Blockchain is still in the news, with stories about people becoming billionaires overnight and industry-specific perspectives on financial transactions. Although the cryptocurrency market is frequently perceived as a risky place to invest, there is still a lot of interest in it, with Coinbase reporting that 70,000 to 1,00,000 new crypto trading accounts are being registered each day on its platform. Nevertheless, despite all the media attention, there is frequently some scepticism about cryptocurrencies because of their technical nature.
What is Cryptocurrency?
The term “cryptocurrency” is a combination of the word “cryptography” and “currency.”
· ‘Currency’ allows people to turn their labour into something of worth that can be exchanged for commodities and other services.
· ‘Cryptography’ transforms comprehensible text into unintelligible text and vice versa for secrecy and authentication reasons.
· Combining the two results in the term “cryptocurrency,” which refers to a digital medium of exchange that uses encryption to ensure the security of transactions.
Cryptocurrencies are quantitative entries in a database that no one may alter or exchange unless specific requirements are met. Cryptocurrencies function as virtual accounting systems that let people conduct business with cash, credit cards, or cheques to purchase things, make investments, or receive payments. Digital blocks are used to store the transactions, which are subsequently signed cryptographically (thus the term “crypto” money), making them completely safe.
When Bitcoin was first announced in 2009 by Satoshi Nakamoto, a pseudonym for the person or organization, it was referred to as a “peer-to-peer electronic cash system,” a decentralized system without any central controlling entity involved.
This was so groundbreaking because blockchain, the technology that powers cryptocurrencies, addressed one of the biggest problems with digital payments: “double spending,” which is the fraudulent practice of spending the same money more than once. Blockchain’s decentralized network makes use of a global public ledger that makes every transaction on the web visible, freeing digital platforms from the need to rely on reliable third parties to prevent double-spending.
A secret digital key, or password, that demonstrates to anyone on the network that a particular amount of bitcoin is their’s to spend or use in any way they choose is provided to them when they purchase or get a cryptocurrency, such as bitcoin. Their key is evidence that they have the right to do so, and when they spend that bitcoin, the entire network will be aware that they have transferred ownership of it. Every transaction that has ever been made leaves a lasting record of who owns what. This document is known as a “blockchain.”
How to purchase cryptocurrency:
As a clear reminder that this is an unstable investment environment, the warning frequently included with cryptocurrency investments reads, “Investing in crypto coins or tokens is extremely risky, and the market is primarily uncontrolled. Anyone thinking about it should be ready to lose whatever they invested.
Here are a few tips-
1.) START SLOWLY:
The managing director of Crypto Asset Management, Tim Enneking, advises being patient and letting the Bitcoin price come to you before investing a little at different stages whenever the price is appropriate.
2.) USE YOUR WALLET:
Exchanges are an excellent place to purchase digital currencies, but to guard against hacking, assets should be kept in both online and offline crypto wallets.
3.) DIVERSIFY INVESTMENTS:
When one investment component declines, another will benefit from diversification. To lessen swings, think about creating an investment portfolio with an equal mix of Bitcoin, Ether, Litecoin, Ripple, and Bitcoin Cash in addition to conventional equities and bonds.
BEING A STREETWISE NOVICE TO THE CRYPTO WORLD-
Even though bitcoins have never been stolen or hacked, digital ledger technology has. The most prominent heist was in 2014, when someone stole 8,50,000 bitcoin from the Mt. Gox exchange by pretending to be someone else.
The Commodity Futures Trading Commission (CFTC) of the United States issues warnings against “pump and dump” operations that prey on novice cryptocurrency investors. By investing in a particular coin simultaneously and making it appear more appealing to new, naive buyers, big groups of people work together to drive its price up. When the price is high, these con artists simultaneously sell all of their coins, substantially lowering their value and causing the newbie to lose a sizable portion of their investment.
As we have understood, cryptocurrency brings both its merits and demerits; hence it’s advisable to utilize this asset judiciously.