What You Should Know About Cryptocurrency

A beginners guide to cryptocurrency

For the past few years, cryptocurrency has been on investors’ radars. Many cryptocurrency enthusiasts suggest Bitcoin, Enthereum (ETH), Ripple (XRP), Litecoin (LTC), and Bitcoin cash (BCH) are quite possibly the future of currency. Some traders believe a cryptocurrency is a good option against pandemic inflation.

For someone new to the idea of cryptocurrency, there is a lot of information to sort through. What is a cryptocurrency? How does it work? And is it a good investment? Are questions most beginners ask. Also, what is the risk, and can it lead to a profitable investment?

What is cryptocurrency?

Cryptocurrency is money that’s entirely online, meaning there aren’t any bills like traditional money. Instead of a bank, cryptocurrency is transferred directly to someone. It is stored mainly in a digital wallet, such as inside of a computer or hardware.

In 2009, Cryptocurrency began to show on investors’ radars when a mysterious individual under the alias name “Satoshi Nakamoto” wrote a whitepaper that described the idea of Bitcoin and the blockchain where Bitcoin resides.

The cryptocurrency developers created a code system that encrypts super sensitive data to keep the units of exchange safe from outside sources. The identities of cryptocurrency users are protected by robust protocols, which makes transactions and currency flow more complex.

Since cryptocurrency is not regulated by the government, users do not have to worry about their funds in an account being frozen or seized. However, cryptocurrency does not have the same legal protections that traditional funds have.

Cryptocurrency is a decentralized digital currency. In the cryptocurrency community, miners are known as the record keepers. A miner’s job is to add transactions to the blockchain and ensure it is secure and verified.

Each block that is added by a miner must have proof of work. Also, mining is done entirely on a computer and within a specific software program.

So, where do you exactly store your cryptocurrency? For starters, you place it in a digital wallet. Each cryptocurrency user has a private key that verifies their identity and gives them access to exchange units. However, if a user loses their private key, they can lose all their cryptocurrency and never retrieve it back.

Decentralized means that there is no bank, government, or in-between involved. This currency runs on technology, also known as the blockchain.

What does a blockchain do?

A blockchain is made of cryptocurrencies that are built upon a global ledger. The purpose of a ledger is when someone buys or sells cryptocurrency, the ledger keeps a public record of the transaction. Then, it’s copied hundreds and thousands of times hourly to multiple computers.

So, if you are asking, is the blockchain secure? Some financial analysts believe decentralized banks are more secure because it will take the entire blockchain to be tampered with if one block is compromised. According to analysts, that is impossible to do.

Traders feel optimistic about the blockchain because it’s transparent and can help stop corruption. A blockchain does not have centralized power, and it’s entirely controlled by the people. Blockchains work well at preventing people from cheating the system.

Bitcoin

In recent years, Bitcoin is the most well-known cryptocurrency to traders and investors. This coin is the most popular and has the longevity of all cryptocurrencies in the market. It came in the wave of frustrations people had with banks and hedge funds.

Bitcoin runs on cryptography, a form of mathematics, and it has its unique address “ID.” Bitcoin’s future forecast for 2021 and beyond is bright. Bitcoin can be more valuable than gold because of its simplicity of easy storage, obtaining, and transfer. Some traders predict it will reach a high value worth up to $1 million in the next ten years.

Bitcoin Cash

The process of transactions is different than Bitcoin, meaning it moves more quickly. Bitcoin Cash offers shorter wait times and lower transaction fees. The Bitcoin Cash network can deal with more transactions per second than Bitcoin’s network. The downside of Bitcoin Cash is it’s used less in the physical world than Bitcoin is.

Enthreum

The Enthreum coin is slowly progressing, and some traders predict it could be the next dominant cryptocurrency, even more so than Bitcoin. Enthreum is similar to Bitcoin in the way it is bought and sold by investors. It is the second-largest cryptocurrency platform behind Bitcoin.

Not only is Enthreum a platform, but it also is a programming language that runs on a blockchain. Besides, it assists developers in building and placing applications.

Ripple

Ripple is a cryptocurrency coin that is relatively new to the market. Also known as XRP, it is not as decentralized as Bitcoin is, and financial institutions use it to accelerate partnerships.

Ripple is known to be a fast and secure cryptocurrency. Transactions are verified in seconds rather than minutes like Bitcoin. Also, many mainstream banks use the XRP payment system.

Litecoin

Many businesses and individuals use Litecoin to transfer funds without the requirement of a bank processing service. Litecoin is continuing to have strong growth and is a big competitor for Bitcoin.

Just like Bitcoin, Litecoin is a cryptocurrency that is proof of the work ecosystem. Also, it can deal with more transactions than Bitcoin.

Should you invest in cryptocurrency?

Cryptocurrency is an unpredictable, complex, and risky investment. Before you decide on cryptocurrency, it’s a good idea to do thorough research of your own. Of all the financial investments that are in the market, cryptocurrency has an uncertain future. A majority of cryptocurrency assets drop, and the losses can be fast and sudden.

The value of cryptocurrency varies hourly. One day, an investment may be worth thousands, yet it could fall to be worth only a few hundred dollars the next day. In the cryptocurrency ecosystem, there is a lot to choose from. With any investment, there is volatility, and it can be high risk. On the flip side, the reward can be very profitable.

Cryptocurrency is the most high-risk investment currently in the market. Before you invest, it’s key to consider what a financial advisor suggests each coin’s market is doing at the moment.

Cryptocurrency has a limited supply and restrained supply growth. Because of the growing demand, the sufficient supply growth will bring Bitcoin’s market to soar in 2020 and into the following year. Also, since the world is becoming more digital, the concept of cryptocurrency is enticing to many investors. A new cryptocurrency investor should not be influenced by a headline that lasts for only a day.

Another essential factor to consider is what are your short or long-term financial gains. ICO projects and platforms that have been up and running for a few years and continue to show strong growth are the projects to make an investment move. ICO projects that show a clear picture of success not based on guessing or overhype can be a good opportunity for long-term financial goals.

Conclusion

In conclusion, in 2021, the popularity of cryptocurrency is multiplying. It is a gamble. Some have made thousands of dollars, while others have lost hundreds of thousands of dollars. There is still much to learn about cryptocurrency and its complexity as an investment.

Should you invest in cryptocurrency? That is a question only you can answer for yourself. Are you looking to invest in the long term? Or are you a spectator looking to make quick money and be on a wild ride that the volatility of cryptocurrency is sure to bring?