The mention of the term cryptocurrency (read more about Shiba Inu coin at hundeblogg.com) excites mixed reactions depending on the experiences of every individual. For those who have had a successful investment in cryptocurrency and made great wealth from it, the talk of crypto just soothes emotions. For a fact, quite a number of people have great stories about how cryptocurrency, especially bitcoin, provided them with an investment option that completely turned their life around. So much of such stories can be picked from pioneer bitcoin investors. Of these early investors, some managed to grow their fortunes into millions of dollars today. 

On the other side is a lot that cryptocurrency reminds of a past they wish to forget. These are people who ventured into cryptocurrency investments, failed to master the art or just were unlucky in the trade and ended up losing lifetime investments. There are so many like this who have nothing good to say about cryptocurrency. 

Whichever side or perceptions people may have about cryptocurrencies, the reality is that they are not just about to vanish into the thin air. With more and more retailers accepting cryptocurrency as a means of payment, countries such as El Salvador and Central African Republic accepting bitcoin as legal tender, it would be extreme wishful thinking to imagine that cryptocurrencies are a passing cloud. Moreover, new types of cryptocurrencies collectively called altcoins keep coming up each day with so much potential for investors. 

So, as a basic start, we must embrace cryptocurrencies and understand what roles they have to play in our currency space where online marketing is an in thing. The good, bad and ugly about crypto notwithstanding, they are a disruptive trend that need consideration. It is therefore a good point to start demystifying cryptocurrency, highlighting their attributes, defining their guiding concept and their meaning going forward. With so much to learn and understand, let’s try an all round look at cryptocurrencies in general with a singular aim of getting people started with them. 

Getting started on cryptocurrency

To best understand cryptocurrency, the starting point should be on currency and its history. As anyone who cares about human transactions can relate, there was a  point in time when people practised barter trade which later  changed to  the use of precious metals as a measure of value before money came to be. Money or simply currency  intended to overcome the many challenges of earlier measures of value and make transactions less cumbersome. But, then the emergence of technology yet again provided another opportunity in which so many businesses occur online. This change combined with the growth in computer technology birthed the blockchain and cryptography. These two plus other modern day computations developments ushered in virtual currencies whose intention is to eliminate all intermediaries in the name of banks or other government bureaucracy in the transaction chain and bestow unfettered authority on the currency owner. With this little starter, let’s dive into the deeper areas. 

A cryptocurrency refers to a digital currency. This kind of currency does not rely on any central authority on maintaining and upholding it. Also, known as cryptos, it is secured by cryptography meaning that it is impossible to double spend and counterfeit. Most cryptocurrencies are based on blockchain technology. Some of the popular cryptocurrencies include Bitcoin, Ethereum, Litecoin, and others. 

Most of the cryptocurrencies use proof of work mining. The main design is using calculations that need a lot of computer time. Besides, a huge amount of electricity is needed in performing the computation. For instance, on a yearly basis, Bitcoin consumes 150 terawatt-hours. 

Traditionally, cryptos are not considered currencies. They are distinct assets. As opposed to paper money, cryptos do not exist in physical form. Also, a central authority does not issue cryptocurrencies. The reason has everything to do with their decentralisation. The first modern crypto to be released in the world in 2009 was Bitcoin. 

As a trader, before purchasing crypto, it is important to do some research. First, you need to understand the fact that picking crypto is not like a stock. In stock, there is ownership of a company that develops profits for its shareholders. On the other hand, owning crypto represents ownership of a digital asset with zero intrinsic value. Also, supply and demand increase and decreases the price of a cryptocurrency. For instance, in case of increasing demand as well as an increase in limited supply, the price increases.

The Way Cryptocurrency Works 

Bitcoins as well as the other cryptos are supported by blockchain technology. It maintains a tamper-resistant record of transactions in keeping track of each amount owned by the investors. Blockchain addresses the issue that had been previously faced with efforts of establishing a digital currency. It thus prevents people from making any copies of their holdings as well as trying to spend it twice. 

