Cryptocurrency, crypto, digital cash – these words are heard everywhere these days and seem like they’re taking over the financial world. But what are they? What do they mean? Why are people ditching the traditional paper money that has a nostalgic value? Hang in there, we got you covered in this post.
The global economy is switching towards a digital ecosystem. Why waste paper when we can go paperless? That’s exactly one outlook for the advancements towards digital cash. Before we dig deep into the details, let us understand what cryptocurrency really is.
Understanding the Basics of Cryptocurrency
Cryptocurrency, also known as crypto is a form of payment that is exchanged for goods and services, online. We all understand how it’s not just the final product that we see, there’s a lot that goes behind it knitting together the threads. That’s exactly how it is with Crypto.
Cryptocurrencies work using a technology called blockchain. To have a better understanding of it, blockchain is a decentralized technology spread over multiple computers that keep track of the day to day transactions. If we talk about the ownership of records, individual coin records are stored in a ledger that exists in the form of a computerized record. Being monitored through peer to peer internet protocol, it’s a security that attracts many!
The common and popular examples of cryptocurrency include: Bitcoin, Ethereum & Ripple.
Cash to Cryptocurrency – Why are people switching?
Cryptocurrency might be taking over the world but why should one get out of their comfort zone and make the switch? Cash is by far the most important commodity. Let’s take a deeper insight into why people are switching to crypto. The most important factors that come in play are that it’s far more liquid, it’s cheaper in the long run, it’s way more secure and don’t forget, it’s immutable!
The financial institutions that control the paper cash we all know are the central banks in each country. However, when we talk about bitcoins, it has no owners. Furthermore, with the concept of peer–to–peer transactions, every in and out is carefully monitored and recorded – be it a hefty one or just a minor transaction.
Lastly, cryptocurrency is not affected by government interference. Thus, most macro-economic issues caused by governments do not really affect cryptocurrencies (although they are of course affected by other macroeconomic factors).
Is Crypto a Good Investment?
More and more people, companies and big institutions are considering cryptocurrencies as the currency of the future, and also as a good investment. Is this really true? Well, for a currency to be the currency of the future it is essential for it to maintain stability.
Most investors today are still looking at cryptocurrencies as a very speculative instrument and not really as a safe investment. The underlying reason behind it is the fact that these generate no cash flow. For you to reap profits on cryptocurrency, it is necessary for someone to pay more for the currency you did.
There are more and more active stock and currency traders (known as Forex traders), who are turning to trading crypto currencies because of their speculative nature. For example, you can check out this icm capital review for a better insight of a global forex and CFDs broker that also allows trading in crypto.
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