Total more than 9000 cryptocurrencies available in the market. You may have many questions in your mind regarding cryptocurrency like what is cryptocurrency? How many types are there? Is it legal or not? Is it safe to invest in cryptocurrency or not? Why should I invest in it? How can I invest in it? You may have many questions, so let’s know about cryptocurrency.
What Is Cryptocurrency?
Cryptocurrency is a digital currency, computer programming has been used to create and maintain it. I will not bore you by using the technical language of computers here and will try to explain it to you in simple words. Cryptocurrency is secured by cryptography technology. The specialty of this technology is that it prevents copying of cryptocurrency. Most cryptocurrencies are based on decentralized network. Meaning no government controls it. Nor can any government of any country manipulate it. This feature of cryptocurrency makes it special. Making online payments in cryptocurrency is very safe because it does not use any third party app or software for payments. Due to which it is very difficult to hack it and online payments can be made safely.
The way most cryptocurrencies work is based on blockchain technology. Blockchain technology is a computer program that ensures how the cryptocurrency will work? How will cryptocurrency transactions take place? How will online payments be made?
Many computer experts believe that blockchain technology can make all businesses related to the online world even better.
Types of Cryptocurrencies
You just read what cryptocurrency is. Now the question arises, how many types are there?
Generally, cryptocurrency can be divided into two different categories: Coin and token.
Coin:
A coin can be any cryptocurrency that works on its own blockchain. To understand this, you can take the example of Bitcoin. Bitcoin is considered a coin that works on its own infrastructure. Ether and Ethereum are also such examples.
Token:
Tokens are also a digital currency like coins. It can be bought and sold online. But tokens do not work in the same way as coins work on a blockchain created for themselves. Tokens work on a blockchain technology created for someone else. Tether is one such example which is hosted on Ethereum’s blockchain technology. Chainlink, Uniswap and Polygon are also tokens.
Bitcoin (BTC)
Ethereum (ETH):
Tether (USDT):
Binance Coin (BNB)
These are some of the famous cryptocurrencies which are traded the most
Is cryptocurrency legal?
Before understanding this, please tell me which currency is used in your country? Can you buy all the things you need with that currency? Now you will say that you can buy, all the transactions are done in that currency only. But now you tell me what will happen if someone refuses to accept that currency. Now you will say that the simple answer to this is that we will complain about it. And then he will definitely accept that currency because it is a currency created by the government which has legal recognition. Similarly, cryptocurrency is a digital currency created by a private institution which anyone can create. But it cannot be provided security/recognition legally. Because now its trend is increasing, so it is legal in some countries like US, Japan and European Union. In Saudi Arabia, you can also make payment in cryptocurrency to buy something.
Still, you can do trading in countries like China, India but it has not become legal.
Is it safe to invest in cryptocurrency?
From what you have read so far, you must have come to know that it is a digital currency. And it has not been created by the government of any country so that cryptocurrency can be given legal validity. But still the skyrocketing prices of cryptocurrency are telling that people’s interest in cryptocurrency has increased. And traders / investors are ready to buy at high prices even today. Still, investors should be aware of the following risks before investing in cryptocurrency:
Investor Risk:
If you want to invest in cryptocurrency, then one thing you must know is that when you make a payment to invest in cryptocurrency, there is no way to cancel it. Some investors have lost their investment due to forgotten password and wrong address and now they are not able to recover it. According to some estimates, the number of these investors is equal to about one-fifth of all bitcoins. So be careful while making payments.
Regulatory risks:
Governments of many countries are trying to implement it as currency and securities for daily transactions, but still the legal status of some cryptocurrencies is not clear yet. But if it is suddenly banned by the government of any country, then you can lose all your money.
Third-party risk:
Third party hardware and software are required to store cryptocurrency. Many traders and investors adopt this method to store their cryptocurrency. And this is where the possibility of cryptocurrency related information being stolen increases.
Lack of information:
In this era of growing internet, a lot of wrong information is spread and due to this influential people can easily manipulate the market. With the increasing demand for cryptocurrency, such problems can also come to the fore.
Virus Attacks:
There is always a danger in all the businesses related to the computer world and that is of computer virus. Computer virus is created only so that it can destroy all the information related to it or someone can steal it. In such a situation, since it is a digital currency and it does not even get legal protection from most countries, its risk increases even more.
Despite all these risks, there has been a tremendous jump in the price of cryptocurrency, due to which the total trade of cryptocurrency has reached trillion dollars. And many investors have also made a lot of wealth by taking risks.
In this blog post, I have tried to explain cryptocurrency to you in simple language. If you have any suggestion or question about this post, then please write in the comment.
Invest but keep the risk in mind