Cryptocurrency: Definition and Current Prices – All You Need To Know
Do you want to venture into cryptocurrency? Here are a few things you should know about cryptocurrency and the current prices of crypto coins.
Cryptocurrencies enable you to purchase goods and services, access apps and games, and trade them for profit.
Here’s more information on cryptocurrency and how it works.
What is cryptocurrency?
Cryptocurrency (or “crypto”) is a type of digital asset created through cryptographic techniques that allow people to buy, sell, or trade them securely.
Unlike traditional fiat currencies, which national governments control, cryptocurrencies can exist without the intervention of a monetary authority, such as a central bank.
How does cryptocurrency work?
Most cryptocurrencies are supported by blockchain technology, which keeps a tamper-resistant record of transactions and keeps track of who owns what.
The use of blockchains addressed a problem encountered by previous attempts to create purely digital currencies: preventing people from making duplicate copies of their holdings and attempting to spend them twice.
Individual cryptocurrency units are known as coins or tokens depending on how they are used.
Some are designed to be units of exchange for goods and services, while others are value stores and can be used to participate in specific software programs such as games and financial products.
How are cryptocurrencies created?
The top 10 cryptocurrencies by market cap
Ethereum (ETH)
USD Coin (USDC)
Dogecoin (DOGE)
Cardano (ADA)
Polygon
How to choose a cryptocurrency
It’s critical to remember that Bitcoin is not the same as cryptocurrency in general.
Despite the fact that Bitcoin was the first and most valuable cryptocurrency, the market is vast.
According to CoinMarketCap.com, a market research website, over 21,000 different cryptocurrencies are publicly traded.
While some cryptocurrencies have a market capitalization in the hundreds of billions of dollars, others are obscure and essentially worthless.
If you’re thinking about investing in cryptocurrency, it’s a good idea to start with a cryptocurrency that is widely traded and relatively well-established in the market.
NerdWallet has created guides for some popular cryptocurrencies, such as Bitcoin and some altcoins, or Bitcoin alternatives:
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Bitcoin is the first and most valuable cryptocurrency.
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Ethereum is commonly used to carry out financial transactions more complex than those supported by Bitcoin.
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Litecoin is an adaptation of Bitcoin intended to make payments easier.
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Solana is another competitor to Ethereum that emphasizes speed and cost-effectiveness.
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Dogecoin began as a joke but has grown to be among the most valuable cryptocurrencies.
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Shiba Inu is another dog-themed token with more complex mechanics.
- Stablecoins are a class of cryptocurrencies whose values are designed to stay stable relative to real-world assets, such as the dollar.
Pros and cons of cryptocurrency
Cryptocurrency pros
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Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable.
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Some supporters like the fact that cryptocurrency removes central banks from managing the money supply since over time, these banks tend to reduce the value of money via inflation.
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In communities that have been underserved by the traditional financial system, some people see cryptocurrencies as a promising foothold.
Pew Research Center data from 2021 found that Asian, Black, and Hispanic people “are more likely than White adults to say they have ever invested in, traded, or used a cryptocurrency.”
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Other advocates like the blockchain technology behind cryptocurrencies, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems.
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Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.
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Some cryptocurrencies offer their owners the opportunity to earn passive income through a process called staking.
Crypto staking involves using your cryptocurrencies to help verify transactions on a blockchain protocol.
Though staking has its risks, it can allow you to grow your crypto holdings without buying more.
Cryptocurrency cons
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Many cryptocurrency projects are untested, and blockchain technology in general has yet to gain wide adoption.
If the underlying idea behind cryptocurrency does not reach its potential, long-term investors may never see the returns they hoped for.
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For shorter-term crypto investors, there are other risks. Its prices tend to change rapidly, and while that means that many people have made money quickly by buying in at the right time, many others have lost money by doing so just before a crypto crash.
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Those wild shifts in value may also cut against the basic ideas behind the projects that cryptocurrencies were created to support.
For example, people may be less likely to use Bitcoin as a payment system if they are not sure what it will be worth the next day.
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The environmental impact of Bitcoin and other projects that use similar mining protocols is significant.
A comparison by the University of Cambridge, for instance, said worldwide Bitcoin mining consumes more than twice as much power as all U.S. residential lighting
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Governments around the world have not yet fully reckoned with how to handle cryptocurrency, so regulatory changes and crackdowns have the potential to affect the market in unpredictable ways.
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