The blockchain is a distributed public ledger. It records all the transactions that are held and updated by the currency holders. In addition, the crypto units are created through the mining process. Traders may also purchase cryptocurrencies from the brokers, store them, then later utilise them in cryptographic wallets. 

The individual cryptocurrency unit is called tokens or coins. However, it depends on the way they are used. While some can be stores of value or units of exchange for services and goods. Moreover, some help in the participation of some software programs including financial products and games. 

The History of Cryptocurrencies 

Cryptocurrency history dates to the 1980s during which time, they had a name tag, cyber currencies. The coin was introduced when David Chaum, an American cryptographer published a conference paper that outlined anonymous cryptographic money. The concept was for the currency to be sent in an untraceable manner. 

In 1998, Nick Szabo designed Bit Gold. It needed a participant of dedicating computer power to solve cryptographic puzzles. The ones who solved them got a reward. When you understand Chaum and Szabo’s work, then it is almost resembling Bitcoin. Unfortunately, Szabo was unable to solve the issue of double spending. 

Cryptocurrencies commenced gaining popularity in 2008 with Bitcoin’s introduction. The person or people who created Bitcoin are unknown. However, the person or group is under the name Satoshi Nakamoto. The launch took place in 2009 after publishing a paper that outlined a system for developing digital currency that does not trust a third party. 

Over the past few years (since 2011), Crypto popularity has grown. Besides, more and more people are investing in them. Besides, it has enabled people to send money across borders without government or bank interference. As of 2010, there was just one crypto. During that time, it was just a few cents. Over the years, the prices have risen and fallen. 

After the success of Bitcoin, the decentralised digital currency commenced gaining traction. Altcoins have also been introduced into the market. These altcoins provide incremental improvements over the Bitcoin protocol. It has features such as enhanced anonymity and greater speed. Litecoin is among the famous altcoins. 

2013 was a milestone for Bitcoin. It was during that time that the price of one unit of Bitcoin exceeded $1000. It was a great milestone. In 2015, Ethereum was introduced and it is the second most popular crypto after Bitcoin. 

Cryptocurrency Mining 

The process of crypto mining does not just entail the creation of new coins. Instead, it involves the validation of crypto transactions in a blockchain network and then adding them to a distributed ledger. Besides, crypto mining plays an essential role in preventing the issue of double spending. 

Mining refers to the process where Bitcoin as well as other crypto utilise in generating new coins as well as verifying new transactions. The process entails decentralised and vast networks of computers across the globe. This is to secure and verify blockchains in which we have the virtual ledgers documenting cryptocurrency transactions. 

The Way crypto Mining Works

There are three main ways of getting cryptocurrencies. The first one is by purchasing them on an exchange such as eToro, Plus500, and Binance. The second way is by getting them as payment for services and goods. The third and last way is by mining. 

Initially, when cryptos were introduced, it was possible to mine them by yourself. All you had to do is have a home computer and internet then you can participate. However, as blockchain has grown, the computational power needed in mining has increased. For instance, by 2019, Bitcoin needed 12 trillion times more computational power to mine one Bitcoin as compared to 2009.

Due to the above issue, mining cryptocurrency as a beginner may be challenging. Therefore, as a beginner, it may be difficult to make a profit. Basically, all the mining is currently done by specialised groups of people bringing resources together or companies. 

The specialised computers conduct calculations needed to record and verify new bitcoin transactions. Besides, it is important to ensure that the blockchain is secure. Moreover, blockchain needs a good amount of computing power that the miners contribute. 

Furthermore, mining cryptocurrencies such as Bitcoin mining runs like a big data centre. Firms are in charge of buying mining hardware as well as making payments for electricity needed in keeping it running. Therefore, for the process to yearn for profits, then the value of the coins earned should be higher than the cost of mining the coins. 

People mine because of the motivation they get. Each computer races in the first computer or person who will guess a 64-digit hexadecimal called hash for the case of Bitcoin. A miner will highly earn a reward if it can spit out the guesses fast. The winner is then in charge of updating the blockchain ledger with newly verified transactions. 

