what-is-cryptocurrency

What Is Cryptocurrency? Ridiculously Easy Guide For Beginners 2021

What is cryptocurrency? A cryptocurrency (also called crypto) is simply digital money that you can use to buy different services and goods from various firms. However, it differs from using the norm “money” by using an online ledger with solid cryptography to secure all online activities and transactions.

The most well-known cryptocurrency, Bitcoin, has had volatile price moves last 2 years, touched an all-time high of around $65,000 just a few months ago before losing almost half its value in May. Without any further delays, let’s begin our article by answering the question, what is cryptocurrency?

What Is Cryptocurrency?

A cryptocurrency is a sort of payment that you can trade online for services and products. Many businesses have announced their currencies (often called tokens), and these tokens can be exchanged particularly for the goods or services that the same firm offers. You’ll need to exchange real money for getting cryptocurrency to obtain the goods or services.

Cryptocurrencies operate using a technology called a blockchain. Blockchain is a decentralized technology developed across many computers that run and record all transactions. Part of the attraction of blockchain technology is the confidence in its security.

what-is-cryptocurrency

How Many Cryptocurrencies Are There & What Are They Worth?

There are 10,000+ different cryptocurrencies traded publicly, according to CoinMarketCap, which is a market research site. Nonetheless, cryptocurrencies continue to increase, growing money through initial coin offerings (or ICOs). 

Also, the total value of all cryptocurrencies on May 30, 2021, was more than $1.5 trillion — falling from the April high of $2.2 trillion, according to CoinMarketCap. Yet, the most popular crypto (Bitcoin) total value was secured at about $653 billion — falling from the April high of $1.2 trillion.

Why Are Cryptocurrencies So Famous?

Cryptocurrencies attract their followers for various reasons. Here are some of the most common:

  • Followers believe cryptocurrencies such as Bitcoin are the future currency and are rushing to buy them presently, presumably before growing to be more expensive.
  • Some followers love that cryptocurrency eliminates central banks from controlling the money supply since, over time, these banks favor reducing the value of the currency through inflation.
  • Others like the blockchain technology behind cryptocurrencies because it’s a decentralized processing and recording system and has the ability to be more reliable and secure than standard payment methods.
  • Some speculators fancy cryptocurrencies because they are increasing in value and don’t have any interest in the currencies’ long-term recognition to transfer money.

Are Cryptocurrencies A Reliable Investment?

Cryptocurrencies may increase in value rapidly, but many investors don’t see them as actual investments. Why? Just like real money, cryptocurrencies don’t generate cash flow, so for you as an investor to profit, another investor has to pay more for the coin than you did.

Some investors called it “the greater fool” theory. Compare that to a successful and well-managed business, which raises its value over time by increasing the cash flow and profitability of the process.

Moreover, cryptocurrencies such as Bitcoin or Ethereum might not be 100% safe. Some well-known voices in the finance community have suggested would-be investors steer away from them. But are they not safe? This question still doesn’t have a clear answer.

Nevertheless, the well-known investor Warren Buffett equaled Bitcoin to paper checks and said, “It’s a very powerful way of transmitting money, and you can do it anonymously and all that. A paper check is a way of transferring money too. Are paper checks worth a whole lot of money? Just because they can transfer money?”

Also, the first step for any cryptocurrency to be the future currency needs to be stable first. Therefore, for anyone who believes that cryptocurrencies such as Bitcoin or Ethereum are the future currency, you should understand that this crypto needs stability to determine a fair price for goods. Bitcoin and other cryptocurrencies have been highly volatile throughout their records. 

For example, while Bitcoin traded at close to $17,000 in December 2017, its value dropped to as low as about $3,400 in December 2018. By December 2020, it was trading around $19,000 before it jumps over $40,000 in January 2021 at record levels again.

This high volatility in price creates an obstacle and doubts about cryptocurrencies. So, suppose bitcoin will be worth much more in the near future. In that case, investors are less likely to circulate them today the same as traditional money, making cryptocurrencies less attainable as a currency. Why waste using a bitcoin when it might be worth 10x times the value within 10 years?

what-is-cryptocurrency

Are Cryptocurrencies Legal?

Cryptocurrencies are legal in so many countries such as the U.S. and Europe, though China has recently banned their use, and conclusively whether cryptocurrencies are legal and permitted depends on each country. However, I believe cryptocurrencies will be stronger than ever, and many countries like China will be forced to permit their use.

Moreover, think about how to shield yourself from fraudsters who perceive cryptocurrencies as an opportunity to deceive investors.

How Do I Buy Cryptocurrency?

