A Cryptocurrency exists only in the virtual form, unlike the paper currency, which is a physical currency. This currency is accepted to buy goods and services. However, the documentation of the transaction is purely conducted using an online leader. There are numerous cryptocurrencies obtainable in the market right now. The virtual currency is secured with strong cryptography to defend online business activities. This encrypted system also makes it hard for the user to counterfeit or double-spend digital money.
A primary competent what makes digital currency attractive is that any central authority does not issue it. Cryptocurrencies are unregulated, and most of the time, they are traded to gain huge profits. Therefore, speculators are often seen driving cryptocurrency prices higher. They are by large unaffected by government interference or manipulation.
Cryptocurrencies are managed by a technology called Blockchain, a decentralised technology spread across various computers responsible for recording and managing transactions.
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It is a distributed ledger created by various networks of computers. This chain of computers manages and records every transaction made through cryptocurrency. Blockchain technology also provides robust security; however, cryptocurrencies have been exploited in the Dark Web, making it vulnerable.
Many private companies have issued their own currencies. They are called tokens or coins that can be used to purchase the goods or avail of the company's services. Considering these currencies are similar to arcade tokens or casino chips, the only difference is that cryptocurrencies are virtual. The way you purchase a token to play games or chips in a casino with real currency, cryptos can be used to buy goods and services.
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How many cryptocurrencies are available to trade?
There are more than 6,500 different cryptocurrencies in the market and are continuing to snowball. These currencies are traded publicly to raise money through initial coin offerings (ICO)s. As per a market research website, CoinMarketCap, as on December 18, 2020, total cryptocurrencies are worth more than USD 645.7 billion. The most popular virtual currency - bitcoins are worth USD 421.7 billion. Few most famous cryptocurrencies traded online are mentioned below:
- Bitcoin (BTC): It is one of the most prominent and valuable type of cryptocurrency. It is also supposed to be an original cryptocurrency. Created in 2009 as open-source software, Bitcoin allows users to make a user-to-user transactions.
- Ethereum (ETH): After bitcoin, this has the second largest value in the market. ETH was created in 2015 and currently offers an alternative to bitcoin. It allows tracking digital currency transactions. Its blockchain allows a decentralised array of financial products which can be used by anyone in the world.
- XRP: A digital asset built to make a payment, XRP is an open-sourced virtual currency. It works on decentralised blockchain technology on the XRP ledger and settles the transactions in about 3 to 5 seconds. The money can be used to source liquidity in cross-border transactions.
- Tether (USDT): In the cryptocurrency market, the volatility is often experienced. Therefore, Tether was created to offer a stable option in the market to smoother the price fluctuations. Tether's price is directly connected to the cost of the US dollar.
- Litecoin (LTC): Launched as an alternative to Bitcoin, this currency soon became popular. Similar to other cryptocurrencies, no central authority is controlling the money. However, it is faster than bitcoin in terms of transaction time.
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How to protect your funds while buying cryptocurrency?
Cryptocurrencies are popular for multiple reasons. Many people believe that as the world is becoming more and more reliant on technology and digital space, cryptocurrencies will offer a great alternative to the real currencies.
People also like to buy digital money because there is no interference from the government or central bank. Banks have reduced the value of money via inflation in the past. Many banks in the world are currently planning on bringing their own digital currencies. Cryptocurrencies are legal in the United States jurisdiction; however, it is still not in many countries. Therefore, it is imperative to protect your money from fraudsters.
Thorough due diligence is always recommended. Check the company prospects and see who owns the company. It is a good sign if major investors are showing interest in it.