The year 2022 is presented as a year of recovery, although uncertainties remain. As a result, many investors are looking for new investment opportunities, and one of the most interesting ones is investing in cryptocurrencies. These assets have received great appreciation since their inception and, according to experts, will continue their upward trend. In this article, we will explain what cryptocurrencies are, how they work, how to invest in them, which cryptocurrencies to invest in and which are the best for 2022.
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What is cryptocurrency?
The most common definition of virtual currency is that it is "a non-physical digital currency that uses cryptography to securely manage transactions and create new currency".
This description of what cryptocurrency is includes two of the most important characteristics of this electronic currency: first, it has no physical medium, and second, it is a digital currency. In other words, there are no banknotes or coins like Euros, dollars, or pounds. Cryptocurrencies are virtual and can be stored in a physical device (a wallet such as a hard disk or USB flash drive), but there is no physical representation.
Second, since cryptocurrencies are used to create new business entities, they are not dependent on any government or country for practical purposes. With virtual currencies, there is no central authority or government to create a new currency and fund the market. Bitcoin, for example, uses blockchain technology to regulate the creation of new units. This also limits the number of coins available, although this is not always the case with other cryptocurrencies.
Types of cryptocurrencies
Dash, Ethereum, Ripple, Litecoin.... In addition to the famous Bitcoin, there are many other virtual currencies. In fact, the current number of virtual currencies in the world is well over 1,300.
What separates the different types of cryptocurrencies is firstly the technology they use and secondly their philosophy. To put it bluntly, most virtual currencies use blockchain technology, but with certain modifications to speed up the processing of transactions, for example. There are also currencies that use completely different formulas. There are also some philosophical aspects, such as the finite number of coins (bitcoins) in circulation and the transparency of transactions.
However, investing requires sufficient financial knowledge to know exactly what products you are investing your money in and what risks you are taking.
The Most Profitable Cryptocurrencies
As the stock market adage goes, past performance is no guarantee of future returns. The performance of virtual currencies is an indication of their potential, but that doesn't mean they are the best cryptocurrency to invest in 2022. The price of virtual currencies, which have experienced declines of 50% or more on multiple occasions, is a good example of this. Does this mean that you should run away from this sector as soon as possible? On the contrary, the prices were just too high.
Which cryptocurrency will be the best performer in 2021? Taking into account their potential and past performance, we have compiled a list of digital currencies with a promising future.
Bitcoin
Whether you like it or not, Bitcoin remains the most important cryptocurrency, setting the tone for other virtual currencies and making it a great investment. There are several reasons why investing in Bitcoin is a sound investment, and that is because it is decentralized, meaning that there is no central authority that controls the delivery of Bitcoins.
Ethereum
Ethereum is an excellent alternative to Bitcoin and is the second largest virtual currency in the capital. It is not yet a leader, and the possibility of surpassing it as digital money cannot be dismissed, but its strength lies in application development and the use of smart contracts in the development environment.
IOTA
IOTA is one of the most ambitious projects in the field of cryptocurrency. IOTA is based on Tangle technology, which is theoretically much more scalable, faster, and lighter than blockchain.
NEO
Called China's Ethereum, its future depends on what decisions the Asian giant makes about the future of cryptocurrency. The Chinese government has already announced tighter controls over the sector.
Litecoin
Litecoin is one of the veterans in this field. It was founded in 2011 to reduce transaction times compared to Bitcoin.
Like Bitcoin, Litecoin is capped at 84 million units, of which about 55 million are already in circulation.
Monero
Monero is an anonymous cryptocurrency. This means that the details of your coin transactions cannot be tracked. This is its biggest advantage over other alternatives and makes it valuable.
Cryptocurrency Wallets
There are many different types of virtual currency wallets that differ in their functionality and safety. In order of safety, they are as follows
- Cold wallet. This is the hardware or physical device in which coins are stored. It is the most secure against theft, but the least convenient for transactions.
- Wallet application. Software that simulates a wallet and can be accessed on your computer after you download the program.
- Online Wallet. The most widely used. They can be accessed online through the Internet and do not require you to download anything. Their biggest advantage is that they are very convenient for transactions.
- Exchange houses. They are the bank of cryptocurrency and act like a broker. It is undoubtedly the easiest way to buy and sell cryptocurrencies.
Whenever you are going to make an investment, you should always carry out a very thorough study to avoid falling into scams or projects with no future.
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