6 Things You Need to Know About Cryptocurrency  - Coindoo

6 Things You Need to Know About Cryptocurrency 

Editorial Team Avatar
Jun 11, 2020
6 min reading time

We have all heard the term cryptocurrency, but how many of us actually understand how it works? Better yet, how does regular currency work? We, the average people are very much used to the concept of money, without deeply researching how it works. And the word “cryptocurrency” can drive us nuts just because it’s confusing and we don’t really grasp the concept. So let’s turn all that around and see what we are dealing with here. Is it the currency of the future, or what? Here are a few key points you should know. 

1. What Is It and How Can We Use It?

Source: TheNational

A cryptocurrency is a form of payment like any other, but it doesn’t have any physical basis to it, exists exclusively virtually and is not centralized and controlled by a single individual or organization. It’s value entirely depends on the supply-demand situation and there are a few thousand different cryptocurrencies currently in existence, the most famous of them being Bitcoin and Ethereum. You can’t use it without internet. Now there’s a shocker, right? First and foremost, this is a currency that can only be used online. So if you are considering any kind of transactions, get your connection in order. Unfortunately, we have interruptions or failing reception at home or at work. But it’s the last thing you want to happen when you are dealing with money transactions. If this problem is holding you back, you might want to consider getting a phone signal booster and then concentrating on your main task. You can get a cell signal booster for home, or for the workplace. Whatever you need. 

So let’s return to our muttons.  It’s a bit tricky to unload cryptocurrency. Meaning you can buy it easily, but once you want to spend it, that might pose a challenge. Despite the fact that you can shop with cryptocurrency and purchase various services, there are still many limitations from a number of companies. But you can always exchange it for other non-crypto currencies using special apps and online tools. 

2. What’s a Blockchain and How Are They Created?

Source: Saga-NewFrontierGroup

Blockchain is sort of a record-keeping “service” which guarantees no tokens are spent twice. Each block represents one transaction and carries all of the information about it. Before this blockchain is created, each person willing to make a transaction has to send a request. After the “peers” evaluate the request and confirm it,  a block is created, carrying a “hash”, which is an individual code with unique info on every single transaction. This solves the problem of double-spending and ensures the record of the transaction cannot be erased or altered.

3. How to Obtain Cryptocurrency?

As we mentioned before, you can buy cryptocurrency, or you can “mine” it yourself. Meaning you can solve a cryptographic puzzle to create a cryptocurrency token ( a Bitcoin, for example) and as it requires quite a lot of computer power, the number of tokens you can create in a specific time frame is very limited. Mining is an exhausting process that requires time and money, and last, but not least, technical inclination. For many people, this process is way beyond their capabilities and knowledge. But for others, this can become an obsession, not unlike the Gold Rush.  

4. Should You Invest in Cryptocurrency?

This is a question no one can give a foolproof answer too. There are many different opinions concerning this point, so let’s be honest. The downside is, cryptocurrencies don’t generate cash flow, so many investors would not consider it to be a good destination for a large investment. Plus, as of today, they have no stability. And the exchange rate is jumping up and down every few years. Are they worth the trouble in the long run? That’s for you to decide. 

5. Dangers of Cryptocurrency.

As we mentioned before, cryptocurrencies are not typically centralized. This was a thought-out move to prevent a person or a company from abusing the system in their favour. But scammers are still finding ways to sidestep the law and use cryptocurrency to their own advantage. We’ve talked about mining before and that’s a stage of the process that’s prone to ‘highjacking’. Scammers can basically use your phone or computer power to mine tokens for themselves, sidestepping you completely. So you won’t even know that your device is being used for mining. It can be as easy as visiting a suspicious website. So if your device performs slower than usual, or the battery life has shrunk considerably without apparent reasons, clean out the device and consider a powerful antivirus software. 

6. How to Dodge the Bullet?

If you are entering the world of cryptocurrency, naturally, you are going to need tools to protect yourself. First and foremost, if you are considering buying cryptocurrency from companies on ICO bases (Initial Coin Offerings), read everything carefully. This might be much more profitable for them than for you. ICO is a way for companies to expand and grow by selling you cryptocurrency. Something like public funding. You buy tokens – they use your money to expand. So again, read thoroughly and do your research. Are there any big investors involved? Is the information provided to you detailed enough?

Source: Medium

In any case remember, that you should invest only in systems you fully grasp and understand. So do your research carefully and make sure you have all the ends covered before you make a final decision. 

Cryptocurrency is still very young and has a lot of stability still to achieve. But nonetheless, it is a genius system that can offer our world an alternative approach to money, investing, banking and purchase in general. So it’s a good idea to dip into the subject, even if you are not looking to invest or buy. Keeping up with new technology is a great rule of thumb. This way you will always be in touch with the “now” and will be able to predict the “tomorrow”! 

Featured image: The Telegraph

* The information in this article and the links provided are for general information purposes only and should not constitute any financial or investment advice. We advise you to do your own research or consult a professional before making financial decisions. Please acknowledge that we are not responsible for any loss caused by any information present on this website.
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