The methods of Mining Cryptocurrencies

There are different methods of mining cryptocurrencies. Some of the top methods include CPU, GPU, and ASIC. For most miners, CPU mining was the option. Unfortunately, the miners found that CPU mining was impractical and slow as it took months in accruing even the smallest profit. This is because of the high cooling and electrical costs as well as increased challenges. 

On the other hand, an application-specific integrated circuit (ASIC) is an important method of mining. This kind of mining specifically mines cryptos to produce more crypto units. The disadvantage of this type of mining is that it is expensive. It means that when mining becomes difficult, they become obsolete. 

As for GPU mining, it maximises computational power. It does this by bringing together a set of GPUs in one mining rig. For the rig, a cooling system and motherboard are needed. Besides, cloud mining is becoming popular. This kind of mining allows the miners to leverage the power of main companies as well as dedicate crypto mining facilities. 

Tip and guide on buying your first Cryptocurrency

As an investor, it is important to know how to purchase cryptocurrency. However, before you do that, there are a few things that you need to know. First, you need to learn about investing in cryptocurrency. Basically, one cannot know what he or she does not know. In doing this, you may look at different platforms that may help you withdraw and deposit fiat currency in the cryptocurrency ecosystem. 

The second issue is going for a balanced portfolio. You know, investing in cryptocurrency is like gambling. Therefore, you cannot put all your investments. Crypto is a risky asset, thus, you need to invest in different brands. 

Furthermore, before engaging in purchasing crypto, you need to conduct some research. You need to know about the history of certain crypto utilities as well as know the value that you may get. It is also in doing research that you will know the risks linked with certain crypto. 

As a trader, you should also focus on understanding the regulatory and taxation concerns. These concerns are very important. They will help you as an investor understand the way taxation of crypto works as well as the way they should be reported. You should always ensure that you do not violate any law. 

Besides, you should not join the herd. Most crypto beginners do have the fear of missing out. Without conducting proper research, you should not use your instincts in making any decision. For instance, many failing cryptos do report valuations rising by about 30% in a 24 hours period after duping unaware beginners. Once again, remember that research assists you as an investor to stay away from random decisions because of public opinion. 

The Process of Purchasing Cryptocurrency

As a beginner, choosing between cryptos such as Ethereum, Polkadot, Dogecoin, and Bitcoin may be challenging. The following are the easy steps. 

1. Choosing a Crypto Exchange or Broker

A crypto exchange refers to a platform in which the sellers and buyers meet in trading cryptocurrencies. The exchanges are very convenient as they provide significant features for holding, selling, trading, and buying cryptocurrency. Some of the popular exchanges include Binance, Gemini, Coinbase, Plus500, and eToro. 

Crypto exchanges work differently. Some allow the investors to remain anonymous. The reason is because of their decentralised nature, making them not need the personal information of the users. However, for others, you will enter your personal information before using them. 

Furthermore, a crypto broker takes the challenge of buying cryptocurrency. As a trader, they offer you an easy to use interface which interacts with the exchanges on your behalf. The fees that they charge vary from one broker to the other. The top crypto brokers are SoFi and Robinhood. 

2. Developing as well as verifying your account

After deciding on the brand of exchange or broker that you will use, you need to sign up in opening an account. Also, after deciding on the amount and platform you want to use, you will have to verify your identity. This step is important as it helps in preventing fraud. Besides, it helps the company in meeting the federal regulatory requirements. 

The purchase and sale of crypto only take place after the verification process. For instance, some platforms may ask you to provide a passport or even a driver’s licence. Apart from that, you may be asked to provide a self in confirming that the documents you have provided match. 

3. Connecting Your Exchange or Broker with A Payment option

For most exchanges, you can connect your bank account directly or even connect your credit or debit card. As much as you may use a credit or debit card in buying crypto, its price volatility might inflate the overall cost of purchasing crypto. For instance, even though Bitcoin is legal, some banks may question you when making a deposit. Some even stop deposits made to crypto-linked exchanges or sites. Deposit fees also vary among exchanges. 

4. Deposit the Fiat Currency that You need to Invest

After connecting a debit or credit card with your account, you can now deposit money. Depending on the kind of broker or exchange that you will use, you may wait for a few days before you may use the deposited money. However, a point to note is that although some brokers or exchanges can allow you to deposit money from a credit card, it is expensive and risky. 

