What is Cryptocurrency: Everything you want to know
Don’t have any idea about what cryptocurrencies are, why is it such a trendy topic in today’s world, and why almost everyone out there is taking so much interest in it at present? Here’s a quick crash course for the uninitiated so you can also catch up and get along with the present crypto world.
Cryptocurrency has become the buzzword of the moment with more American households than Apple Watches purchasing cryptocurrency.
Let’s now dive deep into it to learn everything about what cryptocurrency is and how it works once and for all.
What is Cryptocurrency?
Cryptocurrency is a digital currency using cryptography for security that enables the transfer of value. The “crypto” comes from the Greek word for ‘secret’ or ‘hidden’.
Unlike paper currency which is centralized physical money that we use in our daily life to buy and sell stuff, cryptocurrency is a decentralized currency that can be used in digital form only. So it’s known as digital money or currency contrary to paper money.
Its first use was in the title of a paper that described how to embed a price into the Bitcoin virtual currency scheme.
People use it for various purposes, but a majority of them invest in cryptocurrency just like they invest in some stocks or in buying assets. So, its biggest use case in today’s world is in trading. You buy a cryptocurrency when the price is falling and sell it off when the market rises to earn profit.
Which was the 1st Cryptocurrency?
Bitcoin (BTC) was the first-ever cryptocurrency launched as a solution to the time-taking bank payment systems and elongated money transfer among people through centralized networks.
Satoshi Nakamoto who is considered to be the inventor of Bitcoin named it as an electronic P2P payment system based on cryptographic or digital proof instead of trust.
It had also come up as the first-ever use case of Blockchain Technology.
A currency that was used to buy 2 Pizzas by giving the Pizza vendor about 10,000 Bitcoins at the time of its launch is now the world’s largest cryptocurrency.
Top 10 Cryptocurrencies
Cryptocurrencies are ranked based on many factors including their market cap, their project credentials, their circulating supply, their trade volume, etc.
Some famous ones which collectively acquire more than 70% of the global crypto market cap are Bitcoin (BTC), Ethereum (ETH), and Cardano (ADA).
As per the CoinMarketCap, here’s a list of the top 10 cryptocurrencies at the time of publishing of this article:
What are Stable Coins?
The coins whose prices always remain fixed and unaffected by the trends changing in the crypto market are termed stable crypto coins. Stable coins are mostly centralized cryptocurrencies whose prices are always stable equivalent to $1.
These coins are used for trading other cryptocurrencies, exchanging cryptocurrencies for withdrawing them into local currencies and cashing out, and storing them to keep the money in digital form (and for trading purposes when needed).
Some of the famous and most used Stable crypto coins in the market today are Tether USD (USDT), USD Coin (USDC), and Binance USD (BUSD).
Here’s a list of 10 major Stable coins according to Cryptoslate:
What are Volatile/Unstable Coins?
Contrary to Stable coins, all of those coins whose prices remain changing throughout the market trends are known as Volatile Coins in the crypto market.
These are such coins that people buy, sell as well as hold to earn profit. Stable coins are used to trade these volatile coins in the crypto market.
As per the CryptoRank News, here is a chart of the top 10 most volatile cryptocurrencies as per their volatility ranking:
How & Where to trade Cryptocurrency?
Every trading is accomplished at its respective market. Just like stocks are bought and sold on Stock Markets, cryptocurrencies also have markets known as Crypto Exchanges which facilitate crypto trading in the crypto world.
Where the cryptocurrency is decentralized, most of the crypto exchanges are however centralized through which trading is done. Several exchanges are used for trading purposes worldwide depending upon their trading prices and other factors. Some of them are Binance, Coinbase, OKEx, etc.
Binance is the most popular crypto trading exchange trusted and used worldwide. It is a centralized crypto exchange that also has its cryptocurrency as well, named Binance Coin (BNB) which is ranked among the top 5 cryptocurrencies.
Other than BNB, Binance also has its Stable Coin used for crypto exchange and trading purposes known as Binance USD BUSD. It is ranked the 3rd most popular Stable Coin after the top 2; USDT and USDC respectively.
Which are the Top Cryptocurrency Exchanges?
Here’s a list of some of the trusted and reputable crypto exchanges:
1. Binance
2. Coinbase
3. Kraken
4. Crypto.com
5. eToro
6. Coinmama
7. Bisq (Decentralized Exchange)
8. Gemini
10. Robinhood
How Crypto Market goes up & down?
There are two types of trends in the Crypto Market; bearish and bullish.
When the Crypto Market is bearish, prices are going down. On the other hand, the market is said to be bullish when the prices are rising.
Now so many factors are there which cause the Crypto Market to remain volatile throughout the whole year. To put it in a nutshell, when the price of gold (which is a store of value in the real world) varies, the prices of different currencies in the world also vary. So is the case in Crypto Market.
In the digital (or crypto) world, Bitcoin is considered as digital gold and a store of value. When its price booms, the market is said to be bullish as the prices of many other cryptocurrencies also shoot and set their new ATH (All-Time-High).
When the price of Bitcoin is falling significantly, the prices of many other cryptocurrencies also decline and the market shows a bearish run.
Now the question is, how does the price of Bitcoin vary if it is itself a store of value? Well, the answer is ‘there are many factors which affect Bitcoin’s price’. Some of them include News, speculation in the market, trading volume, availability, trends in the world related to Crypto Market, etc.
The prices of cryptocurrencies also shoot when there arrives some positive news about them and vice versa. Also, when big companies or prominent brands and investors invest in a specific cryptocurrency or back it through various tactics, its prices rise in the market.
What is Crypto Mining?
Crypto Mining is a process of solving very complex mathematical problems with the help of computers and mining machines to facilitate the transactions of cryptocurrencies in the market.
In simple words, when there comes a lag in the transactions of a cryptocurrency, miners are led to mine that particular cryptocurrency to speed up its transaction process. For doing this, miners are paid with some amount of the same cryptocurrency they’ve mined as their reward.
Mining also consumes a lot of energy and power to solve those complex problems with the help of sophisticated computer systems linked with the mining machines. As a result, the systems and mining machines also release a large amount of heat which is also leading towards increasing global warming.
In many countries, Crypto Mining is still illegal because of various reasons including one that it releases a hefty amount of heat into the atmosphere.
Pros & Cons of Cryptocurrency
Every system has its pros and cons. Cryptocurrency was also launched as a solution for facilitating money transfer and payment that banks were unable to accomplish. However, cryptocurrency also got its boons and banes. Here are some of them:
Pros of Cryptocurrency
- Easy 24-hour access
- Fast and secure money transfer unlike banking
- Transparent system backed by digital proof available and accessible globally
- Instant and instant
- Profitable and a valuable asset
Cons of Cryptocurrency
- Challenging to understand and comprehend to some extent
- Risky
- Market fluctuations and volatility may lead to severe loss
- Sort of causing inequality in wealth distribution among people
- Regulations and Cybersecurity issues
