Cryptocurrency is a digital or virtual form of currency, characterized by cryptography, a network that is distributed over a large number of computers that makes counterfeiting or double-spending nearly impossible. It is a system that allows for secure online payments, denominated in virtual tokens.
It operates on decentralized networks that operate on blockchain technology, a system of recording knowledge very much; That makes it very difficult or impossible to change or cheat the system. This structure allows crypto to exist outside the control of governments and regulatory authorities.
Cryptocurrencies became a worldwide phenomenon amid talk that they are visiting to replace common currencies shortly. The pace of cryptocurrency adoption continues to be fueled in part by the world’s progress towards a cashless society.
The fact that some people, nowadays, transact through electronic money indicates that cryptocurrencies could be long-term currencies. However, given strong opposition from regulators around the world, it will take slow before they enter the mainstream.
With industrialization and the involvement of technology, digital currencies are gaining a better position than others. One such currency is Bitcoins. Many people are used to this familiar term. Through cryptocurrency, it is easy to transfer funds directly between two parties, without the need for a trusted third party such as a bank or other institution.
But, what are the advantages of cryptocurrency? In the next section
Advantages of Cryptocurrency
Here are some of the major advantages of cryptocurrency.
Protection against Inflation:
Inflation causes many currencies to decline in value over time. At its launch, almost every cryptocurrency is released with a hard and fast amount. An ASCII computer file specifying the quantity of any coin; Only 21 million bitcoins have been released within the planet. Therefore, as demand increases, its value will increase which can keep up with the market and, in the long run, prevent inflation.
Self-Governed and Managed:
Management and maintenance of any currency is also critical factor in its development. Cryptocurrency transactions are stored on their hardware by developers/miners, who receive a transaction fee as a reward for doing so. Since miners own it, they keep transaction records accurate and up-to-date, maintaining the integrity of the cryptocurrency and decentralizing the records.
Decentralized:
The main pro of cryptocurrencies is that they are primarily decentralized. Many cryptocurrencies are controlled by the developers who use them and who own a significant amount of the coin or are controlled by a corporation to develop it before it is released to the market. Decentralization helps keep the currency monopolies free and in check, so no one organization can dictate the flow and therefore the value of the coin, which in turn, will keep it stable and secure, unlike fiat currency.
Cost-effective mode of transaction:
One of the most common uses of cryptocurrency is to send money across borders. With the help of cryptocurrency, the transaction fees paid by the user are reduced to a negligible amount. It does so by eliminating the need for third parties like VISA or PayPal to verify transactions. It eliminates the need of paying any additional transaction fees.
Currency exchange ends easily:
Cryptocurrencies can be purchased using several currencies such as US Dollars, European Euros, British Pounds, Indian Rupees, or Japanese Yen. Various cryptocurrency wallets and exchanges help convert one currency to another by trading in cryptocurrency, in various wallets and paying minimal transaction fees.
Easy Transfer of Funds:
Cryptocurrencies have always positioned themselves as the best solution for transactions. Transactions in cryptocurrencies, whether international or domestic, are very fast. That would be because the verification requires some time to process. After all, there are only a few constraints.
It is possible to become rich by investing in cryptocurrency but you can also lose all your money. Investing in crypto assets is a bit risky but also potentially highly profitable.
Cryptocurrencies are a good investment if you want to get direct exposure to the demand for cryptocurrency. A safer but potentially less attractive option is to buy shares of companies exposed to cryptocurrency.
Let’s examine whether Is cryptocurrency a good investment?
Is cryptocurrency a good investment?
Cryptocurrencies can be a good investment if you’re willing to accept that it’s a high-risk gamble that might pay off — but there’s also a strong chance you could lose all your money. Cryptocurrency prices, including Bitcoin, are falling in 2022 amid a worldwide crypto price crash.
Before investing in Bitcoin or other cryptocurrencies you must go in with your eyes open.
If you invest in cryptocurrency, do it based on the facts, not the hype.
Before you buy and sell digital currency, know the risks so you can judge if investing in it is a good idea for you and your finances.
The Bank of England would not agree that it is a great investment. Governor Andrew Bailey warned that people who invest in crypto should be prepared for loses.
What are average returns for cryptocurrencies?
There is no guarantee that cryptocurrencies will work in the long run.
For example, of the top 10 cryptocurrencies by market value in 2013, only seven are still operating today.
Using industry data provider, the top 10 cryptocurrency coins in 2013 were:
- Bitcoin
- Litecoin
- Peercoin
- Namecoin
- Feathercoin
- Terracoin
- Devcoin
- Freicoin
- Novacoin
- CHNcoin
In 2013, one bitcoin was worth just under $112 and had a total market value of over $1.2bn. On May 16th, 2022, one bitcoin is worth about $30,000 and has a total market value of $1.3trn.
Eight years ago, one Litecoin cost $3.38. In April 2021 its value was around $245 per coin. It now costs $67.
Devcoin, Novocain, and CHNcoin are no longer listed by Coinmarketcap, while two of the 10, freicoin and terracoin, have declined in value in the intervening time; Terracoin is a fraction of what it was in 2013.
So, buying small coins and holding them as a long-term investment doesn’t necessarily make real money.
A steady stream of new cryptocurrencies is entering the market. Dogecoin is just a recent example that launched in May 2021 but has struggled to keep up with investor momentum.
Conclusion
Cryptocurrency investors should do their diligence, as they would with any other investment. Think long and hard about which cryptocurrencies have real potential to change the world.
Try not to be swayed by malicious money-grabbers shouting that this or that coin is “going to the moon”.
Remember that there is nothing like losing a month’s wages in one day to bring an investor back down to earth.