5. Make an Order for the crypto coins

Crypto exchanges have mimicked the features of stock brokerage counterparts. Also, crypto exchanges provide various order types as well as ways of investing. Most of the crypto exchanges offer limit orders, market, and stop loss orders. 

After having money in your account, you should place your first crypto order. As I said earlier, there are several cryptos you may choose from apart from Ethereum and Bitcoin. Therefore, it is you as a trader who can decide. 

6. Selection of the Storage Method

Federal Deposit Insurance Corp. (FDIC) does not back cryptocurrency exchanges with any kind of protection. Because of this, they face risks such as hacking or theft. Moreover, in case you lose or even forget your codes you may be unable to access your account. Therefore, it is significant to have crypto storage in place. Remember, when purchasing crypto using a broker, you have no choice on where your cryptos are stored. 

Ways of Storing Cryptocurrency after purchase

After you have successfully bought your first cryptocurrencies from the best crypto currency exchange of choice. Be it Binance, Coinbase exchange, Kraken, Gemini or whichever it is, the next thing is keeping them safe. Just like your notes and coins, cryptocurrencies must also be kept in a safe. Ordinary money would be stored in banks  buy cryptos in digital wallets from where the owner can initiate and complete transactions from time to time. That safe place that is protected by both public and private cryptocurrency keys is a wallet. A wallet is a digital storage for cryptocurrencies. This is because crypto currencies can’t be touched and felt in their form like our usual money. Instead, they are kept in highly encrypted formats in a digital wallet. 

1. Cold  crypto Wallet

A cold wallet is a storage method not connected to the internet. Besides, there are low chances of getting compromised. The offline wallets store the private key of a user on something which is not connected to the internet. Also, some come with software allowing the investors to view their portfolio by not putting their private key in a risky situation.  

One form of the cold wallet is a paper wallet. It is generated on some websites producing private and public keys that are printed on paper. Most of the investors do laminate these papers. They then store them in a safe place at home or safe deposit boxes. 

A cold wallet may also be in the form of a hardware wallet. In such a case, the keys are stored in a USB device offline. These wallets are advantageous as compared to hot wallets since things such as viruses do not affect them. Therefore, cold wallets are more secure than hot wallets.  

2. Hot crypto Wallets

Hot wallets are also referred to as online wallets. They are on different devices including tablets, phones, and computers. These kinds of wallets generate private keys to your coins on internet-connected devices. 

This kind of wallet user is not a private key holder on the crypto held in this wallet. Basically, the exchange wallets are the custodial accounts held by the exchange. In case the exchange is hacked, then it means that the funds of the investors are hacked. 

Unfortunately, the hot wallet holders who have not established enough security may lose their funds to theft. Therefore, in avoiding this, you should use safe internet browsing, strong passwords, as well as two-factor authentication. Hot wallets are just recommended for a small amount of crypto. 

Leaving Cryptocurrency on the Exchange

When you purchase crypto, it is stored in a cryptocurrency wallet linked to the exchange. However, if you are not satisfied with this kind of storage or exchange provider, you may transfer it to a more secure location. However, based on the size of your transfer or exchange, you will pay a small fee in performing this transaction. 

Blockchain Technology Explained 

A blockchain refers to a decentralised ledger of all the transactions across a peer-to-peer network. It is through this technology that the traders can confirm transactions without a third party or rather a central authority. The potential applications include voting, settling trades, and fund transfers. 

The blockchain is responsible for storing information in a digital format electronically. Basically, blockchain plays an important role in cryptocurrency systems like Bitcoin to maintain decentralised and secure transaction records. Blockchain further guarantees the security and fidelity of a record of data. It is the one that generates trust without any third party. 

On the security of the blockchain technology, it gets decentralised security as well as trust in different ways. First, the new blocks are stored chronologically and linearly. Blocks become immutable after they are added to the blockchain database. Besides, the blocks are verified with regard to consensus mechanisms protecting traders against hacking and weeding out fraudulent transactions. 

