Cryptocurrency is the new rage in town. Everyone is buying, wants to buy, and at the very least wants to know about what cryptocurrency is. Be it the rising price charts of various cryptocurrencies, the returns generated by someone known, or the sheer curiosity around the technology, the interest in cryptocurrency among the general public is increasing by the day. Here is all you need to know about Cryptocurrency:
What is cryptocurrency?
A cryptocurrency is a digital or virtual currency that is encrypted and is not backed by any central authority, government, or bank. The basic premise of cryptocurrency is that no government or central authority should have control over the currency. As a result, cryptocurrency is decentralized in nature wherein the inherent blockchain technology is the differentiating factor between traditional currencies and cryptocurrencies. While Bitcoin has been a pioneer in cryptocurrencies, there are over 11,000 cryptocurrencies that exist today.
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Cryptocurrency is made of two words i.e. ‘Crypto’ short for ‘Cryptography’ which means encryption and ‘currency’ which can be used for spending or making payments. A key feature of cryptocurrency is that since they are not issued by a central authority or a particular government, they do not have much control over various factors involving cryptocurrency.
What is Blockchain?
Blockchain technology is a distributed ledger that is enforced by a network of systems that maintain records of all transactions involving cryptocurrencies. This is a public ledger that is accessible to all and has unique codes for each transaction which makes it nearly impossible to duplicate or recreate.
Blockchain has two elements – ‘blocks’ and ‘chain’ wherein the data is stored in various blocks in a network of computers wherein a new block is added in a technologically-enabled framework as soon as their earlier block is filled with data.
Blockchain technology has the potential to provide many use cases in healthcare, finance, banking, logistics, and law among others. Experts also believe that blockchain can be a revolutionary solution in the voting systems of various nations. Having said that, it is still in its early days and needs to stand the test of time and cross several hurdles as it aims for higher acceptance and popularity.
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Advantages and Disadvantages of Cryptocurrency
Like any other new concept or solution, there are several advantages and disadvantages of associating with cryptocurrency. Here are the key advantages and disadvantages of cryptocurrency:
| S.no | Advantages | Disadvantages |
| 1 | Decentralized in nature as compared to traditional currencies | Attracts elements involved in illegal activities due to its decentralized nature |
| 2 | Low processing fees as compared to traditional banking and finance systems | Price is highly volatile |
| 3 | Faster processing speed due to blockchain technology | Not regulated by any central authority |
| 4 | Asset class for portfolio diversification. | Still in its early days |
| 5 | Difficult to recreate or duplicate | Can be hacked, stolen and is open to cybercrime |
How to invest in cryptocurrency?
The most common avenue for investing in cryptocurrency is through crypto exchanges. There are many crypto exchanges like Coin DCX, WazirX, Coinswitch Kuber, etc that exist in India today. You can open an account with any of the crypto exchanges after doing your due diligence and use their service to buy cryptocurrency.
There are several popular cryptocurrency options like Bitcoin, Ethereum, Binance Coin, Litecoin, Solana, Cardano, etc that are popular among investors. Several cryptocurrencies exist today but you need to have a proper understanding of where you are investing and what are future growth prospects.
You should do your research before selecting the right cryptocurrency and exchange as per your requirements. As mentioned, cryptocurrencies are still evolving and are yet to see many changes along with way. Many experts label it as the highest risk and highest return category of the asset class.
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A good way to start would be to invest a small amount that you are willing to lose. This way, you will be able to take small steps in this crypto world and increase your exposure once you are comfortable with the nuances and working of the industry.
