What is a cryptocurrency and is it worth investing in it?

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Only lazy people have not heard about the existence of such a phenomenon as cryptocurrencies and the phenomenal growth of bitcoin today. This article will analyze cryptocurrency and tell how legislation regulates this market.

The word “cryptocurrency” is a literal translation from the English term “cryptocurrency” (crypto – secretly, currency – currency). Cryptocurrency is a digital virtual currency put into circulation without the participation of the Central Bank, built on open and distributed technology of encryption and data storage (blockchain), which has some functions and properties of fiat money, such as means of exchange, means of savings, unit of account. Even during the play online casino in India, you can use bitcoin – what is not an indicator of popularity?

How the cryptocurrency market works. Cryptocurrencies are cryptographic (mathematical) codes. Due to the encryption features, each code is unique and cannot be used twice. Various cryptocurrencies are accounted for and put into circulation by thousands of Internet users in a distributed computer network worldwide.

What cryptocurrencies exist

Bitcoin 

It is the first and most popular digital currency. Bitcoin appeared during the financial crisis of 2008 as an experiment to create a decentralized payment system that is more “honest,” efficient, and independent of regulators.

Bitcoin’s supply is limited: it has been in circulation for 125 years and has 21,000,000 coins. The stability of its network and the extraction of coins do not depend on the authorities’ decisions, the rate of epidemics, and other factors significant to the traditional economy. This peer-to-peer, i.e., peer-to-peer payment system allows making transactions in decentralized networks without intermediary banks or paying commissions to them.

The story of bitcoin’s launch began in October 2008, when a manifesto, technical description, and the first version of the code, published by a person or group of persons under the pseudonym Satoshi Nakamoto, appeared online.

There is a popular theory that bitcoin has much more in common not with fiat money but with gold, a digital version of which it is often called. As a result, virtual currency may increasingly take over precious metals in the future.

Altcoins and tokens. Cryptocurrency platforms

Because the bitcoin source code was open and publicly available from the very beginning, any programmer could “modify” it and create a new product – a “fork” based on the bitcoin code but with arbitrary functionality. It is how the era of altcoins, or all blockchain-based projects, of cryptocurrency varieties, appeared after bitcoin began. Today, their number is already several thousand.

Cryptocurrencies differ in the parameters of maximum circulation, time of production of a new block, etc. In different digital currencies, the right to form the next coalition is given to the one who:

  • Will do the work (proof-of-work);
  • has a certain amount in the account (proof-of-stake);
  • Provides some resources (proof-of-space).
  • The formation of the next block can be based on another procedure, which is easy to verify, but difficult to execute or fake.

As for the functionality, it also differs. It could be, for example, a decentralized data storage – analogous to Dropbox. Disk, only on the blockchain, where users themselves can “rent” space on their devices and receive project tokens in return. It is also possible to rent out computing power – there are already several projects that allow you to monetize time when your device is not in use.

Other projects allow you to run entire applications on a decentralized network. For example, the second most popular cryptocurrency, Ethereum, or ether. As its developers call it, it is a “world computer,” that is, a platform for creating decentralized online services based on blockchain, built on smart contracts – fully autonomous algorithms stored in the blockchain and working without human intervention. Launched in the summer of 2015, the platform is currently the second-largest by capitalization, mainly because it can establish its token based on ether.¬†

Another example is Ripple, a real-time settlement system created to replace the SWIFT protocol, which is already losing effectiveness. The concept of Ripple aims to create secure, lightning-fast, and almost free exchange transactions. The project has already been integrated into several dozen global banks and financial companies, such as UniCredit Group, National Bank of Australia, and others.

Tokens can be used as:

  • A means of payment, acting as a more convenient alternative to fiat currencies (which we primarily mean by the term “cryptocurrencies”);
  • a means of payment for services within a product (utility or service tokens);
  • An alternative to the usual securities (securities or security tokens).
  • These three types of tokens are considered essential, but there are many more variations. For example, asset tokens are digital versions of real-world objects, reputation tokens, and hybrid tokens that combine elements of the highlighted types of tokens. Maybe a little more time will pass, and bitcoin will lose its leading position.

How to make money from cryptocurrencies

The simplest option is to buy and hold cryptocurrencies in an account in your blockchain wallet (or on an exchange), hoping for future value growth. In professional slang, this strategy is called HODL.

More confident investors with trading experience trade on the cryptocurrency market, making money on the difference in exchange rates.

Some prefer to engage in mining. The idea behind mining is to solve complex mathematical problems with special equipment and get rewarded for it in bitcoins or another cryptocurrency.

Sometimes blockchain projects hold free token giveaways, called airdrops.

Those who understand well how the cryptocurrency market works use stacking or receiving rewards to keep tokens in their cryptocurrency wallet and confirm blocks.

Note that if you want to be distracted and learn new information for yourself, the article “Travel and Online Casinos” will be able to entertain you and discover further details.

What experts say

How do investors invest in cryptocurrencies?

To begin with, it is necessary to outline one crucial point: a person should decide whether they are ready to deeply study everything about cryptocurrencies to control the transactions on their own or not prepared. In the second case, choosing other, much safer, and potentially more profitable instruments is preferable.

Let’s talk about the strategy of investing specifically in digital currencies. Of course, active trading will be first because the yield can reach tens and even hundreds of thousands of percent. But such indicators depend on the choice of instrument and platform, market phase, and the ability to conduct high-quality technical analysis.

Can I be guided by the news when trading and investing in digital assets?

You should not be guided by the predictions and statements of famous media personalities. Even the most experienced and successful professional can sooner or later make a mistake and pull all his followers down with him.

In addition, the immediate effect of such news is not always predictable and long-lasting. However, the opposite is true over the long haul: any information about a cryptocurrency that engages a new audience is a cushion for future growth.

It is worth noting that if you prefer not to take risks and diversify your investment portfolio qualitatively, the same news can be good for one asset but bad for another.