The database is protected with financial grade public key encryption. This makes it difficult for any outsider to access. The mentioned features earn the architecture of blockchain a post as among the top secure databases that have ever been created in the world. 

The Importance of a Blockchain in the world of cryptocurrency

Blockchain is a very promising as well as a revolutionary technology. The reason is that it assists in stamping out fraud and reducing security risks. In short, blockchain brings transparency in a scalable way. 

Blockchain is popular due to its association with non-fungible tokens (NFTs) and cryptocurrency. Because of this, technology has evolved in being a management solution for every kind of global industry. For instance, in the food supply chain, blockchain technology offers transparency.

This is how a Blockchain Works

There are five principles linked to blockchain technology. The first one is the distributed database. Every party in a blockchain can access the whole database as well as its complete history. In short, it means that there is no party in charge of controlling information or data. Also, every party has the responsibility of verifying its transaction records. 

The other principle is computational logic. The way the ledger exits digitally indicates that blockchain transactions may be tied to computational logic. Basically, they can be programmed. Therefore, the users may set up rules and algorithms that trigger transactions among nodes. 

Transparency with pseudonymity is another important principle. Every transaction as well as linked value is visible to any individual who can access the system. Moreover, every user or node in the blockchain has a 30 plus character alphanumeric address which identifies it. Traders may choose to offer proof of their identity or remain anonymous. Therefore, transactions take place among blockchain addresses. 

Moreover, in blockchain technology, there is the irreversibility of records. Records cannot be altered after a transaction is entered in the database or even after the accounts are updated. The reason is that they are associated with each transaction record that comes to them. Different approaches and computational algorithms are deployed. This is to ensure that each database recording is permanent and chronologically ordered. Besides, it is available to the other parties in the network.

The last principle is a peer-to-peer transaction. Instead of a central node, communication takes place directly between peers. Additionally, every node forwards and stores information or data to all the other nodes in the blockchain. 

The Advantages of Blockchain

Blockchain technology is very efficient. It operates 24/7. This means that users can make efficient asset and financial transfers. They do not need to wait for days for the government or even the bank to confirm everything. They do not have to wait that long for the confirmation process to take place. 

Blockchain is also global. It means that cryptos can be sent across the planet cheaply and quickly. Also, they increase privacy. This is because crypto payments do not need a trader to include their personal information. This protects you from having your identity stolen or being hacked. 

With Blockchain, there is a higher accuracy of transactions. This is because transactions have to be verified by different nodes. Thus, reducing errors. In case there is a mistake in one node, the other can see it is different and then catch the error. It is different from the traditional database in which when a mistake is made, it might go through. Because double spending is highly reduced as each asset is individually identified and then tracked on the blockchain ledger. 

Using blockchain also provides extra security. The reason is that it makes it impossible for any fraudulent transaction to take place. Therefore, in entering a forged transaction one will need to hack each node and then change every ledger. Although it is not completely impossible, blockchain systems use proof of work or proof of stake in verifying the transactions. 

Lastly, there is no need for intermediaries. Using blockchain involves two parties in a transaction who can complete and confirm something without involving a third party. While this saves time, it also saves the cost of paying an intermediary such as a bank. This is because it has the capacity of bringing efficiency to all digital commerce. Moreover, it increases financial empowerment for the underbanked and unbanked populations of the world as well as the power of a new generation of internet applications. 

The Disadvantages of Blockchain 

With blockchain, there are some possibilities for illegal activities. The issue of decentralisation adds more confidentiality and privacy making it appealing to criminals. When illegality takes place, it is very difficult to track them as opposed to when they happen in a central authority like the bank. 

Another disadvantage is the limit it has on Transaction per second. Because blockchain highly depends on a great network in approving transactions, there is a limit on the way it may move. For instance, while a visa can process about 1700 transactions per second, Bitcoin can only process 4.6. You may also not increase the number of transactions as it can result in network speed issues. 

Furthermore, with blockchain, there is a risk of asset loss. For instance, digital assets are secured with a cryptographic key. Therefore, as a trader, you need to guard the key. In case one loses the key then it means that your assets are lost. Also, due to the issue of decentralisation, there is no central authority that you will call such as a bank in regaining access.

