Cryptocurrency at a Glance
Money is something we all want to grow and investments are a great way to multiply our hard earned money. There are various ways like stocks, FDs, property, Forex just to name a few. One of the very trending new way to invest is investing in crypto currencies which is very high return yielding but could be very dicey too.
What is cryptocurrency
A cryptocurrency is a medium of exchange, like our ordinary currency such as a US dollar or an Indian Rupee, but is digital and uses encryption techniques both for the creation of monetary units and to verify the transactions. It is a non tangible currency, great to buy stuff at a lower cost wherever possible to do so, but has no certainty of its own cost.
Just like money that we use in our daily lives, cryptocurrency is also used to buy goods and services online; but the similarity ends here. With cryptocurrency you cannot purchase everything but only few selected products and that too only on the platforms that allow you to do so. It is a digital or virtual currency that uses cryptography to make secure transactions.
One of the benefits is also that the transactions are almost confidential so if you are eyeing that one commodity discreetly without letting your spouse or parents about it you know what currency to use. 😊
How safe is cryptocurrency
As such cryptocurrencies are very safe as they use cryptography for transactions. Operating on block chains they ensure secure transactions. Just like we use bricks for constructions, blockchains use cryptography, computers and electricity to build the blocks, rather than stone and cement.
Every block is unique in its code, called hash, and is different from all other blocks. Each block is added chronologically. The new block, with its own unique hash, succeeds the old block. In fact block chain is the technology that enables the existence of cryptocurrency
Block chains uses cryptography (based on highly complex algorithms), to ensure unique transactions. It protects information so that the data is discreet and can be read by only those for whom the information is intended.
Every block in the blockchain has a specific code that distinguishes itself from all other blocks in existence. This unique code is called a hash. Blocks of information being added to a blockchain are added chronologically. A new block is added directly after the last block created, which also has its own unique hash.
Which is better cryptocurrency or stocks or gold or fiat money
*While fiat money investments like FDs remain the safest bet where you might earn little but the returns are fixed. Investments like gold or stocks run a risk but may give you higher returns if invested wisely. Cryptocurrency is the most risky one of the lot and can be invested only for the amount you are prepared to lose. However the risk factor in crypto shouldn't be a deterrent for investment as returns in crypto are astonishingly high. For the ones who have a high tolerance for risk; a well diversified portfolio which has only certain percentage of money invested in crypto that even if lost doesn't hurt the pocket, is safe enough.*
Nobody owns or regulates a cryptocurrency. Its’ value is not subject to a country’s political whims or a central bank’s monetary policy.
Is Crypto the future
Unlike fiat money which is fully backed by the government, with the proper mechanism, to issue a currency right from printing to tracking transactions controlling counterfeit an so on; cryptocurrencies are not legal tender in any jurisdiction.
As of now, no cryptocurrency is fully backed by the government. Unlike the conventional currencies that are issued by the monetary authorities of any country’s government; cryptocurrencies are not controlled or regulated and their price is determined by the supply and demand of their market.
Still there is a strong belief prevailing that digital currency is the future.
Cryptocurrencies don’t use middlemen. The transactions take place on a secure network between just the two people on one to one basis. As the need for financial institutes like banks is eliminated; so transactions are usually easier, faster and require less or no additional transaction fees.
Crypto currencies cannot be stolen or in this case is almost impossible to get hacked due to block chain technology.
Many believe the change is round the corner and could be as soon as by the end of this decade. The way of storage of money in a common man’s pocket will change. Firstly the pockets are likely to be replaced by the smartphones 😊 and that money you store might not be just crypto. The countries might have their own digital money and governments are working on that including the Indian government.
There have been reports of RBI introducing a digital rupee in near future, which is likely to have better odds of outlasting cryptocurrencies.