Cryptocurrency

What are Cryptocurrencies? 5 Things You Should Know

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Snapshot:

  • What are cryptocurrencies?
  • Advantages and disadvantages of Cryptocurrencies.
  • Reasons why there is a surge in Cryptocurrency adoption.

Cryptocurrencies, as a whole, is an asset class that help make any investors and traders diversify their portfolios. One can buy goods and also enjoy profits by selling them. 

Cryptocurrencies, also known as cryptos or digital currencies are the harbinger of financial evolution. Its uses are not limited to exchanges but are also highly compatible to be used as a replacement for cash. The new-age digital currency can be used to buy goods and services alike. Any transaction that takes place via them happens while using an online ledger with strong cryptography. 

These digital currencies have earned themselves world recognition because of their power to drive profits. Speculators at times or most of the times also play a massive role in driving the prices skyward.

What are Cryptocurrencies?

Cryptocurrencies are digital currencies that can operate as a medium of exchange at a peer-to-peer level and enabling direct payments between individuals. Since the entire blockchain is developed using the principles of asymmetric cryptography, it was wise to call Bitcoin or any mode of exchange on a blockchain, a cryptocurrency. The idea behind the invention was to find a way to be independent of a central authority while producing a means of exchange that is secure, immutable, and verifiable.

Cryptocurrency was derived from the encryption technique which was used to secure the network. 

All cryptocurrencies operate on decentralized platforms which means it is not controlled by any central authority. The decentralized nature of the blockchain makes cryptocurrencies theoretically immune to the old ways of government control and interference. Transactions made by this system can neither be reversed nor be faked. Cryptocurrencies are the way to solve the digital cash problem and help to maintain integrity.

Advantages and disadvantages of Cryptocurrencies:

Advantages Disadvantages
  • You can transfer funds easily without involving a third party; i.e. the bank.
  • Their semi-transparent nature makes them a vessel to carry out activities that are not legal.
  • The transfers are safe, secure and irreversible.
  • The price volatility is also a matter of concern.
  • Transferring funds through cryptos require minimal to zero fees.
  • Scalability issues in some of the cryptocurrencies.
  • Transfers are almost instant.
  • It is not easily understood. 
  • They are not controlled by any governing body.
  • Every transaction that takes place is anonymous. 

How many cryptocurrencies are there in total? How much is each of them worth?

Cryptocurrencies have branched out into an institution of their own. Every coin has a significance and a story behind its origin. As of today, there are more than 6000+ cryptocurrencies in the world. All put together, their market capital today has crossed $1.6 trillion, with Bitcoin taking up the $1trillion for itself. Check the current price of Bitcoin, Ethereum and many more here.

Also read: How to Invest in Bitcoin in India?

Top 10 biggest cryptocurrencies (Market Capital):

Cryptocurrency Market Capitalization
1. Bitcoin $1.7 trillion
2. Ethereum $207.7 billion
3. Tether $36.67 billion
4. Binance Coin $42.18 billion
5. Cardano $46.23 billion
6. Polkadot $33.36 billion
7. XRP $21.26 billion
8. Litecoin $13.79 billion
9. Chainlink $12.32 billion
10. Bitcoin Cash $10.07 billion

Data current as of March 18, 2021. 

Reasons why Cryptocurrencies are so popular:

Cryptocurrencies are one of the most intriguing topics of discussion for quite some time now. Its decentralised feature may be the very core reason for its popularity, but here are few more reasons for the same.

Fees are very low

Transferring funds becomes a hassle because of the various circles of protocols they have to maintain. But with Cryptocurrencies, this has become instant. Therefore, there is no need for waiting anymore. As a result, the transfer fees have also seen a steady decline. Besides, transferring funds through cryptos are also a lot safer than other methods.

Devoid of a central governing body

One of the main reason why Cryptocurrencies have gained immense popularity is that they regulate themselves through decentralised systems. That means there is no government involved.  Many investors and traders see cryptocurrencies as a good way to protect their wealth. The potential that cryptocurrencies have shown, to be safer than some official government currencies, makes them more appealing in nature. 

Profitability

Another characteristic that lures investors or traders towards cryptocurrency is their potential for profits. The vast profits of cryptocurrencies are the result of their volatile nature. If you are making an investment in Bitcoin while its price dips, you have the potential to earn a lump sum amount when its price surges. 

Cryptocurrency investment apps

With the massive crypto adoption throughout the world, it is becoming amazingly easy to use exchanges or apps to buy your cryptos. This is also because of the vast increase in institutional interest in cryptocurrencies. Moreover, this is resulting in an increase in awareness and an overall surge in popularity. All of which is leading to easier methods and processes of crypto investments. 

Best Cryptocurrency exchanges in India and Crypto exchange apps for buying bitcoin and other altcoins:

1. CoinDCX
2. Binance
3. CoinSwitch
4. Zebpay
5. WazirX

It is the Future

Cryptocurrencies are the future of finance. There is no denying that. Along with the acceptance of Cryptos comes the acceptance of technological advancements like blockchain. Blockchain technology is changing the world in many ways and it is going to make trading a much more transparent process.

How do I buy a cryptocurrency?

The momentum that the cryptocurrency exchanges have seen in 2020 and new coins being launched on a regular basis has led the crypto space to be constantly developed. While Bitcoin and Ethereum are the most popular cryptocurrencies, there are thousands of other coins that are being introduced to the market. There are a large number of media outlets and individuals who are continuously writing articles or blogs and discussing cryptocurrency prices; one being CoinDCX.

There are many new-age investors who are not well versed with the concept of cryptocurrencies and end up buying Bitcoins or Ethereum (only popular coins) based on recommendations or simply due to FOMO (Fear of Missing Out). India is facing a lack of knowledge when it comes to alternatives to Bitcoin or altcoins. This mainly happens because they do not know where to look for the required information or how to purchase them. In fact, not all cryptocurrencies are listed on one particular exchange. It is crucial you research as much as you can about the asset you would like to invest in. Picking coins for investing is also a highly subjective matter. 

To ease your burden, click here for a Step-by-Step guide.

Investing in Cryptocurrency is a very subjective matter. Many observers see the possibility of value preservation against inflation and facilitating exchange as potential advantages. They are also deemed valuable because they are easily transferable over precious metals like gold.  Their decentralised nature, which makes them immune to the influence of central banks and governments is also one of the major factors that gains traction. 

Note: It is advisable for anyone interested in any crypto investment to do so with sound research and analysis.

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