The words “cryptocurrency,” “blockchain,” and “Bitcoin” are often used in the media and various contexts. Bitcoin (BTC) was the first cryptocurrency to go mainstream, and since then, other cryptocurrencies such as Ethereum (ETH), Tether (USDT), Cardano (ADA), Ripple (XRP), and even Dogecoin (DOGE) have emerged. Such a fact may not be new to you—but as a newbie crypto investor, you may still have several questions in your mind about “this” and “that” in the cryptocurrency industry.
In this article, we would like to help you start your crypto journey by diving into the list of frequently asked questions below.
What are Cryptocurrency and Cryptography?
According to Rob Zel, crypto exchange bitni.com, cryptocurrency is a decentralized peer-to-peer electronic money enabled via encryption or cryptography. Cryptocurrencies are unregulated by their very nature, putting investors at risk of market volatility and loss. However, when utilising Bitcoin and other cryptocurrencies, the security hazards and fraud risk are greatly minimised.
Encoding and decoding data is a mathematical and computational technique known as cryptography. Cryptography technology is utilised for various reasons, including safeguarding network transactions, regulating the production of new currency units, and verifying the transfer of digital assets and tokens. Moreover, it ensures the security of transactions and participants and the independence of operations from a central authority, and protection against double-spending.
How do Cryptocurrencies work?
Cryptocurrencies are still in their infancy, and their exact use has yet to be discovered. As a store of value, they can be likened to gold or real estate. The theory is that as more people begin to own these coins, their value will rise over time, and additional applications will emerge. You can buy things with Bitcoin and other cryptocurrencies, but it’s not always the best option.
What is a Virtual Currency? Is it the same with Cryptocurrency?
A virtual currency (VC) is a form of digital “money” generated by a community of online users, which is held in electronic wallets (e-wallets) and used to conduct transactions online. In contrast, cryptocurrency is a type of VC. Central banks or government agencies do not issue or guarantee it.
Within the community of users, VCs can be transferred. It may be used to purchase virtual products (such as games and applications) or actual goods from online shops and merchants who accept VC as payment. VCs are utilised as a medium of trade in this aspect. VCs may also be exchanged for or against real money (fiat money) by people or businesses in the user community.
How many Cryptocurrencies are there?
According to Statista’s study (2021), over 4,000 digital currencies were available in early 2021, up from just a few in 2013. However, keep in mind that a significant part of these cryptocurrencies may be insignificant. Making a cryptocurrency is pretty simple due to how transparent the process of creating one is. Indeed, the top 20 cryptocurrencies are thought to account for roughly 90% of the overall market.
Why is Cryptocurrency so risky?
Although your crypto investment is most certainly “secure,” this does not imply that it is “safe.” Market volatility and the lack of federal insurance and regulation are two factors that make cryptocurrency riskier than cash in a bank account.
Is Cryptocurrency prone to fraud?
Exchanges and online wallets have unfortunately been hacked in the past. Because your money is held in digital wallets, which are easier to hack than blockchain technology, cryptocurrency is not entirely hack-proof. In the recent Cointelegraph report (2021), Uranium Finance, a Binance Smart Chain-based automated market maker platform, has claimed a $50 million loss due to a security breach. One of the most important reasons to do your homework before trading cryptocurrencies and storing your digital assets is to avoid being scammed.
What are the perceived advantages of Cryptocurrency?
To simply put, here is a list of some advantages of cryptocurrency:
- Low transaction fee
- Easy and confidential transactions
- Give access to credit
- Hold ownership
- Strong security
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