Before now you must have known or heard a lot about Cryptocurrency, how it works and its features but though this article is going to guide you through the basics you need to know regarding Cryptocurrency before you decide to join in the market.
To start with let’s find out what Cryptocurrency is;
Cryptocurrency is a digital currency that is based on a cryptographic system that is a system that is concerned with the communication security of its users regardless of the medium that was used by the user. This means that Cryptocurrency is a digital currency that involves the security of its users, that is, the confidentiality of their messages, integrity of their messages, the sender’s authentication, the non-repudiation of the sender’s messages and many other factors that refers to the security of the user.
Also from a research work, a definition of Cryptocurrency was given;
Cryptocurrency are digital tokens. They are a type of digital currency that allows people to make payments directly to each other through an online system. Cryptocurrency have no legislated or intrinsic value; they are simply worth what people are willing to pay for them in the market.
Cryptocurrencies are in contrast to national currencies of countries and they get part of their value from being legislated as legal tender. There are a lot of cryptocurrencies which are into existence but among them are the two most popular – Bitcoin and Ether.
The fascination with the cryptocurrency proves to be that there have been more profits made than related to its use as a new and unique system for making payments, we know this because there have been a high degree of volatility in the prices of many cryptocurrencies. For Example, the price of the most popular cryptocurrency – Bitcoin increased from about US$30,000 – US$35,000 in mid 2021 to almost US$70,000 – US$75,000 towards the end of 2021 before falling to around US$35,000 in early 2022. Not only Bitcoin had increase, Ether and many other cryptocurrencies also had similar volatility.
But then, How Does a Cryptocuerrency Transaction work?
Cryptocurrency Transactions occur through electronic messages that are sent to the entire network with instructions such as the electronic addresses of the parties involved, the quantity of currency to be traded and a time stamp about the transaction.
To illustrate this Whole sentence above, suppose Anna decides to transfer two unit of cryptocurrency to Jerry. Anna would have to start the transaction by sending an electronic message with all her instructions to the network, where all the users can see the message. Anna transaction is one of the transactions that have been sent recently and since the system is not instantaneous, Anna’s transaction sits with a group of other recent transactions waiting to compiled into a block which also appears to be just a group of the most recent transactions. Then the information from the block is turned into a cryptographic code which miners would have to compete to solve the code in oder to add the new block of transactions top the blockchain.
So once a miner solves the code successfully, the other users of the network would have to check the solution and reach an agreement that it is valid. Then, the new block of transactions is added to the end of the blockchain, and then Anna’s transaction is confirmed but the confirmation is not instant as it takes a lot of time for the six blocks of transactions to be processed in order for users to be certain that their transaction has been successful.
Can Cryptocurrency be defined as Money?
Cryptocurrency is not a form of money as the key characteristics of Cryptocurrency does not match with the key characteristics of money which includes- Unit of accoumt, Store of value and Widely accepted means of payment
Despite the fact that cryptocurrencies can be used to make payments, it is currently limited to be used as a means of payment and does not display the key characteristics of money. But then, there is one digital currency that could be considered money that is, digital currency issued by a Central Bank.
The uniqueness of cryptocurrency is certified with the fact that it is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double spend, Also it is a purely digital asset that uses public ledgers over the internet to prove ownership.
What are the Advantages you stand to gain if you decide to join cryptocurrency Now?
Inflation Protection
Transaction Speed
Cost Effective Transaction
Decentralization
Diversity
Accessibility
Safe and Secure
Transparent
Private
Currency Exchanges are done Effortlessly
What are the Disadvantages you stand to gain as well?
Cryptocurrency claims to be an anonymous form of transaction, nut they are actually pseudonymous which means that they leave a digital trail that the Federal Bureau of investigation can decode. So, there’s a possibility of interference from federal or government authorities to track the financial transactions of normal people
On a blockchain, there is a constant risk of a 51% attack which means It is a situation when a miner or group of them gets more than 50% of the network’s mining hash rate control. While in control, an ill-natured group can reverse the transaction that is completed, pause the transaction in process, double spend coins, prevent new transactions from getting validation and much more. Nevertheless, this attack is only a risk to recently hard-forked networks and new blockchains.
The majority of blockchains work on the proof-of-work consensus mechanism. Network participants are required to use powerful ASIC computers and the right hash to make a block added to the network. Due to this, there is excessive power consumption and countries are taking majors to lower its impact on the environment.
The lack of key policies related to transactions serves as a major drawback of cryptocurrencies. The no refund or cancellation policy can be considered the default stance for transactions wrongly made across crypto wallets and each crypto stock exchange or app has its own rules.
How do you buy a Cryptocurrency?
Visit any crypto exchange website, such as Gemini, Coinbase, Binance, Bybit, Bitfinex, HitBTC etc, Create an account and verify your identity using any of the required identity verification cards. Follow the website’s instructions to buy your cryptoassests, such as Bitcoin and Ether, then your purchased cryptocurrency will appear in your exchange account.
The above are the basic things you need to know as a beginner in the Cryptocurrency market but then something is left out and that is the process of trading. That would be an article of its own that would be published within the week, so stay Tuned!
All the information used in making this article was gotten from across the internet and it is necessary for a newbie in the Cryptocurrency market to make it an aim to always engage in DYOR because it will help you to know more details about the market.
Thank you for your well spent Time!.
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