“You can’t find returns in Investments you haven’t made” – Clayton Christensen
By : Shashank Suresh
Cryptocurrency is a form of digital money that is decentralized and based on blockchain technology. Cryptocurrency is a type of online payment that may be used to buy and sell products and services. Many businesses have created their currencies, known as tokens, that can be exchanged for the goods or services that the business offers. Consider them to be arcade tokens or casino chips. To use the item or service, you’ll need to convert actual money for cryptocurrency. Blockchain is the technology that enables cryptocurrency to function. Blockchain is a decentralized system that organizes and records transactions across multiple computers.
Before starting to invest in Crypto, it’s important to understand the technology behind it.
A blockchain is a decentralized, open ledger that stores transactions in code. In practice, it’s similar to a chequebook that’s spread among thousands of computers all over the world. Transactions are stored in “blocks,” which are then connected to previous bitcoin transactions in a “chain.” Everyone who uses a cryptocurrency has their copy of this book on a blockchain, which creates a unified transaction record.
Each new transaction is logged by software as it occurs, and every copy of the blockchain is updated with the new information at the same time, ensuring that all records are equal and correct. Each transaction is validated using one of two major validation approaches to avoid fraud: proof of labor or proof of stake.
Proof of Work vs Proof of Stake
Proof of work- Proof of work is a method of verifying transactions on a blockchain in which an algorithm provides a mathematical problem that computers race to solve.
Proof of stake- To reduce the amount of power necessary to check transactions, some cryptocurrencies use a proof of stake verification method. With proof of stake, the number of transactions each person can verify is limited by the amount of cryptocurrency they’re willing to “stake,” or temporarily lock up in a communal safe, for the chance to participate in the process.
Cryptocurrency vs. Fiat Money
The medium of Exchange: Fiat money and cryptocurrency differ in that fiat money is a physical, or conventional, means of exchange, whereas cryptocurrency is a digital means of exchange. Fiat currency is more secure than cryptocurrency since it is guaranteed by the government and money transfers can be monitored. In crypto, transactions may be made anonymously.
Backing: The government backs fiat currency, which might take the form of actual money or be represented electronically. A cryptocurrency is a decentralized, digitally encrypted money that is neither controlled nor tied to any authority.
Supply: Fiat money has an infinite supply, which means that central banks may produce as much as they want. Many cryptocurrencies include a supply restriction, ensuring that only a certain amount of coins are ever available.
How to invest money in Crypto
The process of investing money in Crypto has become fairly easy and friendly for new users. There are various apps available in Play Store/ App Store which allow people to add money through INR and use it to buy Crypto. Most apps require a User to finish KYC (based on Govt regulations) and then they can start investing.
Other ways are a little complicated and not recommended for new users, including exchanging currencies through BTC to buy newer cryptos that might not be available for purchase through INR. But most major cryptos are available for purchase through INR and a new user should focus on the major cryptos.
Some of the best apps to start investing in Crypto in India are:
- CoinSwitch Kuber
Should you invest in Crypto?
People often question how safe Crypto is. Since it’s a new and fairly unknown technology, people worry about safety. However, Crypto is a great form of investment. It is only getting more and more popular and governments are slowly starting to understand the value of Crypto and it will only rise in the future.
However, due research and market analysis should be done before investing anything. It’s also very important to diversify your investments. If you have 10000Rs for example to invest, use half of it on Mutual Fund SIPs, use 2500 for Stocks and 2500 for Crypto. That way, you have diversified your portfolio and minimized your risk.
If you’re new to the market, you should only invest in fundamentally strong cryptos which exist in the market for long and are comparatively stable. Some of the most popular crypto for new investors are:
- XRP (Ripple)