Understanding the Concept of Cryptocurrency

You might be familiar with the names Bitcoin and Ethereum, but do you really know that these names can be used as a mode of exchange in everyday life? The tempting idea of becoming rich overnight might have crossed your mind often. And cryptocurrency gives you freedom to get benefit from it. In a most simple level, this digital currency is a virtual mode of exchange that doesn’t face the same problems as physical cash. So, let us understand all the basics of cryptocurrency, how it works, and how it can benefit you.

What is cryptocurrency?

Cryptocurrency is a form of digital currency that has gained traction over the last decade. Like any other currency, cryptocurrency is designed to be a medium of exchange. Since it is a digital medium of exchange, you must think of it as limited entries available in a database. For clarity, think of popular online games like Farmville. In this game, you must ensure that your farm thrives by planting seasonal crops, buying essential items (like tractors or pigs), and earning revenue. Your earnings in the game are represented in the form of coins, and these coins can be used to buy anything within the universe of the game. Cryptocurrency is similar in the sense that these are digital currencies too. The difference is that instead of using it in a video game, you use it in real life.

Now, that’s just one end of it. If we are thinking about these as limited entries in a database, then what is that database? The database runs on Blockchain technology. Through this multiple users or nodes monitor and update the entries in the database. This prevents any tampering or false information. It also ensures quick processes, transparency, and ease of payment. To understand how Blockchain functions, you can read our previous blog.

Another thing to understand about cryptocurrencies is that they have their own value. These values are not linked to traditional currencies. The value of different cryptocurrencies vary on the basis of demand and factors related to mining and availability.

Popular cryptocurrencies

Many people believe that Bitcoin and Crypto are the same thing, but this is not true. Bitcoin is merely a type of cryptocurrency. To be fair, this cryptocurrency is the most well-known one (and currently the most successful in terms of market value), which is why so many people make the mistake of thinking that Bitcoin is the only cryptocurrency worth looking at. However, the same way that there are many different types of traditional currencies (like dollars, yen, rupees, etc), there are different types of cryptocurrencies, each with varying values.

If you’re going to invest in cryptocurrencies (or are just trying to learn more about this new medium of exchange) the following are some types that you should know of:

Bitcoin (the first ever digital currency): the market cap for Bitcoin as of 03 November 2018 is $112,735,453,936, with a single coin being worth $6760.98.  

Ethereum (this is the fastest growing cryptocurrency after Bitcoin and allows builders to create apps – something that would not work with Bitcoin)

Ripple (unlike all the other cryptocurrencies, Ripple does not run on Blockchain)

Bitcoin Cash, Litecoin etc are other popular cryptocurrencies

This table shows the price, volume and market cap of popular cryptocurrencies. It was taken on 25 November 2018 from Coin Market Cap.

Using Cryptocurrencies in the Real World

Buying Goods

Currently, Bitcoin is the most accepted cryptocurrency, however that is changing. Apple recently authorized the use of 10 cryptocurrencies for purchases made in the App store, and many other organizations and merchants are following suite. Buyers can use cryptocurrencies on websites that accept them (such as Overstock, Newegg, Gift Off, Open Bazaar, and Bitify). Slowly, digital currencies are moving towards being the norm. However, it will take some time for them to become the main mode of all transactions all over the world, particularly in third world countries that may rely on paper currencies far longer than others.

Accepting As Payment

Businesses and individual consultants can use cryptocurrencies as a form of payment. Platforms like Maester Protocol allow individual consultants to offer their services on a per-minute rate and facilitate the instant payment for these services the minute their calls are over. Apart from this, using gateways like CoinPayments, CoinGate, Cryptonator, and BitPay can also help you receive crypto payments (without the added benefits of connecting you with potential clients, of course!).

Moreover, if you are wondering whether you can use these payments in your daily life, it pays to know that there are at least 1,800 Crypto ATMs located in 58 different countries.

Investing

People are looking at cryptocurrencies as viable investments as well. However, it is worth a mention that cryptocurrencies are quite volatile, with values skyrocketing one day and then dropping the next. It will help to speak to experts about cryptocurrencies before putting your money into them for long term investments. On the other hand, investors also argue that stock markets tend to rise and fall sporadically too. So investing in cryptocurrency is not without risk, but can prove to be a great investment if you play your cards smartly.

Are people actually using Cryptocurrencies?

While applications and the potentials of cryptocurrencies are all very interesting, the real question is – are more people adopting cryptocurrencies? Consider the following charts that show wallet address growths for Bitcoin and Ethereum and see if you can answer that question!

There are more than 24 Million Bitcoin wallet addresses currently while there are more than 31 million Ethereum wallet addresses.

Legality of Cryptocurrencies

Cryptocurrencies can be used in three forms: legal tender, commodities, and barter trade. Legal tender refers to coins or currency that can be used as payments. Different countries have difference stances on how cryptocurrencies can be used.

For instance, USA, Australia, Sweden, Switzerland, New Zealand, are some examples of countries where using cryptocurrencies for transactions is completely legal. In fact, the department of Treasuries in USA has been issuing different guides on how people can use cryptocurrencies. It is also used as a legal tender in the European Union.

On the other hand, some countries only allow trading and have do not allow cryptocurrency to be used as legal tender. For example, Canada and Vietnam allow cryptocurrency to be used as trading commodities.

Conclusion

Cryptocurrency certainly is the future of currencies. There are many benefits to cryptocurrency such as the fact that it runs on Blockchain technology, which makes it:

• Easy to monitor
• Tamper proof
• Transparent
• Quick (in terms of transactions)

As consumers, it is vital to understand how this currency is growing, and whether your country is pro or against it. Before you know it, laws and the current financial structure may change overnight, with completely new modes of payments and earning!