Cryptocurrency:- Is this the future of the Internet or basically everything
Why you should know about it?
Hey readers, I hope you are doing well and am sending lots of hugs and positivity to all of you. Long time, have been stuck in my work, as my internship is going on and because of which I couldn’t write, so here I am.
Guys, I have been thinking a lot of it, as it’s driving me, or not only me but everyone around the world crazy as it’s the biggest innovation in human history, it’s unique, it’s making us think from a different angle about the world, and the way we live.
It’s the thing that might even change the way we trade and is a different financial instrument overall, and it is trending all the time and is discussed a lot.
So one of my friends or a fan suggested or inspired me to write on it as not only she is thrilled to know about it, and wants to explore this space overall, and even I am thrilled about this space and want to learn about it. And guys the topic is, you guessed it, Cryptocurrency.
Yes, this is the thing that we all are inspired, want to know about this unique instrument, and has the potential of the way we live, and the way we trade, and also it might be the next currency and can replace the traditional currency. So, sit back and relax, and enjoy the ride with me, as there is a lot of insights that you will be learning about this futuristic world or tool.
So, before we embark on this journey let us understand,
What exactly is Cryptocurrency?
Let’s keep it simple so that we can understand the basics of it, so Cryptocurrency is a digital asset, that consists of coins where the owner of the coin records or stores it in a ledger in a computerized form, and this works as a medium of exchange. Cryptocurrencies are completely computerized and don’t have a central authority, as this financial instrument is decentralized, whereas the traditional currencies that we use in our daily lives are centralized by the central banks and governments.
The traditional currencies print more notes according to the interest rates, and this lacks the value of it, whereas in the cryptocurrency space there is no such hassle as compared to the traditional currencies.
Now, we got to know about the basic thing of cryptocurrency. Let's get to know the history of cryptocurrency.
Origins:-
Cryptocurrency roots back to the early 90s, when the internet just started and it was a baby, yes a baby, all new, and people didn’t have the proper knowledge and were not much aware of it.
So back then, the first cryptocurrency was made and it was known as DigiCash, it was the first step in the making of cryptocurrency and blockchain in general, and the motive was to use it as a medium of exchange that is trading(buying and selling) and also be used by small businesses as a medium of exchange or accepting payments, but since there was no advancement in technology and the internet was just started, it failed, but the motive was right as to be used as a new currency overall.
Later in 2008, there was a bunch of individuals or a group, called Satoshi Nakamoto, hailed from Japan, that was working on a certain type of financial instrument that will be used as a currency, but also can be used as a financial asset, and they started working on it like coding and creating ledger that will be computerized, and then in 2009 it just changed the wave of the financial sector and is still making a new wave of trading and they created a thing that we all talk about it daily, and investing in it, yes it’s known as Bitcoin today.
It used SHA-256, a cryptographic hash function, in its proof-of-work scheme. SHA-256 is a set of algorithms that uses 32-bit and 64-bit words respectively that is used as the base of cryptocurrencies. These were the geeks who started this trend and made a new form of financial instrument, that just changed everything.
And one more important thing I need to mention is that cryptocurrency and blockchain are not the same, it’s different. So,
What is Blockchain?
Blockchain is a chain of blocks. Each block is used to store some information, and it stores information such as transactions info like who is the sender, receiver, and how much was transferred. If the first block is full then the information will be stored in the second block. Each block points to another block with the help of a reference number and hash, which means every block is linked, and therefore it’s known as Blockchain. And if you try to remove a block or try to alter it, then the entire blockchain will get disrupted. So, blockchain is the base for cryptocurrencies. Isn’t it amazing readers?
Because of bitcoin, there has been a revolution in the cryptocurrency space as more and more cryptocurrencies have been introduced like Ethereum, Dogecoin, Binance Coin, Tether, Cardano Polkadot, Litecoin, and many more. It has opened a path for more cryptocurrencies to enter the market.
Why you should invest in Cryptocurrencies?
Cryptocurrencies are making a big wave as we hear about them daily, and that the thing that is exciting us a lot. So, there are some pros to why you should invest in cryptos:-
It might be the next currency and might even replace the traditional currency:- We have realized this after the 2008 financial crisis and the 2020 coronavirus pandemic, that the traditional currencies and systems are becoming flaw, and there is a need for an alternative system, that can cut the middlemen. So, that’s where cryptocurrencies are since it doesn’t have any central authority and it will take the central banks and the government out of the equation. And even the banks are understanding this and that’s the reason why the banks are also taking an interest in it.
