So you are here to find out what a cryptocurrency actually is? Well, your curiosity about Cryptocurrency is justifiable given the buzz that Cryptocurrency is making. There are several types of Cryptocurrencies in the world, among which Bitcoin is the most popular one.
The trend of investing and trading in Bitcoins has never been more alive. Since you are here, I am sure you like to keep a keen interest in Cryptocurrency and want to know more about it in detail. Do not worry, as, through this article, I will be telling you everything you need to know about cryptocurrencies.
From what it actually is to why you should invest in Cryptocurrency in 2021. In this article, I will be focusing more on Bitcoin as it is the world’s most popular Cryptocurrency. So without wasting any further time, let us know in detail about this magical digital currency.
What Is A Cryptocurrency?
Cryptocurrencies are basically cryptographic digital currencies that are used as a mode of payment, as an investment option, and trading option. It works on Blockchain technology which works on the principle of the distributed public ledger.
One of the most important features of Cryptocurrency is that it is decentralized, which effectively means that it is not backed by the Government or any regulatory body. Cryptocurrency is often synonymous with Bitcoin as it is the most popular Cryptocurrency in the market. Bitcoin was first introduced in 2009 by a person named Satoshi Nakamoto.
At that time, the price of one Bitcoin was only a mere $0.0008. As I am writing this blog, the price of one bitcoin is $45,859.50. The overall market capital value of Bitcoin is around $1.7 trillion as of February 2021. Like I mentioned before, there are other cryptocurrencies as well, so let us take a brief look at them.
Types Of Cryptocurrency
Apart from Bitcoin, there are several other cryptocurrencies such as Ether, LiteCoin, NameCoin, Dogecoin, XPR, etc. All Cryptocurrency other than Bitcoins is called Alt Coins. These altcoins have their own sets of rules. But the blockchain technology on which they work remains to be the same in whatever Cryptocurrency you choose.
The aggregate value of Cryptocurrencies in the world is around $214 Billion; bitcoins form the lion’s share with a whopping 68% of the total value. Now let us take a closer look at the advantages and disadvantages of Cryptocurrency
What Are The Advantages Of Using Cryptocurrency?
Despite being a new currency in the market, Cryptocurrency is one of the leading digital assets and is performing extremely well compared to fiat currencies. Given below are some of the advantages that you can enjoy over fiat currencies.
1. Facilitates Digital Payments
The whole world is going digital, and so is your money. People want to get things done with just a tap on their phone’s screen. Cryptocurrency facilitates digital payments to the next level.
All you need to have is a wallet and, of course, Cryptocurrency. You can transact using Cryptocurrency in a matter of minutes. There is no processing or transaction fee as Cryptocurrency is completely decentralized.
2. Safe Haven Asset (Deflation)
Cryptocurrency can prove to be a safe haven asset for investors. Investors that want to avoid inflation that fiat currencies have can invest in Cryptocurrency.
Since there are only a limited number of Cryptocurrencies that can be mined. The mining cap of Bitcoin has been set to 21 million. There is no scope for inflation in Cryptocurrencies, and the value of Cryptocurrency is only going to move upwards.
This is one of the most important features of Cryptocurrency. The ethos of decentralization is what makes Cryptocurrencies all the more interesting. Decentralization means there are legal bodies to watch over your finances.
Whatever transaction you make is just within you and the other party you are transacting you. And also the best part about it is that you are not obliged to give an account of your spendings to any legal or higher authority.
What Are The Disadvantages of Using Cryptocurrency?
Cryptocurrency has its fair share of cons that you should definitely know about.
4. Highly Volatile
Cryptocurrencies are highly volatile in nature, which makes it pretty hard for them to work as an alternative or a substitute to fiat currencies. The prices of Cryptocurrencies swing every second.
For example, when I started writing this article, the price of one Bitcoin was $45,859.50, and now the price of one Bitcoin is $46,160.00. So I guess you can probably tell why making Cryptocurrency as a substitute or alternative to fiat currencies would be a major problem.
5. No Legal Authority Backing It
One of the main disadvantages of Cryptocurrency is that it has no legal body backing it. The whole concept of Cryptocurrency works on the concept of trust. The day this trust is gone, Cryptocurrency will also be gone.
To tackle this problem, Governments are launching Central Bank Digital Currency and making an attempt to regulate cryptocurrencies.
6. Used For Doing Malicious Activities
The reason why people often see Cryptocurrency in a bad light is that it is used for funding illegal and malicious activities.
Lots of illegal activities like human trafficking, terrorism, and child pornography, sale of drugs are funded by Cryptocurrency because it is very hard to trace Cryptocurrency since it is decentralized.
Why Should You Invest In Cryptocurrency In 2021?
You should invest in Cryptocurrency, especially Bitcoins, in 2021 because Elon Musk, the founder and CEO of SpaceX and Tesla, has recently invested a staggering $1.5 Billion in Bitcoins.
Tesla has also officially announced that they would be taking Bitcoin as a payment option. All these have made the price of Bitcoins break the roof. It has reached an all-time high; last week, it crossed $50k.
According to financial experts, the market of Bitcoin is not going to crash any time soon. So you can consider investing in Bitcoins in 2021.
There you go; I am sure by now you know pretty much everything about Cryptocurrency. I hope that you have found this article to be enriching. The way the popularity of Bitcoins is rising, soon they are bound to be accepted by most nations as a legal mode of payment.