Things You Should Know About Cryptocurrency
If you not living in the wild, then there is a high chance that you have at least heard about Bitcoin. We know that most of the crypto market is a mystery but it has gained so much popularity since its inception. Whether you have just heard the term or have some knowledge, there is always room to learn more about it. To help you understand cryptocurrency and how it works, we have share important things about it.
What is Crypto?
First of all, you need to understand what cryptocurrency really is. Well, it is a currency like USD but instead of being physical, it is digital. Furthermore, it is not backed, issued, or controlled by anybody. The first currency was Bitcoin and was based on blockchain technology. For those who don't know, blockchain is where we create a public ledger to record each transaction. This ledger or you can say the record is kept on a network of computers.
People usually confused when heard about cryptocurrency and Bitcoin. They think that these are different terms. Bitcoin is the name of a digital currency, while cryptocurrency involves all digital currencies. Many people trade and comprare bitcoin to earn some money when its' price goes up.
How Many Cryptos are Out There?
Of course, there are more cryptocurrencies on the market after Bitcoin. Every time, there is no currency on the market. Last year, there were around 5000 of them on the market. We see new currencies hit the market every year and see some failures as well. Other famous currencies include Tether, Litecoin, Monero, Litecoin, Ripple, and Ethereum.
Most of these famous currencies can be made using mining. Basically, they are made using computers. Every computer has to solve a complex algorithm to make new coins. There are some currencies backed by assets and behave like traditional currencies.
Is It Safe?
Well, they are safe currencies. If we compare them with traditional, then they are safer. Blockchain technology makes sure that no one can double-spent them. There are some anonymous currencies, which means that there is no way to trace you back. We have also seen that cryptocurrency exchanges are hacked by high-profile hackers. But in the long run, they are safer than fiat currencies.
But if you are looking at them from an investor perspective, then the story is different. There are stories of people getting millions of profits overnight by investing in crypto. On the flip side, some lost everything in the crypto market.
Why Price Fluctuate?
Cryptocurrencies are volatile in nature and there are few reasons for that including factors like supply and demand. There is also a factor that is not backed by anybody like fiat currencies where the central bank tries to keep them as stable as possible. Furthermore, they try to maintain a certain value. As cryptos are decentralized, so the value is what the market believes it is worth.
If we take a close look at the history of Bitcoin, you can see how volatile it is. There was a time when a single coin was $13, and after a year it goes to $700 and back to $300 a year after that. Due to this volatility, crypto is considered to be a risky investment. However, in a way, this volatility has attracted many traders.
Can You Buy with Crypto?
Most people just invest money in crypto. But you can buy things with it. In the world of crypto, Bitcoin is leading. So, various companies accept Bitcoin as a payment method. Some of the most famous companies are Overstock.com, BMW, and Microsoft.
One of the things that people don't want to use crypto is because they are volatile. So, there is no specific way to assign a value to the currency. For example, if you bought pizzas 10 years ago with 5,000 Bitcoin, then you have paid about $50 million today.
These were some of the basic things that you should know about cryptocurrency. They are indeed volatile, but it is what attracting day traders. If you want to trade then you have to learn more about it. You can easily find useful information online to have a solid knowledge of crypto trading.
(Devdiscourse's journalists were not involved in the production of this article. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)