A cryptocurrency is a form of digital money that not a lot of people are aware of. We have to admit, not everyone is familiar with Cryptocurrency. This digital currency is greatly associated with internet using cryptography as security. This is commonly known as virtual currencies. The first cryptocurrency was created in 2009 which is a Bitcoin by Satoshi Nakamoto.
The government does not control cryptocurrencies. This is so different from the centralized banking. But Cryptocurrency security is very tight which is why it is difficult to counterfeit. When you are new to cryptocurrencies, it can be intimidating on how this system works. Let’s break it down and learn the benefits and disadvantages to fully understand it.
What are Cryptocurrency and Bitcoins?
Cryptocurrency is a digital currency or digital cash which is regulated by encryption techniques. It is not regulated by the central bank or the government. It has its own independent operation. Whereas Bitcoins are the base of cryptocurrency. Both were created and introduced by Satoshi Nakamoto in 2009. This is a form of digital public money which is secured by computer users called the “miners.” This is basically electricity converted into long strings of code which has monetary value.
The Benefits of Cryptocurrency
Transferring cryptocurrency between two parties is easy. The fund transfers are charged at the lowest rate unlike what most banks and financial institutions do for wire transfers. Bitcoin will use a blockchain to store an online ledger which has all the transaction history with Bitcoin. More financial institutions are seeing cryptocurrencies to have a potential in lowering transaction costs through more efficient payment processing.
The Disadvantages of Cryptocurrency
Cryptocurrencies are virtual. There’s no central repository and it is not controlled by the government. If a hacker is able to get through the system, everything will be wiped out if there are no back copies. The prices depend on the supply and demand, so the cryptocurrency conversion rates are not stable. They fluctuate all the time. There are times that the change is minimal, but at times it can be drastic causing some investors to lose a huge amount of money.
Factors Affecting the Price and Value of Cryptocurrency
Everybody in the Cryptocurrency industry knows that the price and value of any cryptocurrency like Bitcoin are affected by different factors. This causes the fluctuating value which affects the investors. Here are some of the factors that you should be aware of which help you determine whether to invest or not.
- Supply and demand
- Electricity used to secure the blockchain
- Scams and Blockchain security level
- The use of the cryptocurrency
- The public’s opinion about cryptocurrency
- Price of Bitcoin
- Positive or negative media reports
- The investors
- Market dilution which affects new cryptocurrencies
- The traditional systems
- Legal and Governmental issues
When you are planning to invest in a cryptocurrency know what is cryptocurrency first. Today, Bitcoin is still the best cryptocurrency to invest in. But you can also do your own research about the different cryptocurrencies available. Remember that there are over 5000 cryptocurrencies today. Make the best decision and be wise about it.