Since the emergence of Bitcoin, cryptocurrencies have been gaining popularity steadily. In fact, as of 2020, more than 5,392 cryptocurrencies were being traded. But what are cryptocurrencies? Why are they becoming that popular? Let me break it down for you.
What is Cryptocurrency?
What is Cryptocurrency? A cryptocurrency, also known as crypto, is a form of digital currency, which you can use to buy and sell goods and services. This currency is purely electronic (or virtual). There are no physical notes, bills, or coins available. Due to the rising popularity of this digital currency, many companies are now accepting payments through cryptos.
Forms of Cryptocurrency
There are thousands of different cryptocurrencies being traded today. The most common form is Bitcoin, a cryptocurrency that was first introduced in 2008. Up to date, the creator of this digital currency remains unknown. However, since then, Bitcoin has grown steadily, and currently, its value is around $40,000 per Bitcoin.
Other popular forms of Cryptocurrency include:
- Binance Coin
What Makes Cryptocurrencies so Popular?
The popularity of cryptocurrencies continues to rise day by day. Here are the main reasons why:
- Popular cryptocurrencies, such as Bitcoin, are often seen as the future currency
- Cryptocurrencies have no middlemen, which eliminates inflation
- Cryptocurrencies are more secure than using fiat money
Benefits of Cryptocurrency
In a nutshell, what makes cryptocurrencies unique is that they are almost impossible to counterfeit. That’s because this currency uses cryptography, a science of encrypting information, and has no middlemen.
Other than that, cryptocurrencies have numerous benefits. Let’s look at the main ones below.
1. Transactions are Flawless
Convectional transactions using cash or credit cards involve many brokers such as banks and other financial institutions. As a result, a single transaction may take several days to mature.
What’s more, some transactions may experience delays, especially during weekends and public holidays. You will also have to comply with a dozen conditions by the institution, which often involves a lot of paperwork.
However, with digital currencies, every transaction is seamless. There are no middlemen, giving the user complete control over their money.
2. Transactions are Confidential
Regular credit or cash systems require you to provide all your identity details before registering with them. Similarly, each transaction is attached to your account, with all your details.
Thus, people working within the organization have access to your details, including phone numbers, location, financial transactions, and more. Each cryptocurrency transaction will have a unique encrypted ID, which protects the user and discloses the buyer or seller’s information. Everything else remains anonymous.
But that doesn’t mean that cryptocurrencies are entirely anonymous. It is possible to trace the identity of the person who did a particular transaction. But the process is a hard nut to crack.
3. Easy International Transfers
Cryptocurrency users can transfer or receive the currency regardless of their location without requiring any authorities or extra charges.
4. Cheaper and quicker
The cost of money transfers is exorbitant. Banks take out a large percentage of your money as transaction costs. The prices are even higher if you’re making international transfers.
However, with cryptocurrency, this cost is reduced significantly. You don’t have to pay for account maintenance charges. Plus, there is no minimum balance.
What’s more, regular bank wire transfers require a few days to process. But with cryptocurrencies, the process is fast and reliable.
One of the biggest enemies of fiat money is hackers. They can easily bypass almost all bank security systems to rob off your hard-earned money.
But with cryptocurrencies, this is nothing to worry about. Hacking is almost impossible. Every transaction is encrypted, and no middlemen are involved. Plus, the transactions are irreversible, which plays a significant role in preventing fraud.
The regular money we use is referred to as a centralized currency since the government controls it. On the other hand, cryptocurrency is a decentralized currency whose value is usually controlled by the network, depending on its demand and supply.
Frequently Asked Questions
Cryptocurrencies are still a new concept that many are yet to understand and venture into. Thus, many questions linger in the minds of potential investors.
Below I’ll answer the most commonly asked questions about cryptocurrency.
1. Is Cryptocurrency Safe to Invest in?
Every investment is risky. Similarly, Cryptocurrencies have their share of risks. First, the hype about these digital currencies may lure you into investing all your cash, while the returns may not be as advertised.
What’s more, cryptocurrencies are a recent developing technology. So the process will, of course, have its ups and downs.
On the bright side, the current trend of cryptocurrencies’ growth reveals a promising the future of digital currencies is promising. Moreover, you can even buy and sell these cryptocurrencies on giant platforms such as PayPal.
Suppose you are reluctant to invest in cryptocurrencies directly by buying these tokens. Instead, you can also invest in digital currencies by buying the stocks of popular organizations like PayPal and Square, already investing in the same. It is less risky and can be equally rewarding.
But the final decision is in your hands. So do your homework and choose wisely.
2. Can Cryptocurrency be Converted to Cash?
In their introductory stages, it was impossible to turn your cryptocurrency into cash. The good news? There are now several ways to convert your cryptocurrency, such as Bitcoins, into cash.
The easiest way to convert cryptocurrency into cash is by selling them to a cryptocurrency exchange such as Kraken or Coinbase. The process is easy and secure, as you’ll need to withdraw using the same account you used to deposit. That helps in preventing brokers from stealing your money.
There are also cryptocurrency ATMs and debit cards that you can use to pay for goods and services.
The Bottom Line
Day by day, cryptocurrencies continue to take the market by storm. This rising trend is attributed to their numerous benefits. For example, they are safe to use, transactions are easy and flawless.
Plus, since there are no middlemen involved, sending cryptocurrencies is cheaper. Some companies have even included cryptocurrency as one of their payment methods.
Regardless of the progress, many people still have so many questions about these digital currencies. I hope this guide has provided most of your unanswered questions about cryptocurrencies. Do you have any other questions? Please ask in the comment section below.