Everything you need to know about digital currency
Recently, we hear a lot of terms such as: cryptocurrency trading, investing in cryptocurrencies or names such as the digital currency Bitcoin... So what is all that? What are digital currencies? And what can you do with it? Is Bitcoin the only digital currency in the world? We will answer all these questions in today's article.
Cryptocurrency is a cryptocurrency that enables you to purchase goods and services online. It uses a digital online ledger with strong encryption to ensure and protect online financial transactions. The growing interest in these virtual currencies comes as a result of what is known as "cryptocurrency trading", in which these currencies are bought and sold to achieve real financial profits from them.
What is the difference between cryptocurrency and blockchain?
When we hear the word “digital currencies” we may immediately think of the word “blockchain”, as many think that both terms express the same thing, but this is not true. As we have already explained above, digital currencies are cryptocurrencies that are used to purchase goods and services, while Blockchain is the technology or technology behind it. It is a decentralized technology that incorporates encrypted records spread across many high-speed and capable computers, which manage all transactions made between clients within this network.
Thus, the most important difference between digital currency and blockchain technology is that digital currencies are a part or branch of blockchain technology.
Types of digital currencies and their prices
Some believe that there is only one type of digital currency, which is Bitcoin. However, that is not true. According to CoinMarketCap.com, there are more than 6,700 digital currencies that are publicly traded and dealt with, and the cryptocurrency market is still witnessing an increasing growth every day.
At a time when Bitcoin is the most popular and most valuable digital currency, there are many companies that have started issuing their own digital currency, which you can use to purchase services and products from this particular company. It's like those points that you earn when you buy merchandise from a certain site, which you can later exchange for real money that you use to buy products from the same site (and not any other site). Here is a list of the most famous types of digital currencies and their prices, where the bitcoin is topping the list and its price or market value is approximately $ 969 billion.
• Bitcoin: The market capitalization is $969.9 billion.
• Ethereum: With a market capitalization of $222.3 billion
• Tether: $33.1 billion.
• Binance Coin: $30.5 billion.
• Cardano: $28.3 billion.
• Polkadot: $28.1 billion.
• XRP: $24.4 billion.
• Litecoin: $15 billion.
• Chainlink: It has a value of $13.3 billion.
• Bitcoin Cash: $13.1 billion.
The importance and advantages of digital
currencies Digital currencies have gained the attention and support of many people around the world for many reasons, including the following:
-1- A potential future currency.
Many supporters of digital currencies believe that the latter, especially Bitcoin, will become the official currency in the future, which is why they are rushing to buy it now before it increases in value and price. But is this really what will happen? We will answer that in the next part about investing in cryptocurrencies!
-2- The advantage of decentralization.
The digital currency is not linked to any authority or central authority, such as banks, and therefore digital financial transactions in this case do not need an intermediary in order to carry out them, which eliminates transaction fees, which is something that many supporters of encrypted digital currencies like.
-3- Safety and the difficulty of counterfeiting
As we have already explained above, digital currencies depend on blockchain technology in their work, as this decentralized technology in recording and transferring financial transactions is one of the most secure methods of payment and transfer of funds, as the blockchain network cannot be easily hacked and it is impossible to forge it. This makes cryptocurrency a preferred option for many.
Investing in cryptocurrencies
Perhaps you are now wondering about the topic of cryptocurrency trading, and perhaps you are thinking to yourself: Is investing in cryptocurrencies a wise choice? In fact, although the price of digital currencies may rise in the future, these investors see that this is nothing more than just assumptions. Why? This is because digital currencies are like real currencies, they do not create any cash, and in order to make a profit from it, you must find someone who is willing to pay an amount more than what you paid to buy this digital currency. Therefore, investing in digital currencies is different from investing in a real, studied project whose value increases over time and with the increase in the value of cash flow and the profits that it achieves.
