Cryptocurrency has been around since the 1980s. But, till date it remains a foreign concept to many people. Research shows that an astounding 98% of people do not have a grasp of the crypto basics. The Yahoo finance report focuses on stablecoins, bitcoin, and NFTs.
Those in the survey group answered a 17-question quiz about cryptocurrency. 98% of them scored less than 60%. The findings of the survey highlighted the need for crypto education. Indeed with the growing use of Bitcoin and its recognition as an asset class, there is a dire need to understand the implications .
If you are part of the statistics above, this article will prove timely. Read on to learn about cryptos, how they work, and their benefits.
Understanding Cryptocurrencies
Cryptocurrency, in its simplest element, is a digital or virtual currency. It is not a tangible product like you would have with physical cash. It uses cryptography as a way of securing transactions.
David Chaum was an American cryptographer and a forerunner in crypto technology. He visualized a world where authorities wouldn’t control financial transactions.
This formed the bedrock on which the the existing cryptocurrency landscape was built. The open-source platform does not have a central issuing body. Neither banks nor government institutions control what happens within. The peer-to-peer cryptosystem exists in the digital space. It also has a public ledger on a blockchain that contains all the transactions.
Bitcoin, one of the first cryptocurrencies, came into existence in 2009. The creator was Satoshi Nakamoto, an unknown individual/ individuals operating under a pseudonym.
The generation of cryptocurrencies occurs in a process known as mining. It entails solving complex mathematical equations with computers to generate a hash. Several miners compete to solve the problem.
The first person who gets the correct answer receives a reward in the form of bitcoin. At the launch of bitcoin in 2009, the winner got 50 bitcoin. But since then, there has been a halving of the amount every 3 to 4 years. As of 2022, the amount stands at 6.45 bitcoin.
So to calculate how much the winner gets, you need to know the bitcoin Kurs or bitcoin exchange rate. As of October 2022, the time this article is being written, the bitcoin price in Euro was €19,612.50. So in order to calculate the bitcoin miners’ earnings what you need to do is multiply that by 6.25 .
Keep up with checking bitcoin real-time Kurs updates. The bitcoin market is volatile and tends to fluctuate a lot. You can also use bitcoin cash price prediction to know what to expect.
Uncovering How Cryptos Work
One of the first things you need to learn about cryptocurrency is the blockchain. Remember the reference to the public ledger above? This is where currency holders record and update transactions.
Each block connects to the next resulting in a chain of expanding data blocks. The distributed ledger means that many computers or nodes contain the records.
Every time a new transaction is complete, it adds to the data block. The system uses encryption algorithms. These include hashing functions, public-private key pairs, and elliptical curve encryption.
All these ensure the safety of the entries within each group of blocks. Further, each node must verify transactions before generating a new block. It helps increase security by removing or minimizing any chances of forgeries. In short, a blockchain is the most safest and secure way to perform transactions. It is foolproof and mitigates the risk of record alteration.
Exploring the Benefits of Cryptocurrencies
Let us now look at some of the benefits of cryptocurrencies.
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Speed and Low Cost of Transactions
Think about how long it takes to move money from one place to another. Financial institutions can take anywhere from three to five days to process payments. You can opt for a wire transfer but will have to wait for at least 24 hours.
With crypto transactions, you can have your money in minutes. All it takes is a network verification for you to access the cash.
The lack of third-party verification removes some costs users have traditionally had to bear. Cryptocurrency transactions come at zero or negligible cost. This is not the case with other service providers like PayPal, visa, or MasterCard, where there is a trascation fee associated with usage of their services.
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Decentralization of Financial Transactions
For a long time, regulatory bodies have had a tight rein over financial transactions. Monetary institutions and banks police and enforce restrictions on monetary dealings. That puts a lot of power in their hands.
Indeed in the case of a crisis within an institution, it can cause significant problems. The 2007/2008 financial crisis is a good example. It was the beginning of the great recession, which had a huge impact on Wall Street.
Cryptocurrencies allow for the decentralization of financial transactions. There is no oversight authority nor dependence on such institutions. The peer-to-peer network, in essence, controls itself.
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Inflation Proof
One way that crypto-currencies maintain their value is by restricting supply. In bitcoin mining, the mining difficulty keeps increasing. It ensures only a specific amount of coins enter circulation. That provides a practical solution to guarding against inflation.
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Privacy and Security
We talked about the different security measures in the blockchain ledger. The networks have to verify all the entries. This makes it almost impossible to forge or falsify data. No one can access your funds or transact unless you give them your bitcoin cash wallet private key.
To open a crypto account, you don’t sign up with any financial institution. You also have the option of using pseudonyms if you so prefer. Your identifier doesn’t need to contain any specific information about yourself. That makes it easy to protect your privacy.
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Transactional Transparency
The use of the public distributed blockchain ledger ensures transparency. Every transaction is available for everyone with access privileges to see. It makes it harder for users to engage in fraudulent transactions.
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Cryptocurrency Investing
Cryptocurrency is a non-correlated asset class. It functions independent of other markets. Thus, market factors that affect bonds, stocks, and commodities do not touch it. That makes cryptocurrency investing a fantastic way to diversify your portfolio.
But please note that there are risks like you will find in any other investment vehicle. Educate yourself well on cryptocurrency investing before putting investing your money.
Final Thoughts
Cryptocurrencies are revolutionizing the financial sector. Some of the benefits include speed, low cost, and higher security. Cryptos have a lower risk of inflation. They are also an excellent way to diversify your investment portfolio. With all advantages lining up behind cryptocurrencies, it is bound to be an attractive investment option for many.
It will be interesting to keep an eye on bitcoin cash news. We can expect many positive changes with this digital asset in the coming years.
