What is Cryptocurrency?
Basically, a cryptocurrency is a digital token, designed to work as a medium of exchange, or a method of record keeping. However, it uses cryptographic algorithms to secure and verify transactions across it’s network and to control the creation of new tokens (inflation). Today cryptocurrencies have become a global phenomenon known to most people.
Bitcoin – 21st Century Unicorn – Or The Money Of The Future?
Bitcoin was the first decentralized cryptocurrency, created in 2009. Bitcoin uses Peer-to-Peer (P2P) transactions, with no middleman or financial institution involved. Records of each transaction are cryptographically verified by other nodes on the Bitcoin network, then those transactions combined into a ‘block’ and added to Bitcoin’s ledger, otherwise knows as the blockchain.
The blockchain holds details of every single transaction on the Bitcoin network, and as the blockchain is simultaneously held on multiple nodes throughout the blockchain network, it is unable to be changed, disrupted, censored, or hacked. Nodes on the network, commonly known as ‘Miners’ collect a small fee from each Bitcoin transaction, as an incentive for keeping the network online.
1.) Irreversible: After confirmation, a transaction can‘t be reversed. By nobody. And nobody means nobody. Not you, not your bank, not the president of the United States, not your miner. Nobody. If you send money, you send it. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.
2.) Pseudonymous: Neither transactions nor accounts are connected to real world identities. You receive Bitcoins on so-called addresses, which are randomly seeming chains of around 30 characters. While it is usually possible to analyze the transaction flow, it is not necessarily possible to connect the real world identity of users with those addresses.
3.) Fast and Global: Transaction are propagated nearly instantly in the network and are confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent of your physical location. It doesn‘t matter if I send Bitcoin to my neighbour or to someone on the other side of the world.
4.) Secure: Cryptocurrency funds are locked in a public key cryptography system. Only the owner of the private key can send cryptocurrency. Strong cryptography and the magic of big numbers makes it impossible to break this scheme. A Bitcoin address is more secure than Fort Knox.
5.) Permissionless: You don‘t have to ask anybody to use cryptocurrency. It‘s just a software that everybody can download for free. After you installed it, you can receive and send Bitcoins or other cryptocurrencies. No one can prevent you. There is no gatekeeper.
Currently there are over 600 cryptocurrencies traded on the markets, tracked by Coinmarketcap. Bitcoin makes up over 80% of the total market today. Cryptocurrencies other than Bitcoin are usually traded against Bitcoin. Some of the larger ones are also traded against government-backed currencies like US Dollar and Chinese Yuan.
What is the potential?
The blockchain concept is revolutionizing the tech industry, with the potential for growth and revolution throughout the world. Bitcoin, and most other cryptocurrencies are decentralized, meaning they’re hosted by the network users themselves. This allows Bitcoin etc to work outside of the over-regulated world of the banking and finance sector, and it can not be controlled or regulated by any government.
Cryptocurrencies can work cross-boarders, in a timely and efficient manor, with extremely low transaction fees. For example, many people in impoverished regions either have no access to traditional banking, or it is too unsafe to carry carry cash in/out of a bank for fear of being robbed. Bitcoin is giving these people the opportunity for some financial freedom and safety, as well as being able to access micro-loans to establish enterprise in their region.
What Are The Risks?
As with any investment, there are risks. However, due to the nature and relative adolescence of the cryptocurrency industry, the risks are far higher than traditional investments like stocks or property. There is a lot of profit to be made, but investors must do their homework on the coin itself, and the general political climate surrounding these kinds of investments.
There is also large risks of an individual project failing to realize it’s goals, and an ever larger risk of unintentionally investing in so-called Scam-coins, which have been created purely for the profit of the developer, and offer no long term potential.
How Can I Invest?
Firstly, we can help! But yet, it is crucial to do your homework too. Spend some time on the researching cryptocurrency info via online like forums, message boards and YouTube. Research as much as you can, and try to find a reason NOT to invest your hard earned money. We always recommend people invest only in projects which they believe offer industry leading technology, and real value to the greater community.
Most Cryptocurrencies are purchased on an exchange, in much the same way you’d buy stocks, bonds or forex. Depending on the exchange however, there are also alot of unethical exchange that tries to scam their client. Investing in cryptocurrency should suit your personal investment style, and your personal level of acceptable risk. Never regret a missed opportunity, it’s always better to err’ on the side of caution rather than to face a big loss.