Learn the use of this technology:- Cryptocurrencies and blockchain are the next big thing and will revolutionize the internet and the way we trade in the market. So, update yourself and learn the basics of cryptocurrencies and follow the trends. If you won’t be up-to-date about this futuristic technology then, you’ll lag.
It opens a new wave of opportunities:- Sure cryptocurrency is the new wave, you can not only use it to make a transaction for buying, selling, or storing but it can also be used as a financial instrument just like stocks or bonds, you can too invest in it by analyzing different cryptocurrencies, but you have to educate yourself first.
It’s an alternative that will keep you away from inflation:- The biggest problem with traditional money is that it’s always going down by its value, and the reason why it’s going down in its value is due to the interest rates going down, as it’s monetized by the central banks and governments and they do it on purpose especially when there are tough times where there’s a shortage of money like the 2020 Covid-19 pandemic, which has shaken the world completely. The US government in early 2020, kept the interest rates zero so that more money can be printed and can be pumped into the economy. More than 22% of today’s dollars were created in 2020. So, that’s what inflation is, the value of that particular thing fluctuates, and that’s what the traditional money is affected a lot. And that’s what cryptocurrencies are, just like gold, even they hold their value and is inflation-proof as it’s not created as a short-term fixed financial problem.
It’s not at all difficult to get into the crypto space:- Yes, you heard that right it’s not at all difficult to get into the crypto space, as you don’t need a degree in computer science or finance. All you need is some knowledge and a smartphone or a laptop with an internet connection. It’s easier to get into this space as it’s highly liquid, and it doesn’t have any high threshold to get into it, as compared to stocks and bonds where you need a large sum of money, in crypto space, you can start by investing a small sum of money and that’s what is interesting about cryptocurrencies. You don’t need too much paperwork all you need to do is find a crypto broker, fill in the details, add money to your wallet, and there you go.
No one controls your money:- Yes, as I have mentioned before, there’s no central authority, as it’s completely decentralized and that what is good about cryptocurrencies, as no one can control your money and it’s completely safe, and it’s inflation-proof.
But, every coin has two sides, so we should not only consider one side, but should also see the other side, and so cryptocurrencies do have some flaws, and it’s better to know the flaws too.
Disadvantages of Cryptocurrencies:-
The transaction cannot be reverted:- One of the biggest flaws of cryptocurrencies is that suppose if you do some transactions via cryptocurrencies and then you just get to know or be aware that it’s going to the wrong person, then you can’t revert it, whereas if it’s done via a banking system then the chances of getting your money back is possible but not in the case of cryptocurrencies, and this is the biggest flaw.
Volatility:- Cryptocurrencies are highly volatile, and there might be a lot of price fluctuation as it’s very volatile as compared to stocks and bonds, and the reason why there is a lot of fluctuation in price is that there is a lack of inherent value that makes it highly volatile and that’s the reason why Cryptocurrencies scare the hell out of the investors.
Any changes in the algorithm can shut down the system:- Since cryptocurrencies function because of blockchain and blockchain is the base of it, so any change in the algorithm of blocks or if a particular block is removed then the entire system can halt the cryptocurrencies from trading and that will be a huge set back for the cryptocurrency investors. Again this is the biggest flaw of cryptocurrencies.
Dogecoin:- A meme that became a cryptocurrency
It’s an interesting story when I got to know about this cryptocurrency, as we were all common with cryptocurrencies like Bitcoin and Ethereum. Dogecoin has an interesting origin as it was created from a meme that was shared on Twitter.
So, back in 2010, a Japanese Kindergarten teacher posted a pic of his dog on Twitter and the breed was Shiba Inu and the picture became so popular, that it became a meme.
Then in 2013, Jackson Palmer, a software engineer at Adobe tweeted a joke that investing in Dogecoin is the next big thing. And the joke turned out to be serious and people started investing in it.
Jackson Palmer joined hands with Billy Markus, who was a software engineer at IBM, to create a cryptocurrency, and that cryptocurrency is none other than Dogecoin. Who thought that a joke would turn out to be a massive success in the digital world.
In 2013, Dogecoin was launched and you won’t believe that it was created within two hours. And by 2014, Dogecoin turned out to be the 7th largest cryptocurrency in the world and it has grown by 130% times this year. As of 2021, it has a market capitalization of $54,126,320,685 and it’s currently trading at $0.4173. Guys who thought that a meme will be the largest cryptocurrency.
According to reports, Elon Musk is working with Dogecoin developers to improve system transaction efficiency, and also said that Dogecoin has a lot of potential in the future. And over 129,680,464,939 DOGE coins have been circulated.
