What is Cryptocurrency – Easy to Understand Guide

Every cryptocurrency is digital money but not every digital money is cryptocurrency. Here is what else you should know about this cryptographic code which we refer to as digital money or

what is cryptocurrency

So, in January 2021, I invested INR 10,000 in a Cryptocurrency coin ‘Matic’. At that time its value was at Rs.6. But recently, in April 2021 its value jumped from INR 6 to INR 170, and that made almost 2800% profit gain, almost INR 2.83 lakhs. That is the power of the future cash of the Earth.

What is Cryptocurrency?

Along with the carnival of the stock market, cryptocurrency is also seeing an uptick among investors. Cryptocurrency is a digital or virtual currency and it uses digital files as money. Cryptocurrencies are based on a technology called blockchain and exist as a distributed decentralized ledger. The virtual currency is secured by cryptography which makes it invulnerable. So it is the digital currency you purchase with real currency. 

if you would have spent a little time on the Internet, you would have heard of Bitcoin. Bitcoin was created in January 2009 by a pseudonymous Satoshi Nakamoto. Though the true identity of Satoshi Nakamoto is still a mystery. After the introduction of bitcoin in the mainstream many, more people mimicked his idea of the first blockchain database. Several cryptocurrencies have come out on top and are dominating the market. 

Vitalik Buterin’s Ethereum (ETH), Ripple (XRP), Bitcoin cash (BCH), polygon (Matic), Tron (TRX), and so forth. 

As of this writing, the market capitalization of bitcoin is more than $735.31B followed by ethereum worth $324.78B.

Why is cryptocurrency gaining so much popularity?

If I am asked, I believe that citizens have lost faith in central banks in times of crisis. Over the years many banks have been ruined, bankrupted, or caught in a scam which the public has to bear every time. 

Earlier if you look at the evolution of money, people used to transact with gold, and then people switched to paper currency and now cryptocurrency is the future cash of the Earth. As cryptocurrencies are decentralized and do not involve any third-party during the transaction, it makes it more personal and private.

The chaos, the anarchical system had made the people not believe in the government system. That is where the faith in cryptocurrency came out in the light. Suppose, you want to transact the money to another country, it has to go through many layers of the banking system and government security, but with Cryptocurrency, you can avoid that. When you transact with cryptocurrency the transactions will be peer to peer, just like a WhatsApp chat. 

How does cryptocurrency work?

A cryptocurrency is a complex programmed code that is impossible to copy. Cryptocurrency works on blockchain technology.

What is Blockchain?

It is a technology that maintains records in a decentralized chain system. In general, when a transaction is done, its data is kept in blocks united by a strong chain of systems attached, rather than keeping them in a centralized server. With the formation of each block, the previously formed block becomes more secure.

So when a Bitcoin is transacted, the data of the transaction is kept in a block attached to all the computers. When the same Bitcoin is transacted again, a new block is formed, creating a chain of blocks,i.e. blockchain.

Must Read: The Future of Cryptocurrency

Are cryptocurrencies a good investment?

So is it a good investment? It is possible to make an overnight fortune by investing in cryptocurrency. But it could lead to losing all your money. Well, the higher the potential, the higher the risk involved. Cryptocurrency investment can help you in diversifying your portfolio. 

Well, this is what I meant, if I was given 1 lakh rupees, I would invest 20% in cryptocurrency, 50% in ETFs and stocks, 20% in gold bonds, and the remaining 10% in my savings account. Investing all your possessions in one thing makes no sense.

Crypto will be a great playmate in your investment journey. Yeah, cryptocurrencies are promising investments and hold your future riches.

Tech Tycoon Elon Musk on Investment in Cryptocurrency?

“Individuals should not put their life reserve funds into digital money, all things considered,” Musk told TMZ. “It’s too early.”

Still, he said, “If you need to hypothesize and spend a good time – there’s a good possibility that crypto is the future cash of the Earth. At the time what it looks like, what would it be? Maybe there will be miscellaneous.”. Whatever it may be, it’s all a hypothesis now. “

While most cryptographic funds do not consider money to be saved in the future, experts believe that those receiving it should only contribute what they can bear to lose. 

Cryptocurrency Vs System:

The rising popularity of cryptocurrency has been a threat to Central Banks and governments. Their biggest concern is that their powers are taken away by the decentralized system. Their resentment can be seen in their orders.

The Chinese government announced a crackdown on Bitcoin mining and trading while Iran banned cryptocurrency mining. China’s crackdown caused an 11% plunge in Bitcoin prices.

Many economists believe that crypto is overvalued over its fundamental price and is unlikely to be recognized as the mainstream currency. 

The biggest problem with cryptocurrency is its decentralized system of working. Governments are afraid of cryptocurrencies being used in illicit activities, money laundering, terrorist activities, or tax eviction.

Well, we are sure that in future government systems will be more friendly as they are not now. 

How to invest in cryptocurrency?

How to invest in crypto
How to invest in crypto

Crypto investments are like investing in stocks, except they are far more volatile than stocks. 

Here are the steps to invest in Cryptocurrency from the beginning:

  • Open a brokerage account on platforms that allow crypto investments.
  • Deposit funds from your bank (few platforms do not support deposits via UPI, so make sure you have access to net banking) into the brokerage account.
  • Buy coins using deposited funds.
  • Later, sell the coins for a gain or loss.
  • Later, you can withdraw the amount to your bank account.

Best Cryptocurrency to invest around the world:

  • Bitcoin (BTC)
  • Ripple (XRP)
  • Ethereum (ETH)
  • Litecoin (LTC)
  • Bitcoin Cash (BCH)
  • Cardano
  • Dogecoin (DOGE)
  • Monero (XMR)
  • Shiba Inu (SHIB)
  • Polygon (MATIC)

Top 10 best crypto platforms where you can buy/sell your crypto:

  1. Coinbase
  2. Zebpay 
  3. BlockFi
  4. Kraken
  5. Cash App
  6. eToro
  7. Laden
  8. Crypto.com
  9. Binance 
  10. Bitcoin IRA

Where to keep your crypto safe and secure?

Later, we came across several incidents of cyber crimes and hacking. So, you can buy a hardware wallet, a ledger for your coins. 

It will secure your crypto assets such as Bitcoins, XRP, Ethereum. Your coins will be safe and offline in a ledger making them invulnerable to hacking.

Also Read: What Is Bitcoin And How Does Bitcoin Work? 

Are cryptocurrencies illegal in India?

India has a significant share in Crypto holdings. Almost there are 10 million Indian crypto traders and investors. But with some misinformation around the internet and people’s talk, many more potential investors are hesitating to join the show.

No, cryptocurrencies are not illegal in India. Anybody can sell and trade crypto. The Indian government was never against the currency. Governor is just trying to prevent the wrong usage of Cryptocurrency and blockchain technology.

As the transactions are peer to peer, the digital currency may be used to fund terrorism and black money. However, the Indian government is working on crypto regulation. India must not miss the train. 

Skepticism around crypto at this point is indeed right. The digital currency hasn’t yet reached its full potential, and some theories label it as a bubble. It would be immature to give a full nod to a currency that can rise or plunge up to 20% a day just because of a “TWEET”. It is still in its infancy. Cryptocurrency transactions need to be much more transparent than they are now. 

*This is not financial advice. Invest only in your risk and what you can afford to lose. The above content is for education purposes.