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What Is Cryptocurrency? Here's What You Should Know

5 min read


What Is Cryptocurrency? Here's What You Should Know

Since 2009, the existence of cryptocurrency is attracting a significant number of investors. On its front line, we have bitcoin, the first and rapidly growing digital currency. The presence of cryptocurrencies has been made possible through the development and championing by various financial and corporate institutions. It has led to creating attention among potential investors all over the world.

The digital currency markets support over 5,000 cryptos, but we have 13 significant types that dominate the market. They are traded daily with huge dominance in making daily headlines. So what is cryptocurrency?

A cryptocurrency is a form of payment done online in exchange for goods or services. It is commonly referred to as "Decentralized Money," which means that they are created, processed, analyzed, and stored with no central bank or government to govern them.

Additionally, cryptocurrency has no physical form of exchange. All it involves is set data secured under computer science technology that involves encoding and decoding information “blockchain.” For that reason, it acquired the name "Cryptocurrency."

Blockchain technology is decentralized and spread across many computers that monitor, regulate, and records transactions. Let's have a look at what makes cryptocurrencies popular in the markets today.

Why are cryptocurrencies so popular?

There are several reasons why cryptocurrencies are the best preferences by their supporters. Below is a list of reasons why cryptocurrencies are popular:

1. Deflationary In Nature
Crypto mining is one of the many ways people acquire cryptocurrencies. For that reason, there is a limited number of cryptocurrencies that miners can mine, making it inflation resistance. Their deflationary nature is that digital assets will always be scarce.

With each passing day, prices will always go up. Analyst says that before the end of 2021, cryptocurrencies like Bitcoin will surpass $100,000, making it the most popular digital asset.

2. Low Fees Charged
Another reason why cryptocurrencies are popular worldwide is that meager fee is associated with their transactions. You will find out that other online payment methods incur considerable costs to transact compared to low deals related to cryptocurrencies.

Meanwhile, most investors have lost faith in the banking systems that charge hefty amounts when processing money transactions across borders. The absence of cross-border processing fees and short durations when transacting is a reason that makes cryptocurrencies popular.

3. Potential for Making Profits
Cryptocurrencies hold colossal potential for supporters to making large profits. For instance, bitcoin investors will buy BTC at its lowest price and store it on wallets for potential gains when the prices rise in the future.

The majority of the investors who invest in cryptocurrencies are looking forward to more gains. Besides, the cryptocurrency market is active and more charges might trigger more benefits.

4. The Overall Security
Cryptocurrencies’analysts popularity comes from the online mode of payment which is safe and secure when transacting. Despite the cybersecurity challenge in our modern society, cryptocurrencies are ideal for online transactions. Its reliability against cyberattacks is among the attributes that have made it famous.

5. Blockchain Technology

The blockchain technology behind cryptocurrencies has made the popularity of cryptocurrencies immense. Over time in existence, you have seen famous businessmen like Elon Musk engage in cryptos. It's decentralization, processing, and online ledger recording system have ensured secure and dependable transactions compared to the traditional mode of payment.

Are cryptocurrencies a good investment?


Speculations made by financial analysts state that cryptocurrencies are yet to make more in price value. But those are just speculations. Cryptocurrencies are worth an investment based on past trends.

But similar to fiat currencies, cryptocurrencies do not generate cash flow, and for you to create profits, you need to pay more for the cryptocurrency. There is a need for cryptocurrencies to be stable. Some analysts noted that cryptocurrencies such as bitcoin and Ethereum might be a danger zone for an investor.

Comment by Warren Buffet, a legendary investor featuring bitcoin to paper checks, stated, "it is an effective way of transfering money anonymously. Meanwhile, a check is also a method of transfering money. But are checks worth a whole lot of cash? Just because they have the ability to transfer money?"

Investors praising cryptocurrencies as the currency of the future should consider that the crypto needs stability. That will enable merchants and customers to determine the fair price of a commodity in the market.

The historic high volatility in cryptocurrencies creates a problem. If bitcoin is speculated to rise higher in the future, more people will hold it in their wallets, making no spending to circulate the currency. That makes it less viable for people to depend on as a common currency.

Are cryptocurrencies legal?

The legality of bitcoin (BTC) and other cryptocurrencies highly depends on an individual state. More scammers in the market today attribute to banning the use of cryptocurrencies such as BTC in different states. Also, whatever you are looking to do with your cryptocurrency will determine the legality of the cryptos. The majority of the states today are legalizing the use of bitcoin and other cryptocurrencies through exchange markets.