While some popular cryptocurrencies, such as Bitcoin, Ethereum, and Cardano, are possible for buying with traditional money, other cryptocurrencies demand that you pay with Bitcoins or other cryptocurrencies.

Nonetheless, to buy cryptocurrencies, you’ll require a “crypto wallet.” Fundamentally, it is an online app that can maintain your cryptocurrency. Usually, you create an account on an exchange app, and then you can buy cryptocurrencies with real money.

Binance and Coinbase are popular cryptocurrency trading exchange apps to create a wallet and buy/sell any cryptocurrency. Furthermore, many online brokers began to offer cryptocurrencies as they see more opportunities to gain money, such as eToro, Robinhood, Webull, Tradestation, and Sofi Active Investing.

How Do I Protect Myself From Any Fraudulent?

Protecting yourself from fraud is vital before investing and buying cryptocurrencies. Unfortunately, many people see this as an opportunity to “steal” your money. Therefore, if you decided to purchase cryptocurrencies in an ICO, you have to read everything about the company, such as:

  • Who is the owner of this company, and their background? An identifiable and famous owner is a positive sign.
  • Are there other notable investors who are investing in this company? It will be a genuine sign if other reputable investors are investing in this currency.
  • Will you own a part of (a stake) the company or just currency? This is essential because owning a stake implies that you get to partake in its profits (you’re an owner), while purchasing tokens or currency just means you’re allowed to use them.
  • Is the targeted currency already developed, or is the company attending to allocate money to create it? Well-developed crypto is less risky than investing in a new company.

Of course, you will have to work hard to search through all of this information. However, the more detail it has, the greater your chances to reduce risks with its legitimacy. Yet, legitimacy doesn’t determine the currency will succeed over time because that’s a totally different topic, requiring a lot of market savvy.

But away from those concerns, just owning cryptocurrency endangers you to the risk of theft, as hackers try continuously to infiltrate the computer networks that keep your assets. But the security industry is growing faster worldwide as the demand is high to protect such assets everywhere.

what-is-cryptocurrency

Should You Buy Cryptocurrencies?

Cryptocurrency is an astonishingly uncertain and volatile buy. Also, stock exchanging of established companies is commonly less risky than buying cryptocurrencies. But the return on investment with cryptocurrencies is higher. After all, the higher the risk, the higher the gains.

What Online Brokers Offer Cryptocurrencies?

After answering an important question, what is cryptocurrency? Let’s talk about some online brokers trading cryptocurrencies. 

Many online brokers offer cryptocurrencies, and every day more online brokers are improving their offerings by adding more assets. The following well-known brokers offer cryptocurrencies.

  • Binance: The #1 online broker we use, and you can access to buy/sell 50+ cryptocurrencies.
  • Coinbase: Coinbase is almost the same as Binance, and we love it all the same, and you can access to buy/sell 50+ cryptocurrencies.
  • SoFi Active InvestingThey Offer around 20 cryptocurrencies for trading, including the popular ones such as Bitcoin, Ethereum, and Litecoin.
  • TradeStationAnother online broker trading 5 of the popular cryptocurrencies.
  • Webull: They Offer four cryptocurrencies for trading: Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
  • eToro: eToro is a successful trading platform with access to more than 18 cryptocurrencies as they keep adding more cryptocurrencies to their stockpile.
  • Gemini: Ability to trade 40+ cryptocurrencies.
  • Robinhood: 7+ cryptocurrencies, including Bitcoin, Ethereum, and Bitcoin Cash.

Best Cryptocurrencies By Market Capitalization

According to CoinMarketCap, the following are the ten largest trading cryptocurrencies by market capitalization. (Updated on June 27, 2021)

  1. Bitcoin: $639.9 billion.
  2. Ethereum: $232.5 billion.
  3. Tether: $62.5 billion.
  4. Binance Coin: $43.8 billion.
  5. Cardano: $41.9 billion.
  6. Dogecoin: $32.9 billion.
  7. XRP: $29 billion
  8. USD Coin: $25.9 billion
  9. Polkadot: $14.1 billion
  10. Binance USD: $10 billion

Investing in stocks, cryptocurrencies, and other Initial Coin Offerings (“ICOs”) is highly risky and speculative. This article is not a recommendation by iCryptoApe or the writer to invest in stocks, cryptocurrencies, or other ICOs. Because each person or individual’s circumstances are unique, therefore, a qualified professional and/or a financial advisor should always be consulted before making any financial decisions and/or trading or buying stocks, cryptocurrencies, or other ICOs. iCryptoApe makes no representations or guarantees as to the accuracy or timeliness of the information included within.

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George Papazov
2 years ago

Now a days Cryptocurrency is ruling the future economy. Forex Currencies are really praiseworthy. Thanks for this great article.