Technology has changed the way people make payments, as many consumers and companies no longer prefer cash. They opt for cryptocurrency. You might have heard about Bitcoin countless times. It was the first cryptocurrency, so it has been around for a while. Besides, it’s the most popular coin.
Today, in 2021, there are over 8,000 cryptocurrencies. The number could increase even further since programmers and financial experts now understand the cryptocurrency world and are developing more to cover the original coin’s perceived deficiencies.
What is cryptocurrency? The simplest definition of cryptocurrency or crypto is a digital medium of exchange based on blockchain.
The term “blockchain” describes how records are created and recorded. The payment system relies on ordinary individuals to verify transactions. It then timestamps and records them into “blocks,” which secures cryptocurrencies. As the process continues, a continuous chain of blocks forms.
Before the current relatively widespread adoption of cryptocurrencies, there were several attempts to develop decentralized money. They didn’t gain much traction. Experts explored this idea in the Netherlands and the United States in the early 1980s. David Chaum invented DigiCash, but it failed too in the 1990s.
Other entities such as PayPal took a hybrid approach. Instead of creating new types of currencies, they came up with digital money, the exact equivalent of fiat currency. The past failures inspired the payment processor.
However, the concept of cryptocurrency that Wei Dai described in 1998 didn’t become real until 2009. An anonymous author or group of people using the pseudonym Satoshi Nakamoto released a white paper detailing blockchain and Bitcoin’s building stones.
This document introduced the “triple-entry” book booking system known as blockchain that Bitcoin runs on up to date. As the name suggests, it requires three people to agree on any new transaction. The parties should be the sender, the receiver, and another participant in the Bitcoin network.
Once verified, the transactions are added to the blockchain. This increases trust, as users can trace each transaction to a specific wallet. Nonetheless, it allows for a high level of anonymity. You may not know the owner of the wallet.
Currently, cryptocurrency exchanges are trying to minimize anonymity to comply with anti-money laundering and anti-terrorism regulations and laws.
Bitcoin was valued in 2010.
Someone swapped 10,000 BTC for two pizzas, assigning a monetary value to the coins for the first time.
Today, the coin’s value has increased to see its market capitalization hit figures never imagined a few years back. In March 2021, Bitcoin’s market cap surpassed the $ 1 trillion mark.
That’s the origin of cryptocurrency.
Due to Bitcoin and blockchain technology’s success, rival cryptocurrencies began to emerge in the global marketplace as early as 2011. Most of them try to improve the original BTC design by offering more privacy, better speed, and the likes. Among the first names to emerge after Bitcoin were Litecoin and Namecoin.
While cryptocurrency faces many challenges, it’s likely on track to widespread adoption. It may take a slightly different form in the future due to growing pressure from regulators.
You can use cryptocurrencies in the following ways:
If your retailer or anyone accepts cryptocurrency as a medium of exchange, you can use it to pay them. To send the payment, both of you must have compatible cryptocurrency wallets. In other words, if you have Bitcoins in your digital wallet, the receiver’s wallet should also be able to hold the coins.
To transfer the funds, you can enter the recipient’s address manually or scan their QR code. From experience, the transactions are validated and processed almost instantly.
If your retailer or receiver doesn’t accept cryptocurrency, you can use a crypto debit card like BitPay.
Cryptocurrency is volatile, making it a risky but viable investment. You can purchase the coins on an exchange like Coinbase or a peer-to-peer network like LocalBitcoins.com. Some of the platforms charge exorbitant fees, so you need to be on the lookout, especially if you’re a beginner.
Some exchanges charge about 0.5% on purchases and a flat fee ranging from about $1 to $3. If you’re a prominent investor, this may not scare you. For others, they may need to consider looking for a more affordable alternative.
Once you buy the coins, you manage them as you would do with a mutual fund or individual stocks. When the investment value increases up to the desired level, you sell the coins at a profit.
Note: Before trying this out, be sure you understand the associated risk and expert ways to mitigate it.
To trade in cryptocurrency, you can join a peer-to-peer marketplace. Here, you buy cryptos at a discounted rate and sell them to your customers.
As already stated, using cryptocurrency can be extremely risky if you don’t know how to choose the best exchange to swap your coins. To find a suitable cryptocurrency exchange and prevent this, you can use the tips provided below:
When you work with a credible exchange, you’re assured of the safety of your cryptos. Ensure you choose a platform that has been serving customers for several years. Scams typically don’t last long in the market. Moreover, check customer reviews on various independent sources and find out whether the exchange is responsive to customers’ needs or not.
Crypto exchanges have different fee structures, and you shouldn’t ignore this since you want the best deal. Consider how much network fees, conversion fees, or taker fees they charge. If they charge a small fixed cost, you might go for it if you want to swap large sums. However, this might not be the best option if you know another credible exchange that charges a smaller fraction of the total amount of the coins you swap.
Your cryptocurrency exchange’s purchase method might also add to the overall cost of the transaction. If the exchange requires you to use Paypal, consider whether your account is eligible to receive the funds before proceeding. It would help if you also considered other related costs.
Remember that you’re better off with a cryptocurrency exchange that processes transactions instantly than one that takes days and weeks.
Cryptocurrencies let you buy goods and services whenever you want. You can also trade and invest in these coins. Once you choose a secure cryptocurrency exchange and open or buy a wallet, you’re set to start using them.