposed levies, and national currency doesn’t affect its value. Crypto transactions are at the click of a button since they happen on a global network of computers, utterly indifferent to your location.
All transactions are secured by a strong cryptograph impossible for anyone other than the owner to hack. This ensures safe protection for your identity since its impossible for anyone to know your private key.
Cryptocurrency is a decentralized currency that doesn’t require you to share your identity or details of the transactions you make with the beneficiary. That means you don’t have to share any information with the government or the bank about your transaction deals.
You can remain anonymous because neither transactions nor accounts are connected to real-world identities. Transactions are received on addresses which are randomly seeming chains of around 30 characters. People won’t know who you are on the Blockchain, but they can get some information about the transaction flow.
IV. Fast to do business.
The technology in cryptos has no delays or third parties’ payment of fees. Therefore, you don’t have to wait for a couple of days to receive funds; thus, your business will be fully functional. For that, today, many online and offline merchants accept bitcoin as the favourite form of payment.
Now you can use crypto to pay for hotels, school fees, flights, jewellery, and certain app services. For instance, Apple has authorized at least ten different cryptocurrencies as a viable form of payment on its platform – APP store.
V. Reasonable fees
Transferring money through the bank or any other online forum requires you to pay some transaction fee which is sometimes hefty. Have you ever looked at the monthly bank statement and saw how much money you chalk up due to transactions? Well, with Blockchain, there are no OR negligible costs. As opposed to credit cards or debit cards where the seller pays a fee to receive payment, in crypto, it’s the buyer who pays the fee.
VI. An investment platform
Recently, many people have immersed a lot of wealth in the bitcoin (BTC) franchise. In 2016, one BTC was valued at $800 then in November 2017, the price of one Bitcoin was up to $20,000. So, if you do the math, you can see bitcoin was an investment gem during that period.
Through mining, you can make some substantial amount of money. The mining process is a crucial part of any bitcoin transaction that guarantees a miner a cut in the process. Mining of bitcoins is a verification process where transactions are noted in the public ledger called Blockchain. The process also involves the release of new bitcoins by solving the computational puzzle.
Since nowadays many people use cryptos, solving the puzzle has also become tougher. Hence, miners have to invest in industrial-grade mining hardware to earn a fortune in the mining process. Earlier it was easy to make money as all you required was a computer and it would solve the complicated cryptographic puzzle for you.
Common Problems of Cryptos
With great power, comes great responsibilities where, in this case, the responsibilities are issues you are bound to experience with cryptos. These are;
i. It is complicated
Although crypto yields a lot of benefits, very few people understand its functionality. People infer the use of crypto to nerds and geeks, who are more proficient with computer skills.
- People are afraid of change
Very few countries have legalized the use of crypto. Thus, companies are still wary of accepting digital currencies in their business dealings. Although crypto is widespread, there is still a long way to go before all spheres of commercial entities accept it.
iii. It’s Volatile
You can’t compare crypto to the stock market, but it too is susceptible to the devaluation that may lead to massive losses.
Based on their design, cryptos have a limit to the speed and number of transactions it can be processed at a time.
There is no way you can reverse the payment. Once a miner has verified a transaction, it becomes final. So, if you mistakenly paid someone, the only way you can get your funds back is asking that person to refund the payment.
vi. You can lose your coins
Crypto’s digital nature requires you to store them digitally. You can store them in wallets, either online or offline. The online wallet is affiliated with exchange rates. For that, you are recommended to opt for the cold offline wallets. Offline wallets are the most secure since you can store them on your hard drive. But then, you could lose all your coins if you forgot your password, lost the drive, or a virus attacks your computer.
Crypto is a new age remarkable achievement as the future of the world currency, its better you familiarize with all the basics involved. This article is a commencement piece for your comprehensive journey towards understanding the workings of crypto technology.