Cryptocurrency is the new buzzword that’s disrupting the financial sector. Not only is it becoming increasingly popular, but it is being hailed as the future of currency.
But what exactly is cryptocurrency?
Let us uncover some details:
What is cryptocurrency?
Traditionally, trading can be defined as buying and selling of goods and services or assets in exchange for some amount of financial instrument like paper currency or in simple words money. These assets are usually exchanged between two parties for a fixed amount of money that they can come to agree on after negotiating.
However, the thing to notice here is that in the context of financial markets, the flow of money is controlled by authorities like the government and banks.
But in the digital world, and in the absence of two parties physically, a form of payment channel without being controlled by anyone authority. Instead, the form of payment operates under decentralized financial networks. In simpler terms, you can say, cryptocurrency is a virtual currency.
How is cryptocurrency created?
Cryptocurrencies are created using cryptographic techniques. It is a secure channel and gnarly impossible to counterfeit or duplicate. Many cryptocurrencies operate on decentralized networks that are based on blockchain technology.
Blockchain is like a digital ledger enforced by a number of computer networks. A more defining feature of cryptocurrency is that it is usually issued by one owner and is immune to government manipulation. The elimination of mediators makes the process faster and relatively cheaper.
Experts believe that the decentralized structure allows investors to utilize their cryptocurrencies without collapsing or being affected by outside market conditions meaning, no matter the inflation rate, investors can keep making profits.
Why are cryptocurrencies so popular?
Cryptocurrencies continue to proliferate with the advent of the internet. In fact, market research shows that there are more than 16,600 different cryptocurrencies- with a total value estimated to be around $1.9 trillion as of 10 Jan. 2022.
But the twist is that people are investing in cryptocurrencies for a variety of reasons. Let us take a look at the most popular reasons:
Investors believe cryptocurrencies such as bitcoin might be the future of currency. Cryptocurrency is underpinned by cryptographic systems enabling secure payment options without the interference of third parties or intermediaries.
Advantages of cryptocurrency
Cryptocurrencies were introduced in order to offer a safer payment channel to financial infrastructure, but the way they have been revolutionizing is beyond practical implementations. At the current stage of development, cryptocurrencies offer numerous advantages including:
Free from impacts of inflation
Inflation is one of the reasons behind markets are always considered to be unstable grounds. However, cryptocurrencies offer a new paradigm for money. They are free from the impacts of how outside market conditions are. In this system, there are no mediators. And since there are no intermediaries, the flow of payment does not experience failure such as experienced by financial institutions in the United States in 2008.
Cryptocurrencies are stored and developed by miners. They keep records of accurate flow. Cryptocurrencies also promise to make fund transfer easier directly between parties. The decentralized structure is free from interference.
Cost-effective mode of transaction
It is easy to send and receive money through cryptocurrency across borders. With the help of this system, the transaction fees required to be paid by users reduce to almost negligible amounts. You don’t need agencies like VISA, or Paypal to verify a transaction and pay them any charges.
Currency can be exchanged smoothly
Crypto can be bought using many currencies instead of any one channel like the US Dollar. So, if you don’t have bitcoin to pay for a service, you may pay for the service using a crypto wallet that works in any country.
Secure and private
Privacy has always been a concern for traders. The blockchain ledger heavily relies on mathematical puzzles which are hard to decipher. Therefore, it makes cryptocurrency an extremely safe mode of payment in electronic transactions.
Steps to invest in crypto trading
As a beginner, mentioned below are steps for you to follow if you want to start crypto trading:
Open a stock brokerage account: In order to start crypto trading, you must open an account by providing the necessary information.
Fund your account: After creating an account in any cryptocurrency exchange, fund your accounts. Use your debit card and transfer some amount to your wallet. This will be your digital wallet.
Select the cryptocurrency to deal in: There are several cryptocurrency options in the market, but most traders deal using Bitcoin and Ethereum. Another popular cryptocurrency option is Altcoin, but it is yet to see a rise.
Choose a proper strategy: Picking a trading strategy is crucial. Utilize the fundamental analysis to achieve high profits. If you are a beginner, you may follow a crypto trading course.
Secure your stored cryptocurrency: Cryptocurrencies are prone to hacking. Therefore, store your crypto in a safer place. You can choose a digital wallet or hardware.
Types of cryptocurrency
The top 10 largest trading cryptocurrencies by market capitalization are:
- Binance Coin
- USD Coin
Bitcoin is the most popular cryptocurrency. But each cryptocurrency has a different function and value. For example, Ethereum has recently begun to take a lead in the market. Similarly, XRP is mostly used by banking organizations to facilitate transfer payments between parties residing geographically apart.
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- Highly decentralized model
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We hope that you know the basics of crypto trading, including what it is, its structure, types, and steps to start crypto trading. However, if you think you want to learn more about cryptocurrency trading and blockchain technology, check out our other blogs for more information.