Even a few years ago, Cryptocurrency was something unheard of for the majority of people. But nowadays, it exists everywhere you go. You have heard the stories of people making a fortune out of cryptocurrency and have also heard about people losing their savings through similar investments. People all around the internet are suggesting you invest in crypto but the first question that to mind is whether it is worth it or not.
In this article, we will be talking a lot about cryptocurrency, explaining it in simple terms, how to invest in it, the mining process and some advantages and disadvantages of the whole scheme.
What is Cryptocurrency?
Cryptocurrency is a type of virtual or digital currency, secured by cryptography. This makes counterfeiting and double-spending nearly impossible. Most of them are decentralized networks based on the ”blockchain” technology.
The blockchain is a system of recording information in an encrypted way that makes it difficult to cheat, change or hack the system. It works as a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems present on the blockchain.
More about Cryptocurrencies
Cryptocurrencies are not generally issued by the central authority. This makes them theoretically immune to any governmental manipulation or interference. There are a number of different cryptocurrencies in today’s market and Bitcoin is one of them.
Bitcoin is the first cryptocurrency based on blockchain technology and it is still the most valuable digital currency. It was launched in 2009 and as of late 2021, there are about 18.8 million bitcoins in active circulation. This amount has a market cap of 1.2 trillion USD, but that figure updates often. To regulate the currency and avoid inflation, the amount of total bitcoins that will ever exist is only 21 million.
Following Bitcoin, some other alternate cryptocurrencies have entered the market, they include Ethereum, Litecoin, EOS, etc. The total market cap of all crypto is estimated at around 2.4 trillion USD, among which 42% is represented by Bitcoin itself.
Are Cryptocurrencies Legal?
As cryptocurrencies are not generated or regulated by the government of any country, the question of it being legal varies from place to place. For example, Bitcoin is Permissive in countries like the USA, England, India, Australia, etc. Whereas in countries like Canada and some other parts of the world, it has some legal restrictions on its usage. In countries like Russia, cryptocurrency like Bitcoin is not prohibited directly. As of Jan 1, 2021, it was declared legal to mine, trade and hold but was not allowed to use as a payment option.
Similarly, different Crypto have different statuses based on the region you are looking for so in case you are interested in investing, you should check its status in your country.
How to get Cryptocurrency?
There are two essential ways you can own any cryptocurrency. The first way is to buy them with money, while the other way is to mine them.
In order to buy crypto, you would need to have a ‘wallet’. A wallet means an online app that holds your digital currency. Coinbase is a great example of an app where you can create a wallet and use the money to buy cryptocurrencies. You can also sell your crypto through Coinbase.
The mining process is pretty hectic for a non-tech savvy and requires some serious investments in top-tier computing hardware to pull off a profit. The current inflation in the hardware market and the huge processing time make it an option not suitable for all.
Is investing in Crypto worth it or not?
To be fair, Cryptocurrency is a speculative asset and can be a volatile buy for an average investor. There’s a huge risk involved but to be fair, all investments carry a certain kind of risk. If invested strategically and planned, crypto can be extremely profitable.
You can try investing a little and hold out until you feel like it. If you want to invest in crypto then there hasn’t been any better time than this. But if you want to play it a little safer, then invest in stocks of companies that facilitate crypto trading in the future, like PayPal, Coinbase, etc.
Advantages and Disadvantages of Cryptocurrencies
- Free from Government regulations
- Easier fund transfer making it more directly between two parties
- Secured transfers via Public keys and Private keys.
- Safe from sudden inflation in the market
- No Refund or Cancellation by virtue of its self-managed model
- Mining crypto requires a very high amount of energy
- There’s a risk of data loss
- It is illegal in certain parts of the world
- Even if it’s termed a secure way of exchange, it is still vulnerable to hacks.
As of the enormous potential of digital currency of current times, investing in crypto doesn’t seem to be an affliction. If you play your cards smart and right, you can pull a great profit off of it. But there will always be risks so think carefully and consider all your options before.