What is Cryptocurrency?

To make it simple, Cryptocurrency is a digital asset, which is any type of money that exists digitally or electronically and employs cryptography to safeguard transactions. Cryptocurrency is also known as electronic money, virtual cash, or crypto. 

Cryptocurrencies use a decentralized mechanism to track transactions and create new units rather than a central body to issue or regulate them.

You may be familiar with the most popular versions, Bitcoin and Ethereum, but there are more than 9,000 different cryptocurrencies in circulation. 

How does cryptocurrency work?

A distributed public ledger known as the blockchain, updated and maintained by currency holders, is the foundation of cryptocurrencies.

Individual cryptocurrency units may be called coins or tokens, depending on how they are utilized. Some can be used to engage in software programs like games and financial products, while others can be used as value storage or as units of exchange for goods and services.

Blockchain is a digital database that stores cryptocurrency transactions in blocks that require complex mathematical calculations to record and verify. Coins and tokens are stored in an electronic wallet, which is highly secure as it uses a unique public-private key pairing to verify the owner of the currency.

Trading in cryptocurrencies has grown in popularity, and they now constitute a separate asset class. Although their erratic nature might provide traders with various possibilities, it also makes trading in cryptocurrencies exceedingly dangerous. Losses result from price changes that might occur in a matter of seconds.

Additionally, users can purchase the currencies from exchanges, then store and spend them in digital wallets.

If you own cryptocurrency, you don’t own anything tangible. It seems weird, but you only own a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.

Classification of cryptocurrencies

There are 2 ways to classify Tokens and Coins:

• Coin: Coin is a cryptocurrency created on a personal blockchain. Coin was created to address the issues with payments, money, security, and the blockchain. Each blockchain will only support one  specific coin (such as BTC, ETH, or NEAR…)
• Token: A token is a currency issued on a blockchain, but it will be created on a different blockchain.

For example:

On Near Protocol, Octopus has produced the OCT currency.

Moonbeam produced the GLMR coin on Polkadot.

• Bitcoin and Altcoins:

• Bitcoin is the currency that gets the most attention, marking the start of the crypto market’s current growth.
• All coins and tokens other than Bitcoin are called “altcoins.”

Cryptocurrency examples

There are thousands of cryptocurrencies. Some of the best-known include:

• The first and most valuable cryptocurrency is called Bitcoin.
• More complicated financial transactions than those supported by Bitcoin are frequently carried out using Ethereum.
• A rival to Ethereum, Cardano is run by one of its co-founders.
• Litecoin is a Bitcoin variant designed to simplify transactions.
• Another Ethereum rival that strongly emphasizes efficiency and speed is Solana.
• Although it started as a joke, Dogecoin has become one of the most valued cryptocurrencies.
• Another dog-themed token with more complicated dynamics is the Shiba Inu.
• Tether and USDC are examples of stablecoins, cryptocurrencies whose values are intended to remain constant about tangible assets like the dollar.

Advantages and Disadvantages of Cryptocurrency

Advantages

1. A Simple Transaction
2. Incredible Security
3. Rapid settlement and affordable fees
4. Increased Industry Growth
5. Large Returns
6. Additional Private Dealings
7. Diversification of holdings
8. Foreclosure Hedge
9. Cross-Border Transactions
10.  Increasing Transparency and Inclusiveness in the Financial System
11.  Daily Markets
12.  Speed of Transaction Accessibility
13.  Security
14.  Transparency
15.  Self-managed and Governed

Disadvantages 

1. Illegal Transactions
2. Loss of Data Risk
3. The Power Lies in a Few Hands
4. Purchase of NFTs with Other Tokens
5. No Refunds or Cancellations
6. High Energy Consumption
7. Vulnerable to Hacks  
8. Decentralized but Still Operated by Some Organizations 
9. Some Coins are not Available in Other Fiat Currencies  
10.  Impacts of mining on the environment negatively  

How To Start Crypto Investing

There are 2 popular ways to invest in Crypto:

• Trade coin
• Trade coin is a transaction in which users utilize virtual currencies like Bitcoin and ETH as intermediate currency to carry out transactions dependent on the price movement of other coins on the exchange.

In other words, they purchase coins cheaply and sell them at higher prices, profiting from the difference. You must first grasp the Bitcoin scenario in order to comprehend the price of any currency.

The term “trade coin” is often exclusively used to refer to coins with rapid changes in exchange values; these coins are typically traded within a few days or by someone who counts every hourly tick for financial gain.

• Hold coin:
• Unlike “trading coins,” which is the act of purchasing and selling coins on exchanges, “holding coins” refers to investors who have no intention of selling but who intend to retain a certain currency for a specific amount of time. No matter how erratic the market is, for a long period.

Where to buy and sell Crypto?

Currently, two dominating types of platforms facilitate cryptocurrency trading – DEXes and CEXes. 

• Centralized Exchange (CEX): Run by a single entity, CEX acts as an intermediary between buyers and sellers, facilitating orders and remittances between the parties. Some of the most popular platforms in that space include Coinbase, Binance, Houbi, and Gemini. 
• Decentralized Exchange (DEX): Using blockchain technology, DEX facilitates peer-to-peer transactions between buyers and sellers, eliminating the need for centralized intermediaries. Today’s most popular decentralized exchanges include Uniswap, Sushiswap, and Curve Finance. 

How to store cryptocurrency

Once you have purchased cryptocurrency, you must store it safely to protect it from hacks or theft. Crypto wallets are often used to store cryptocurrencies. These physical wallets or online programs securely store your private keys to your coins. Some exchanges allow you to store money through the site by offering wallet services. However, not all brokers or exchanges will immediately provide you with wallet services.

There are many wallet providers from which to pick. The terms “hot wallet” and “cold wallet” are used:

• Hot wallet storage: “Hot wallets” are a type of cryptocurrency that employs internet software to safeguard your assets’ private keys. For instance: Coinbase Wallet, MetaMask, Trust Wallet, Exodus Wallet, Robinhood, Edge, and more.
• Cold wallet storage: Unlike hot wallets, which use online computers to store your private keys, cold wallets (sometimes called hardware wallets) use offline electrical devices—for example, Trezor, Ledger, KeepKey, etc. 

CONCLUDE

In conclusion, the article provides basic knowledge and guideline about Cryptocurrency. We hope you can benefit from this information to win in this market.