What are Cryptocurrencies?
Updated: Sep 8
Not many people know or understand the term ‘Cryptocurrencies’, but almost everyone knows and heard about Bitcoin.
If you are among those, let me tell you that Bitcoin is also a cryptocurrency, and it was the first-ever cryptocurrency on the market.
However, at present, it is not the only one out there, and there are numerous cryptocurrencies with growing popularity. If you want to know the basics about cryptocurrencies, this read is for you. Stick to it to get the answers.
What is Cryptocurrency?
A cryptocurrency is a virtual product or currency secured by cryptography, and it is not possible to counterfeit or double-spend these currencies.
Moreover, almost all cryptocurrencies are decentralized and rely on innovative blockchain technology.
Cryptocurrencies are not issued or governed by any central authority. It means they are free from government interference and manipulation.
How Does Cryptocurrency Work?
A cryptocurrency is different from other currencies such as the Dollar, Yen, or Euro. Furthermore, the currency is not physical, fully encrypted, and decentralized.
Similarly, no authority manages or maintains its values. Instead, these tasks are performed by cryptocurrencies users online.
Besides, all crypto transactions are recorded and verified through a digital program known as the blockchain.
How many cryptocurrencies are available on the market?
There are 10,000 different cryptocurrencies available on the market that users can trade publicly, as per a report issued by CoinMarketCap.
And still, cryptocurrencies continue to thrive, nurturing money through various offerings of coins.
Reports show that the accumulated value of available cryptocurrencies presently is around $2 trillion. Of this, the total value of Bitcoin is about $900 billion.
Why are they so popular throughout the world?
Cryptocurrencies have several attractions for all types of users. Here are some significant reasons for their immense popularity:
Many people see cryptocurrencies as the future’s currency, especially Bitcoin. Hence they are racing to get the currency now and before they become hard to access and valuable.
Similarly, some think that cryptocurrencies will eliminate or reduce the impact of central banks as these banks can reduce the value of money through inflation in the future.
Besides, many like the innovative technology that cryptocurrencies features, the blockchain. People assume that it is much more secure than conventional payment systems.
A lot of people buy them as they think demand is growing for cryptocurrencies and so they will be able to sell them at a later date for a higher price.
Advantages and Downsides of Cryptocurrency
Cryptocurrencies offer various benefits to holders. The biggest advantage of this digital currency is that it makes the transfer of funds between two parties effortless and without any third person such as the government or a bank.
Transfer of funds are guaranteed and protected via public and private keys and other incentive systems such as Proof of Work or Stake Proof.
Furthermore, cryptocurrency systems have a user's "wallet" or account address along with a public key. In contrast, its private key is only available to the owners so that they can verify and sign transactions.
Another significant benefit of cryptocurrencies is that funds can be transferred with minimal charges and rapid speed.
Cryptocurrency's perceived anonymous nature is a big hurdle to greater adoption. A lot of people consider them to be used by money launderers and terrorists for nefarious activities. This couldn't be further from the truth.
Transactions recorded on blockchains are totally transparent and it is very easy for law enforcement to track down where transactions are going from and to. Furthermore, if a bad actor was to try and cash out, the transaction can be traced right the way to the bank account that they use.
The majority of criminal money is still held in cash as its impossible to trace.
Cryptocurrencies can also be volatile. Price volatility makes them difficult to use as actual currencies (would you accept a payment that could be worth 20% less the next week? Or pay in a currency that could be worth double in a month?), but it makes them potentially great investments if you can manage the risk correctly.
How do I invest in cryptocurrencies?
You can spend months, maybe years, researching which cryptocurrencies you think will do well, buy them on an exchange and store them securely.
Or, alternatively, you can let us do the heavy lifting for you. Our DeFi Infrastructure Fund is available for everyone to invest in on ICONOMI platform. It features a diverse array of cryptocurrencies and is actively managed with the aim of producing better returns than Bitcoin (its currently achieving 3 times the returns of Bitcoin).
Cryptocurrencies are enjoying the limelight right now, but remember; these currencies are still in their initial stage.
Remember that investing in anything new and unknown includes many challenges, and above all final outcome can be surprising, so be well prepared, especially if you intend to invest in cryptocurrencies.
Or leave us to manage your investments on your behalf.