How to Invest in Cryptocurrencies and what all things are required?
As I mentioned above that you don’t need any such qualification to get started, all you need is a smartphone or a laptop and an internet connection. But apart from it, you need an account where you can buy, sell or hold cryptocurrencies.
Just like stocks, where you need a Demat account to get started where you have to look for a broker and then you need to submit various documents as you have to go through the documentation process like Name, Contact, Address, Bank details, and then you have to pay for registration and then you get your Demat account with a trading account, where you have to add money into it and then you can buy stocks that get stored in the Demat Account.
But in the crypto space, you don’t have to go through that hassle of documentation, as all you need to submit is your basic personal info and your bank statement and there you go your crypto account is ready. And one of the best platforms where you can easily buy and sell cryptocurrencies is Binance.
Binance is one of the best platforms or I would say the best cryptocurrency exchange or broker where you can create an account within a few seconds, as it’s very easy and the interface is pretty awesome. And the fee structure is pretty flexible, if you go for a premium service that is provided by Binance, then you get 25% off on your trading, and 10% off on Futures.
For Indians, you have to create an account on Binance and WazirX, India’s only platform for cryptocurrency exchange and then you have to link your WazirX account with your Binance account to get started. To know more read the blog that I have written on Binance, click on the link below to know more.
Also Read: Binance:- The Future of Trading Cryptocurrency
But before you think about embarking on the journey of cryptocurrency and interest is sparking, ask yourself a question,
Can you take the risk of investing in cryptocurrency?
Yes, ask this question to yourself, as investing in cryptocurrency is exciting, and easy to get started, but the most important thing is you can lose money too. Cryptocurrencies are highly volatile, it’s more volatile than stocks and bonds, as the risk appetite is more in it. Yes, it has many pros like as mentioned above, like saving yourself from inflation, no one controls your money, etc.
But also remember the cons, it’s volatile, and if the blockchain gets changed or manipulated it can even halt the entire system, and this can shake you up. Also, one thing I want to mention is there are security issues too since we live in the world of the internet and technological advancement, and whatnot, the main concern is security, as there are many frauds in the crypto space too, as there are many black hat hackers that hack the system and that can lead to losses.
And the most important thing is how much risk you can take? Well, that’s important, take the risk that you can bear, or start by investing small amounts don’t, don’t put all eggs in one basket, you will lose everything.
One prime example is yesterday’s news, which made me shocked, as Bitcoin fell by 30%. It was a nightmare as approx $700 Billion was lost in 24 hours, and it has shaken the economy. According to Coinbase, only 18.7 million Bitcoins have been circulated and only 21 million will ever exist. And the reason is still unclear where the Bitcoins are is anyone’s guess. So,
What made the prices of cryptocurrency fall down drastically?
On Wednesday, a statement issued by the Chinese Banking Association’s website stated that financial institutions must refrain the services that consists of the use of digital currency because of their volatility. This statement lead to the decline or crash of Bitcoin by 22% on wednesday and it closed at $40,310 per coin, whereas even other cryptocurrencies lost between 7% and 22% of its value. The value of Bitcoin going down by thousands of dollars in a short span of time was really shocking as there were swings and that totaled the value around $20,000 in one day. In mid-April the price of Bitcoin was $65,000.
Elon Musk, tweeted that Tesla invested around $1.5 Billion in Bitcoin and Tesla will accept Bitcoin as a mode of paymeny, in Feb 2020, and that lead to the spike of Bitcoin. But later he said that Tesla declines the use of Bitcoin as the mode of payment stating that Bitcoin causes environmental damage that’s resulted from Bitcoin Mining and instead promoted Dogecoin, and that spiked the price of Dogecoin. Elon Musk is a crazy guy, I guess something suspicious is going on, as there is some sort of pump and dump is going on. Let’s wait and see what happens.
Conclusion:-
Cryptocurrency is here to stay and it will thrive in the future and has the potential of replacing the traditional currency. I would say that learn about it, by doing a course on it as there are plenty of platforms that teach you about cryptocurrencies, one such platform is Bitcoin Essentials by Alux.com, so try it out. And I want to recommend a book where you can learn about cryptocurrencies and its basics and it’s called The Internet Of Money:- Talks by Andreas M Antonopoulous. And then try to observe the crypto markets and analyze it and open an account on Binance and put an order by starting with small amount, and get yourself updated with the technology by watching news and reading about it. Don’t bog down and keep on learning about it as this is a huge industry overall and it is shaping up the financial sector. What are your views on Cryptocurrency? Let me know in the comment section below.
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