What You Should Know About Cryptocurrencies
Cryptocurrencies can be traded for profit and can be used in buying goods and services. It is one of the profitable investment an investor can make. However, like other investments, cryptocurrencies have their fair share of risks. Most cryptos are volatile; you can make lots of money by investing in them within few minutes and you can also lose lots of money within few minutes. If you want to know more about cryptos, this piece will help you out. We will be looking at what cryptos are, why they are so popular, how you can buy them, and more. Let’s now go on to learn more about cryptocurrency.
What is Cryptocurrency?
Cryptocurrencies (also called cryptos) are digital currencies that can be used in buying of goods and services. Transactions with cryptocurrencies are secured by a highly sophisticated type of encryption known as cryptography. This encryption is also used to control the creation of new units of currency. Cryptocurrency is built to work as a decentralized exchange medium; it is independent of any central authority or financial institution.
The technology with which cryptocurrencies work is known as blockchain. It is the database that makes crypto transactions unique and secured. Blockchain is a distributed ledger technology (DLT) that is spread across multiple computers that records and manages transactions. One of the appeals of the blockchain technology is its security. It enhances peer-to-peer transactions in a way that is secure, verifiable, and without a centralized party.
How Many Cryptocurrencies Exist Today?
The field of cryptocurrencies keeps expanding and so, it is impossible to get an accurate figure of the number of crypto that exist today. However, according to data from CoinMarketCap.com, more than 7,800 cryptos are in existence today. The total crypto prices by market cap as of 27th Jan, 2021 is $875,229,376,635. Bitcoin, the most popular cryptocurrency has the highest market cap – $553.94B on the aforementioned date. Ethereum, the second most popular cryptocurrency has a market cap of $141.25B on this same date.
Other than Bitcoin and Ethereum, there are other major types of cryptocurrencies. Some of these major types of cryptocurrencies are Litecoin, Bitcoin Cash, and Ripple.
How Are Cryptocurrencies Created?
The process of creating a new type of crypto coins can be done by modifying an already existing process or building a new blockchain. Most of the new “fork” of coins created or “altcoins” are variants of the Bitcoin protocol.
Creating more coins of an already existing crypto can only be done through a process known as “mining”. So, it is not out of place to say that mining is the process by which new crypto coins of an already existing crypto are created.
Why are Cryptocurrencies Popular?
Cryptocurrencies are popular for a good number of reasons. Some of these reasons are:
Supporters of cryptocurrencies sees them as the currency of the future.
Cryptocurrencies are independent of financial institutions; they are not managed by the central bank or any central authority. Supporters love cryptocurrencies for this reason since the independent nature of cryptocurrency keeps them in total control of their money.
Although risky, crypto investment can bring more profit than traditional investments like stock.
Blockchain, the technology behind cryptocurrencies, is more secured than the traditional payment systems.
Where Can You Buy Cryptocurrencies?
Cryptocurrency can be bought via cryptocurrency exchange. These crypto exchanges or platforms allow you to purchase cryptos or trade them. Some of these exchanges allow you to buy cryptos using fiat currency like the U.S dollars (USD) while others only allow you to exchange your existing crypto like bitcoin (BTC) for another. Examples of crypto exchanges are coinbase, coinmama, and coinratecap.
Note that you’ll need a wallet for you to buy cryptos. A wallet is simply an online app that can be used to store your currency. Some exchanges allow you to buy cryptos and also create a wallet.