"Cryptocurrency – meaning and definition"
Cryptocurrency, sometimes called cryptocurrency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrency do not have a central issuing or regulatory body, Instead using a decentralized system to record transactions and issues new units.
What is cryptocurrency?
Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a peer-to-peer system that allows anyone from anywhere to send and receive payments. Instead of physical money being transferred and exchanged in the real world, cryptocurrency payments exist purely as digital records in an online database describing specific transactions. When you transfer funds in cryptocurrency, the transactions are recorded on a public ledger. Cryptocurrency is stored in digital wallets.
Cryptocurrency got its name because it uses encryption to authenticate transactions. This means that advanced coding is involved in the storage and transfer of cryptocurrency data between wallets and public ledgers. The goal of encryption is to provide safety and security.
The first cryptocurrency was Bitcoin, which was founded in 2009 and remains the most well-known to this day. Much of the interest in cryptocurrencies lies in trading for profit, with speculators occasionally pushing prices sky high.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called the blockchain, which is a record of all transactions updated and held by currency holders.
Cryptocurrency units are created through a process called mining, which involves using computer power to solve complex mathematical problems that generate coins. Users can also buy currencies from brokers, then store and spend them using crypto wallets.
If you own a cryptocurrency, you own nothing tangible. What you own is a key that allows you to move a record or unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology from a financial perspective are still emerging and more uses are expected in the future. Transactions involving bonds, stocks and other financial assets could eventually be traded using this technology.
Examples of cryptocurrencies
There are thousands of cryptocurrencies. Among the most famous are:
bitcoins:
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most widely traded. This currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose exact identity remains unknown.
Ethereum:
Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
Litecoin:
This currency is most similar to Bitcoin, but has developed new innovations faster, including faster payments and processes that allow for more transactions.
Waves:
Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track various kinds of transactions, not just cryptocurrencies. The company behind it has worked with various banks and financial institutions.
Non-bitcoin cryptocurrencies are collectively known as "altcoins" to distinguish them from the original.
How to buy cryptocurrency
You may be wondering how to buy cryptocurrency safely. There are usually three steps involved. These are:
Step 1: Choose a platform
The first step is deciding which platform to use. In general, you can choose between a traditional broker or a specialized cryptocurrency exchange:
Traditional brokers. These are online brokers that offer ways to buy and sell cryptocurrencies as well as other financial assets such as stocks, bonds and ETFs. These platforms tend to offer lower trading costs but fewer cryptographic features.
Cryptocurrency Exchanges:
There are many cryptocurrency exchanges to choose from, each offering different cryptocurrencies, wallet storage, interest-bearing account options, and more. Many exchanges charge asset-based fees.
When comparing different platforms, consider which cryptocurrencies are on offer, what fees they charge, their security features, deposit and withdrawal options, and any educational resources.
Step 2: Fund the account
Once you've chosen your platform, the next step is to fund your account to start trading. Most crypto exchanges allow users to buy cryptocurrencies using fiat (i.e. government-issued) currencies such as the US dollar, British pound or euro using their debit or credit cards – although this varies by platform.
Credit card purchases of cryptocurrencies are considered risky and are not supported by some exchanges. Some credit card companies also do not allow crypto transactions. That's because cryptocurrencies are highly volatile, and it's not advisable to risk getting into debt — or potentially paying high credit card transaction fees — on some assets.
Some platforms will also accept ACH transfers and wire transfers. Accepted payment methods and time required for deposits or withdrawals vary by platform. Likewise, the time required to account for deposits varies by payment method.
An important factor to consider is the fees. These include potential fees for deposits and withdrawals plus trading fees. Fees will vary by payment method and platform, which should be researched at the outset.
Step 3: Place your order
You can place an order through the web or mobile platform of your broker or exchange. If you are planning to buy cryptocurrency, you can do so by selecting "buy", choosing an order type, entering the amount of cryptocurrency you want to buy and confirming the order. The same procedure applies to "sell" orders.
There are also other ways to invest in cryptocurrencies. These include payment services such as PayPal, Cash App, and Venmo that allow users to buy, sell, or hold cryptocurrencies. In addition, there are the following investment instruments:
Bitcoin Trusts:
You can buy shares of Bitcoin trusts using a regular brokerage account. These instruments allow retail investors exposure to cryptocurrencies through the stock market.
Bitcoin Mutual Funds: There are Bitcoin ETFs and Bitcoin Mutual Funds to choose from.
Blockchain Stocks or ETFs: You can also indirectly invest in cryptocurrencies through blockchain companies that specialize in crypto technology and crypto transactions. Alternatively, you can buy stocks or ETFs of companies that use blockchain technology.
The best choice for you will depend on your investment goals and risk appetite.
"How to store cryptocurrency??"
Once you have purchased cryptocurrency, you must store it securely to protect it from hackers or theft. Cryptocurrency is usually stored in crypto wallets, which are physical devices or online software used to securely store the private keys to your cryptocurrencies.