There are high energy costs associated with blockchain. Having all the nodes in a blockchain work towards verifying transactions takes more electricity as compared to one spreadsheet or even database. The process makes blockchain-based transactions to be very expensive as well as develops a large carbon burden on the environment. Due to this issue, some of the industry leaders are commencing to move from some blockchain technologies. 

Blockchain Innovation Applications

In Finance, cryptocurrency is used in storing and transferring money from one entity to the other. This process needs a trustworthy intermediary such as a bank. Therefore, blockchain is playing an essential role in blocking these intermediaries through transaction decentralisation. Besides, it helps in solving some of the issues linked to the interoperability of disparate financial systems globally. Its ability to track transactions further increases the security and transparency of blockchain-based payment. 

Blockchain can also be applied in voting. Storing and recording high value and volume of data is inherent to the process of voting. Therefore, blockchain technology is good at updating the voting system. The reason is that all blockchain nodes have to verify information that gets to it. Therefore, people may cast their votes online without the fear of getting frauded. 

Furthermore, blockchain can be applied in NTFS. The NFTs may represent the ownership of anything. However, they are highly used in purchasing and selling digital data. In most cases, digital art exists and is available on the internet for a person to download, buy, and view. 

Furthermore, in health records, it is used in preparing personal health records (PHR). The reason is that the system is trustworthy, secure, and decentralised. PHR collects data from different sources including pharmacies, clinics, devices, and medical centres. Besides, Electronic health records (HER) refers to digital records of the medical history of a patient. It is the doctor that manages them. 

Another important application is in smart contracts. A smart contract refers to a self-executing program that is automatically triggered in case the predetermined conditions are met. Basically, they enhance the terms of the agreement between the buyer and the seller. Since they are executed in a blockchain, the transactions are irreversible, transparent, and trackable. 

The Top Cryptocurrencies in the World

When people talk about Bitcoin, the first thing that comes to people’s minds is Bitcoin. However, there are thousands of other options across the world. The cryptos that are not Bitcoin are called altcoins. Even though Bitcoin was the first crypto, others have become popular. The following are some of the top cryptos based on market capitalization. 

A. Bitcoin in Brief

The Bitcoin symbol is BTC. Besides, its market cap is $360 billion and the current price is $18,803.26. Satoshi Nakamoto created BTC in 2009 as the original cryptocurrency. Bitcoin runs on a blockchain or rather a ledger longing transaction that is distributed across a network. 

Bitcoin may be utilised in purchasing merchandise anonymously. Besides, since bitcoins are not tied to a specific country, thus, making international payments cheap and easy. Small businesses also love bitcoin as it does not have any credit card fees. Some investors purchase bitcoins as an investment as they believe that the value will increase. 

Bitcoin is very anonymous. Even though every transaction is recorded in a public log, the buyers’ and the sellers’ names are not usually revealed. All that is revealed is the wallet IDs of the traders. Although this process makes the users’ bitcoin transactions private. Therefore, it has turned out to be a currency for people purchasing drugs or engaging in illicit activities. 

Furthermore, bitcoin mining entails adding new transactions to the Bitcoin blockchain. Doing the job is very challenging. The people who mine Bitcoin use proof of work deploying computers in the race of solving the mathematical puzzles which verify transactions. 

In enticing the miners, Bitcoin rewards them with 6.25 BTC for every new block. The amount when equated to dollars is currently $117, 518. It is in this way that new coins are created. In the early days, it was possible for an average individual to mine Bitcoin. However, recently, it is impossible. The reason is that it needs more computing resources. 

Furthermore, Bitcoin may be used in different ways. One of them is as an alternative investment. Besides, it assists in diversifying portfolios apart from bonds and stocks. Also, they are used in making purchases. 

B. Ethereum

The Ether symbol is ETH. Its market cap is $186 billion. Currently, its price is about $1,521. Ether is the second most recognized crypto across the globe. Ethereum is a blockchain-based software platform for ether as well as other cryptos. It is used in sending and receiving value in the whole world. 

