The emergence of Bitcoin and similar cryptocurrencies has taken a considerable chunk of current affairs and news headlines in recent years. With a digital boom, millennials and several investment institutions have become less skeptical and have given the crypto market a chance as a viable investment option. On the contrary, cryptocurrency remains uncharted territory. Due diligence and much-needed trial and error on low-risk projects on cryptocurrency must be done before dipping your business into crypto fund investment. Here is a resource guide on what you need to know about cryptocurrency.
What is cryptocurrency all about?
A cryptocurrency is an intangible digital asset that utilizes a highly developed kind of encryption known as cryptography. In this way, transactions are tightly secured, verified, and regulated. The creation of new currency units undergoes this sophisticated encryption. Similarly, cryptocurrency functions as a decentralized medium of exchange independent from any financial establishment or governing authority. Although Bitcoin is the most popular, other types of cryptocurrency exist like Ripple, Altcoins, Ethereum, and Stable coins.
Bitcoin
Bitcoin was the first cryptocurrency to gain traction despite several attempts in the 1990s to create one. Bitcoin operates using the Blockchain or peer-to-peer technology. The exchange, transaction flow, and issuance of Bitcoin are managed by a network that veers away from a middleman. Bitcoin has vastly governed the crypto market since it became available to the public in 2009 under an anonymous programmer group, Satoshi Nakamoto. The introduction of the Ethereum cryptocurrency challenged its dominance in 2016. Both Bitcoin and Ethereum are volatile compared to traditional fiat currencies like the US dollar, euro, or yen.
Stablecoin
What is a Stablecoin? Similar to Bitcoin and Ethereum, Stablecoin is a digital currency that utilizes blockchain technology. Stablecoins came about in response to the volatility and instability of its more famous counterpart like Bitcoin and Ethereum. Stablecoin's value is directly linked to the value of real-world assets like gold, platinum, real estate, and fiat currencies. Its stability is attributed to reserves ensuring that the cryptocurrency holds its value equivalent to the existing coins. A Diem Dollar is a Stablecoin. Case in point, a 100 worth of Diem Dollar is guaranteed by the Diem Network with a 100 USD in its reserve.
How does Bitcoin fare against traditional money?
Cryptocurrency is a legitimate mode of payment for goods and services; furthermore, it can also be an investment in some areas worldwide. They are similar to physical currencies, but contrary to fiat money, crypto funds are intangible. To this date, it has not been recognized as a legal tender in the United States, and a vast number of countries have not backed this form of currency legally. The absence of central authority is the reason why some governments hold cryptocurrency illegal in countries like China, Saudi Arabia, or Egypt. They fear that Bitcoin is being used to circumvent financial controls, illicit purchases, money laundering, and other risky acts.
In a nutshell, cryptocurrency does not represent cash, cash equivalent, foreign currency, or an intangible asset. Cryptocurrency needs further research, regulation, and protection for its users. Nevertheless, cryptocurrency is here to stay and trades over a billion dollars. For now, it is best to keep it as a virtual currency for small-time purchases, trading, and payment gateway for your business.