Not only that, many experts believe that investing in digital currencies such as Bitcoin is not completely safe, but some prominent voices in the investment community have advised potential investors to stay away from it. For example, legendary investor Warren Buffett has compared Bitcoin to paper checks: “It's a very effective way to transfer money and you can do it anonymously and so on. Check is a way to transfer money too. But are checks really worth it? All that money for her just because she can transfer money?"
Some may ask again here: But isn't Bitcoin a future currency?! It is true that this possibility exists, but it is worth noting that in order for a currency to be adopted as the currency of the future, it must be stable. And stability is far from being the case with Bitcoin and other digital currencies. For example, the price of Bitcoin (trading price) was about 20 thousand dollars at the end of December 2017, but its value collapsed to about 3200 dollars after only one year, and then it soon rose again to unprecedented levels in 2020.
Given this great instability in the prices of Bitcoin and cryptocurrencies in general, it is unlikely that it will be spent and used at the present time, because whoever buys this currency will keep it without spending it in the hope that its value will double in value after a year or less. All of the above factors make investing and trading cryptocurrency a bad choice, for the time being at least, given the high risks involved in this investment process.
How do I buy a digital currency?
Even after learning about all the risks of investing in cryptocurrency and expert advice to stay out of the field, you may still want to buy a cryptocurrency and hold it for the future as the saying goes: “Hide your white for your black day!” Who knows, things may really change and cryptocurrency trading becomes a safer option. That's why it's okay to learn how to buy these coins.
You can actually buy some digital currencies for real money in US dollars, while some other types of cryptocurrencies require payment with Bitcoin or any other digital currency. In order to buy cryptocurrencies, you need an e-wallet and an online application in which to keep your cash. Where you must first create your own account in one of the cryptocurrency trading applications, then transfer real money to it to buy the digital currency you want, such as Bitcoin, Ethereum, or others.
Note: Although buying and selling cryptocurrencies is completely legal in the United States of America, there are countries in the world that prevent this such as China, which has banned the use and trading of cryptocurrencies. So, before buying or selling a digital currency, make sure that this process is legal in your country so that you do not expose yourself to any problems.
How to protect yourself from fraud when trading digital currencies?
In case you still want to buy and trade cryptocurrencies, you should first be careful when doing this step in order to avoid scams or counterfeiting. Although blockchain technology is very secure and impossible to hack, it is not the case for different cryptocurrencies, which is why be sure to read the fine details in the prospectus of the company that sells you cryptocurrency to get the following information:
1- Who owns this company?
If the owner is well known and reputable, this is a positive sign that you are in the right place.
2- Are there other investors in this cryptocurrency company?
If there are other investors who would like to have this coin as well, this is most likely a reliable company.
3- Will you own shares in this company or will you only buy cryptocurrency? The distinction between the two is very important, as having a stake (or name) in the company means that you will contribute to its profits (you are the owner / partner in it), while buying coins only means that you are only authorized to use these digital currencies and do not have any powers or other features.
4- Is this currency already developed?
Well, digital currency is a very complex chain of coding and programming, and it needs super capable hardware and very highly proficient programmers to set it up. So make sure before you buy any cryptocurrency that it is in fact ready and you can use it right away as soon as you buy it. If the coin you want to buy still needs more programming and setup, this is a strong indication that you may be getting scammed, and that the company just wants to get paid to complete the encryption process.
It can be really stressful to read all the details of the company that sells you cryptocurrency, but always remember this information...the more details there are, the better and the more likely it is that it is real and not fake. Finally, it is worth noting that despite taking all the above measures and precautions before purchasing a cryptocurrency of any kind, you will in any case expose yourself to risk just by owning a cryptocurrency. Because there are hundreds, if not thousands, of hackers who are actively seeking to penetrate the computers that keep your assets and records of your cryptocurrency possessions. This kind of risk will not be found in normal trading operations, so make your decision after some thought and consideration.
In the end, we conclude that the cryptocurrency market is not very simple or completely safe as some think, as it, like other trading markets, involves many risks in addition to the advantages and advantages. The decision in the end remains with you to choose whether to invest in this market or not.