Ether can be bought using fiat currency from different crypto exchanges such as Coinbase. Ethereum is a decentralised computing framework and blockchain which makes it easy for traders to create their own decentralised cryptos and applications. Moreover, Ethereum enables developers to develop decentralised applications. They help in taking advantage of security. The apps are on the Ethereum blockchain. 

Just like the Bitcoin blockchain, the Ethereum blockchain plays a role in sending and receiving bitcoin globally. There is no use of a third party. Although Bitcoin was created to be a digital currency, Ethereum has played an important role in being a more flexible blockchain. It makes it easy for developers to create decentralised applications. The applications can transfer and store personal data as well as handle challenging financial transactions. 

Furthermore, Ethereum helps in the self-execution of contracts or rather smart contracts. Just like any other contract in the globe, two parties make an agreement to deliver services or goods in the future. However, in such a case, lawyers are not needed. Instead, the agreement is coded in the Ethereum blockchain. After the conditions are met, it delivers and self-executes Ether to the necessary party. 

Ether is Ethereum’s blockchain token. It works as the main fuel powering all the activities on it. Gas is the amount of ether required in performing a function on the network. It performs functions such as mining the NFTs, creating smart contracts, sending transactions, as well as interacting with decentralised applications. 

C. Tether in Simple Explanation 

Tether token is the top most adopted stablecoins. It is pioneered in the digital token space. Tether cryptocurrency is pegged on the U.S dollar. It was launched in July 2014 as RealCoin. The symbol of Tether is USDT and its market cap is $61 billion. The price of Tether is currently $1. 

As a stablecoin, Tether is tied to a specific asset’s value which is the U.S dollar. Tether normally acts as a medium in a case where traders or users move from one crypto to the other. Instead of moving back to dollars, they utilise tether. Theoretically, the value of Tether needs to be more consistent as compared to the other cryptos. 

As you know investing in cryptocurrency is a risky affair. However, even though Tether may not work as an investment, it works as a store of value. Additionally, Tether is backed with commercial paper reserves and fiat. Also, with Tether Limited’s approval, one may switch between Tether and USD. This mechanism has highly helped the stablecoin to keep pegging. 

Furthermore, Tether is available in different currencies. They include Mexican Peso, US dollar, British Sterling Pound, and Chinese Yuan. As a trader, you may choose to invest in Tether since it has great customer support and is transparent to every user. 

Funnily, USDT does not have its own blockchains like Ether and Bitcoin. Instead, it mainly exists in different blockchains including Ethereum, Bitcoin liquid layers, TRON, and EOS network. However, even though it is stable, the crypto has been criticised for manipulating Bitcoin prices. 

Advantages of Cryptocurrencies

Cryptocurrencies commenced with the creation of Bitcoin in 2009. The main benefit of most cryptos is based on blockchain technology. This is because there is no central authority involved. Rather, the crypto networks are peer-to-peer. 

1. Open 24/7 markets

The cryptocurrency markets are different from the stock market. While the stock markets are just opened on the weekdays at a specific time, crypto markets work 24/7. It means that they even work during holidays, weekends, and nights. They do not have any exceptions. 

2. The Blockchain Technology is Secure

Blockchain technology that is linked to cryptocurrency is very secure. The blockchain is the decentralised data storage ledger, which tracks each transaction. After making an entry in the blockchain, it cannot be erased. Besides, blockchain is stored decentrally across different computers. This means that it is impossible for a hacker to access the whole chain once. 

Attempts of modifying the blockchain may need high computing power. This will help in confirming different blocks before the other network may verify the accuracy of the ledger. Also, for popular cryptos such as Ether and Bitcoin, this attack may be very expensive. 

3. High Growth Opportunities

One of the major benefits of investing in crypto as a trader is the growth potential. Even though the stock may yield you a moderate return on investment, it is not high as crypto. New currencies are introduced every time. Besides, their values keep changing every time. As a beginner, you can also make money while investing in stable cryptos like Ethereum and Bitcoin. 

Over the past years, cryptos have been top performing. For instance, in the last five years, Bitcoin has grown by about 1000%. If you compare it to a stock market like the Nifty 50, it has just increased by 65% over the past 5 years. 

