Cryptocurrency, Your Way To Success!

Cryptocurrency is a type of digital currency that exists electronically as a medium of exchange. They can be used as a method of payment that can be exchanged online for goods and services. Blockchain is the technology that is behind the existence of cryptocurrency. It enables cryptocurrencies to operate without a central authority and serves as a digital ledger. Blockchain technologies are really hard to hack which makes the transactions secure. The virtual currency is secured by a specialized computer code called cryptography. They are designed complicated so that it is hard to crack them. People prefer cryptocurrencies because of their portability, divisibility, inflation resistance, and transparency. The most popular cryptocurrencies are Bitcoin followed by Etherum, Litecoin, Ripple, and Cardano. An investor can buy cryptocurrency through crypto exchange platforms like WazirX, Coinbase, Cash app, and more.

(Source: IntelligentHQ)

Why are Cryptocurrencies decentralized?

Cryptocurrencies use decentralized control, which implies that they are not under the control of a particular person or government. As it is a form of digital asset distributed across numerous computers, it is decentralized. This arrangement allows cryptocurrencies to exist outside the government authority. This enables the investors to deal directly with each other instead of operating under government control.

Is Cryptocurrency a risky investment?

Investments are always risky. No one can predict anything, it is all about an investor’s analysis of the market and investment choices. Some people see a wide and promising future in cryptocurrencies. On the other hand, some experts state that cryptocurrencies are a riskier choice. Warren Buffett, the investing expert, said in an interview with CNBC that he is almost certain that investing in this market "will end in a bad ending."

Most commonly used Cryptocurrencies:

1. Bitcoin

It is the most commonly used cryptocurrency. Bitcoins were created in January 2009 under the pseudonym Satoshi Nakamoto but the identity of the person or persons is still a mystery. It is designed, distributed, exchanged, and stored with the use of a decentralized ledger system known as a blockchain. All the transactions are recorded in this blockchain. Bitcoins are used by several companies as a payment option now. These include companies like Tesla, Starbucks, Burger King, PayPal, and many more.

2. Ethereum

It is the second-largest commonly used cryptocurrency after bitcoin. It is also the most actively used cryptocurrency. It was launched in 2015 by Joe Lubin with its own cryptocurrency, ether. Ether is used as a digital currency exchange and is used to run applications and monetize work. Ethereum intends to move its algorithm from proof-of-work to proof-of-stake in 2021. This will allow its network to govern itself with less energy and improved transaction speed. It enables network users to "stake" their ether on the network. This helps in the transaction and secures the digital network.

3. Litecoin

It is also used commonly as bitcoins. It was created in 2011 by Charles Lee, a former employee at Google. Litecoin is one of the leading competitors of bitcoins. It's known as the "silver to bitcoin's gold”. It uses an algorithm named Scrypt. Litecoin has a higher coin production capacity than Bitcoin and has a quicker processing speed. Litecoin has a market capitalization of $10.1 billion and a per token value of $153.88 in January 2021, rendering it the world's sixth-largest cryptocurrency.

4. Tether

It is one of the most popular stable coin. Stable coin is a unique group of cryptocurrencies that attempts to offer more price stability. They may be pegged to a currency like the US dollar or to a commodity’s price such as gold. Tether attempts to attract cautious users. It was launched as RealCoin in July 2014. In January of 2021, Tether was the third-largest cryptocurrency by market capitalization with a total of $24.4 billion.

5. Ripple

It is a digital payment network and cryptocurrency. Ripple is used for payment settlement, currency exchange, and remittance systems. It is preferred by larger companies and corporations than individuals as it deals with larger amounts of money. They claim that they can handle 1500 transactions per second. Ripple can be used to transfer money and assets in any form both domestically and internationally.

6. Dogecoin

It originally started as a joke in response to a meme about Shiba Inu dogs by two software engineers. It was introduced in December 2013, with the logo of the “doge” meme. It is known as the “meme coin”. Dogecoin became the center of attraction when Elon Musk, CEO of Tesla started to tweet about it. He also stated that cryptocurrency could be the future but the investments should be made with caution. Later this was followed by several celebrities like Snoop Dogg, Guy Fieri, and Mark Cuban which increased the demand for dogecoins. Many experts think that dogecoins are uncertain and temporary. They state that the dogecoin bubble might last for some more time but not longer. It has developed by a market capitalization of $85,314,347,523 on May 5, 2021.

(Source: Daily Mail)

Cryptocurrency in India

WazirX is India’s fastest-growing cryptocurrency exchange. It is India’s most trusted cryptocurrency exchange platform with 2 million users. It allows you to buy and sell Bitcoin, Ethereum, Ripple, Zilliqa, and more than 100 other cryptocurrencies. There are other exchange platforms like BuyU, UnoCoin, and Zebpay.

Indian government plans to introduce Cryptocurrency and Regulation of Official Digital Currency where cryptocurrencies like bitcoins will be banned to create a national cryptocurrency. This plan has not been in action yet. The Monetary Policy Regulator had temporarily banned cryptocurrency transactions after a series of fraudulent activities in 2018. Later the Supreme Court of India had overturned the policy.

Criticisms against Cryptocurrency

Since the transactions made through cryptocurrencies stay anonymous, they are being used in numerous illegal activities such as money laundering, terrorism, and tax evasion. All the cryptocurrencies do not serve this purpose to stay anonymous. For instance, Bitcoins are not preferred for illegal activities since the forensic analysis of the bitcoin blockchain can be used to track down the illegal activities. Monero, Dash, or ZCash are more privacy-oriented and far more difficult to trace than bitcoins.

The cryptocurrency blockchains are highly secure and it is not easy to hack the system, but there are other aspects such as exchanges and wallets that are prey to hacking. Since it is a digital technology, they are subjected to cybersecurity breaches. Hackers do this by gaining access to the bitcoin owner’s digital wallet. In the history of cryptocurrencies, several online exchanges have been a threat to hacking with millions of dollars worth of coins stolen. In 2019 alone there were 12 cryptocurrencies hack with $292 million stolen. All in vain, Mt. Gox, Bitfinex, Coincheck, and NiceHash are some of the remarkable heists in the history of cryptocurrencies.

Cryptocurrencies are also exposed to rapid surges and collapses in their value as its very unpredictable. It is the supply and demand that decides the price of cryptocurrencies, this price can fluctuate extensively when it is exchanged with other currencies. Most economists consider cryptocurrencies as a speculative bubble, they can expand to any level but at the same time, their chances to explode are also high. This is why most financial advisors don’t recommend cryptocurrencies as the best investing tool.

There are also several environmental accusations against cryptocurrency mining. Reports state that it uses more electricity per transaction than any other method known to mankind. The Cambridge Centre of Alternative Finance proves that bitcoin mining uses more energy than the entire country of Argentina per year. Bill Gates also states that bitcoin isn’t environment friendly. In the past few years, there has been an increased demand for bitcoin as an investment tool. It is argued that the energy consumed for bitcoin mining will have consequences such as global warming and climate change.

Cryptocurrency is a highly speculative and volatile buy. Investing in stocks of established companies is much safer as compared to investing in cryptocurrencies. Anyone who is planning to invest in cryptocurrencies should be ready for the ups and downs since there can be dramatic swings in their price. Many countries have banned the exchange of cryptocurrency, it includes China, Turkey, North Macedonia, Algeria. There are more than 4000 types of cryptocurrencies and many more are being developed.

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Author - Aleesha Vithayathil

Content Writer at Escribo.