Cryptocurrencies have captured the imagination of investors. The rise in value of digital currencies such as Bitcoin (CRYPTO:BTC) has created enormous wealth for early investors.
But with more than 4,000 digital currencies on the market, COVID-19 is about to push the world into the digital realm. Investing in the technology that makes the cryptocurrency ecosystem work can be even more profitable than speculating on the next big digital asset. Many companies are also working on the development of cryptotechnology.
Cryptocurrencies have great potential to lead the way in technology.
Blockchain, a digital ledger that automatically tracks transactions between parties and confirms ownership of cryptoassets, was initially intended to create a new financial transaction technology that could be used on the internet. However, cryptoassets are being developed to protect everything from medical records to copyright protection and digital identities.
Investors can take a position in cryptoassets by buying small amounts of various cryptocurrencies. However, a better way to gain exposure to the sector is to invest in companies that are benefiting from the adoption of blockchain and cryptoassets, including large, established companies. The amount of revenue these crypto service providers are making from blockchain technology is still small, but that could change significantly in the coming decades.
Advantages and disadvantages of cryptocurrencies
Advantages of cryptocurrency :
Protection against inflation -.
Due to inflation, many currencies lose their value over time. Almost all cryptocurrencies are issued in a fixed amount at the time of launch. The amount of each coin is set in the source code; for example, there are only 21 million bitcoins in the world. This means that as demand increases, so does the value, keeping pace with the market and avoiding inflation in the long term.
Autonomy and control.
The management and maintenance of any currency is an important factor in its development. Cryptocurrency transactions are stored by the developer/miner on their own hardware and they receive a transaction fee in return. Since miners are paid for their services, they are able to keep accurate and up-to-date transaction records and maintain the integrity of the cryptocurrency and the records.
Secure and private
Privacy and security have always been important issues in cryptocurrency. Blockchain ledgers are based on a series of mathematical puzzles that are difficult to crack. This makes cryptocurrencies more secure than normal electronic transactions. To enhance security and privacy, cryptocurrencies use pseudonyms that are not related to the stored data leading to the user, account or profile.
The currency can be easily exchanged.
Cryptocurrencies can be bought with many currencies, such as the US dollar, European euro, British pound, Indian rupee and Japanese yen. By trading cryptocurrencies with the help of various cryptocurrency wallets and exchanges, you can convert one currency into another with minimal transaction fees between different wallets.
One of the main advantages of cryptocurrencies is that they are largely decentralised. Many cryptocurrencies are controlled by the developers who use them, the people who hold large quantities of the coins or the organisations that develop them before bringing them to market. Decentralisation frees up the monopoly of the currency and ensures that no one organisation can dictate the flow or value of the currency, keeping it stable and secure, unlike fiat currencies which are controlled by governments.
Disadvantages of cryptocurrency :
It can be used for illegal transactions.
Due to the high level of privacy and security of cryptocurrency transactions, it is difficult for governments to track users or control their data based on their wallet addresses. Bitcoin has been used as a medium of exchange in many illegal transactions, such as buying drugs on the dark web. Cryptocurrencies can also be used to exchange illegally obtained money through clean intermediaries to hide its origin.
Data breaches can lead to financial losses, and that is what we are interested in.
The developers were looking for untraceable source code.
This makes it safer to invest money in a cryptocurrency than in physical money or a bank vault. However, if a user loses the private key of their wallet, they cannot retrieve it. The wallet remains locked along with the number of coins. As a result, the user suffers a financial loss.
Decentralised, but still operated by an organisation.
Cryptocurrencies are characterised by the fact that they are decentralised. However, the flow and volume of some coins on the market is controlled by their creators and some organisations. These holders can manipulate the currency and cause its price to fluctuate significantly; even the most traded coins, such as Bitcoin, which increased in value several times in 2017, are vulnerable to such manipulation.
Some currencies are not available in other fiat currencies.
Therefore, users must first convert these coins into a major currency such as Bitcoin or Ethereum and then convert them into their preferred currency via another exchange. This only applies to some cryptocurrencies. This incurs additional transaction fees and additional costs.
Negative impact of mining on the environment
Mining cryptocurrencies requires a large amount of computing power and electricity, which is very energy intensive. The biggest cause of this is Bitcoin. Bitcoin mining requires advanced computers and a lot of energy. It cannot be done on a normal computer. The main Bitcoin miners are in countries like China, which uses coal to generate electricity. This has led to a significant increase in China’s carbon footprint.
What is cryptocurrency trading?
In cryptocurrency trading, you buy and sell cryptocurrencies to make a profit. Unlike traditional exchanges that close at the end of the day, cryptocurrency trading is a 24-hour market.
To start trading, you need to choose a cryptocurrency wallet and a cryptocurrency exchange to trade on. There are around 1,500 cryptocurrencies, but beginners are advised to start trading with prominent coins like bitcoin and ether to minimise losses in the volatile cryptocurrency market.
Top non-Bitcoin cryptocurrencies.
1st Ethereum (ETH).
The first Bitcoin alternative on the list, Ethereum is a decentralised software platform that allows you to create and run smart contracts and decentralised applications (Dapps) without downtime, fraud, third-party control or interference. Ethereum’s goal is to create a decentralised financial instrument that is freely accessible to everyone in the world, regardless of nationality, ethnicity or religion. For some countries, this will mean that people without national infrastructure or national identity will have access to bank accounts, credit, insurance and a variety of other financial products.
Launched in 2011, Litecoin was one of the first cryptocurrencies to follow Bitcoin and is often referred to as “Bitcoin’s silver to its gold”. It was created by Charlie Lee, an MIT graduate and former Google engineer, and is the first cryptocurrency to be launched in the United States.
3. cardano (ADA)
Cardano is an “Ouroboros Proof-of-Stake” cryptocurrency created with a research-based approach by engineers, mathematicians and cryptography experts. The project was co-founded by Charles Hoskinson, one of the five original founding members of Ethereum. He left the project after disagreeing with Ethereum’s direction and later helped found Cardano.
4. polkadot (DOT).
. Its protocol is designed to connect permissioned and permissionless blockchains, as well as oracles, so that systems can work together under one roof.