4. Easy Transactions

Cryptocurrency transactions can be made at a low cost easily in a way that is highly private as compared to other transactions. You may even use your platform in performing the transactions. This is because exchange wallets and hardware wallets are easily bought. Besides, some kinds of cryptos including Ethereum can be bought with cash. 

5. Diversification

Cryptos provide investors with diversification from traditional financial assets like bonds. Although there is limited history regarding crypto market prices, currently, the prices seem to be uncorrelated with the other markets. Thus, making them a good foundation for portfolio diversification. 

6. Transparency

When you purchase or sell crypto, the information  records in a permanent public ledger. The ledger is referred to as a blockchain and one cannot alter or manipulate it. The reason is that it is a distributed way of data gathering. 

People are not used to such a type of visibility. However, that is how cryptos work. Remember transparency does not reveal you. The only moment your identity may be revealed is when utilising a crypto wallet to purchase a service. In such a case, the person you are purchasing an item from will need to know you in confirming the service or good you need. 

7. Efficiency and Speed

Transferring money abroad when using services such as Western Union may take up to 2 days. This is because of the intermediaries involved in the transaction process. Cryptocurrency has disrupted this whole segment. With cryptos, you can transfer money globally within minutes. Besides, the money you will use in the transactions will be less compared to the banks. 

8. Pseudonymity

Even though the blockchain transactions are public as I have said before, each trader has a private and public address, which identifies them. They are between 26 to 35 characters long in alphanumeric text. A private address gives you an opportunity of accessing cryptos. However, the public address is an investor’s pseudonym through which transactions are identified. 

Disadvantages of Cryptocurrencies 

As much as cryptocurrencies may have their advantages including pseudonymity, high returns, diversification, and others, they have their limitations. Some of the limitations include data loss, unregulated market, time-consuming, and volatility.

1. Scalability

Scalability is one of the issues affecting cryptocurrency. Although the number of digital coins as well as their adoption is increasing, it is still small as compared to the number of transactions processed by VISA daily. Also, transaction speed counts as another important issue as the infrastructure that delivers the technologies is scaled. Even though things like staking and sharding have been proposed, evolution is difficult. 

2. Unregulated Markets

The cryptos market has no particular traceable and all encompassing regulation. This is a worry because the  network is globally distributed. Simply put, the cryptocurrencies do not have a central authority that coordinates all activities. Besides, since there is no central authority mediating, reversing transactions is impossible. Cryptos do not also have a government or rather central authority that enforces its value. Thus, making a coin’s value to be determined by the ones placed by the peers’ investors. In short, if a top investor may lose interest in certain crypto, then the crypto can be worthless overnight. 

3. Cryptos as a possible leeway for illegal activities

As already mentioned here above, the cryptocurrency market has no particular regulator at a central global scale. Apart from that, the security and privacy of crypto transactions are high. This makes it challenging for a government to track down a user using their wallet address. A crypto like Bitcoin has been at the centre of queries on illicit transacting especially issues to do with money laundering and dealings in otherwise illegal trade.   It has been used in purchasing drugs on the dark web. 

4. Time Consuming

Understanding the way cryptocurrencies work is not a walk in the park. It requires high commitment and research. You know as a trader you have to invest in something you understand. Besides, for someone who is not a digital native, understanding the issue of cryptocurrency may take time. Even as much as there are materials online, you need to spare some time to fully comprehend the drawbacks and benefits of investing in cryptocurrencies. 

5. Volatility

Cryptos are volatile in nature. Therefore, it is not an issue if the price of crypto doubles in months. The price may also reduce within days. This issue makes it a risky affair to invest in as a trader. You do not know what may happen to your crypto. 

6. Data Loss

In cryptocurrency, data loss may result in financial losses. The developers wanted to create untraceable source code, impenetrable authentication protocols, and strong hacking defences. They believed that with this, it would be safe to invest in cryptos than in bank vaults or physical cash. Unfortunately, as a user, you may lose your private key. If this happens, then you may not get it back as there is no customer support to contact. Your wallet will remain locked as well as the coins you had earned resulting in financial loss.