CRYPOCURRENCY

 

CRYPTOCURRENCY

 

Cryptocurrency is digital, encrypted, and decentralized currency used as a medium of exchange through a computer network, whereby the network does not rely on any bank or government. Cryptocurrencies are based on blockchain technology. Blockchain is an open ledger where transactions are recorded in code and distributed across countless computers around the world. These transactions are recorded in blocks and the linking together in chains, thus the name blockchain. Everyone using cryptocurrency has a copy of this book and thus a unified transactions record. Every new transaction is recorded as it happens and every copy of the blockchain is updated immediately. This keeps all the records accurate and identical. To prevent fraud each transaction is validated using the technics such as proof of work or proof of take.

Proof of work is a verifying method whereby transactions in the blockchain are solved using an algorithm. In this case, each computer is referred to as a miner.  Normally the first computer to solve is awarded small amounts of cryptocurrency for the effort. In most cases, miners need computing resources and more power because of working for long periods. On the other hand, the proof stake is whereby cryptocurrency uses proof for verification thus reducing the cost of power. Here every person is limited on the number of transactions one can verify, which is referred to as stake. Proof of stake is more efficient and quicker. Each transaction is checked and verified by the majority of ledger holders.

To own a cryptocurrency one is required to have a wallet, the wallet is how the coins and tokens are held. To hold the wallet one can either self-host or have a third-party service. In a third party, your cryptocurrency is held by a third party which means you are trusting an exchange with your assets. In self-hosting, you host your wallet.  And you will be taking your own security for your asset. The type of wallet you choose depends on your specific needs. Some wallets support specific cryptocurrencies or have limited functionalities.

Bitcoin was the first cryptocurrency that rose in 2008, currently, they include Ethereum, Tether, Solana, and Cardana. According to the market, there are more than 21,000 cryptocurrencies according to CoinmarketCap.com. It is difficult to know the actual estimate of the market value but it is estimated to be around $3trillion. Out of all Bitcoin has the largest share in market capitalization, followed by Ethereum and Tether. Bitcoin is highly secure and has minimum transaction costs. Transactions in Bitcoin cannot be forged and are irreversible thus making it more secure and with less fraudulent activities.

Individual units in cryptocurrencies are referred to as coins and tokens, this usually depends on how they are used. They are used as units of exchange when buying goods and services, as stores of value, and in software programs i.e. games and financial products. For anyone to get cryptocurrency they have to by buying from a user or an exchange. For one to invest in crypto it is helpful to start with the most commonly established in the market but there are no guarantees.

NerdWallet has created guides on widely circulated cryptocurrencies which include Bitcoin and others.

·         Bitcoin is the first and the most valuable cryptocurrency.

·         Ethereum is most commonly used in financial transactions and is more complex.

·         Cardano is the competitor of the Ethereum

·         Litecoin is an adaptation of Bitcoin to make payments easier.

·         Solana is a competitor of Ethereum and it is more cost-effective and fast.

·         Dogecoin began as a joke but has grown to be one valuable cryptocurrency

·         Shiba Inu is another dog-themed token but complex

·         Stablecoins are a class of coins that were designed to be more stable and a real-world asset as the dollar.

Cryptocurrency such as Bitcoin will become a currency since transactions remove central banks from managing the money supply and demand thus no value is affected by inflation. With cryptocurrency blockchain technology being secure then people will feel safe trading or even buying goods and services. Examining it critically with many governments around the world not yet fully recognized there are unpredictable effects. So if you are looking to invest it’s important to consider all. Regulations in cryptocurrencies are still evolving and it is important to pay attention to the legal definitions and disclosure requirements. Policymakers are focused on regulating the exchange and trading of cryptocurrencies. Basically, people should follow good principles of investments that offer returns. Generally, cryptocurrency has changed how we invest and how we do business in the world.