Cryptocurrencies is the new buzzing word in today’s world and millions of investors are looking at cryptocurrencies as their next investment opportunity.
Below is a search trend of the word cryptocurrency for the last 5 years, and we can see from the below graph how the trend has improved from end of 2020, and it’s rising year on year.
I am writing this blogs as many on my students asked me about cryptocurrencies, so here is a guide which will help you get a deeper perspective on cryptocurrencies.
What is Cryptocurrency?
Cryptocurrency is a decentralised digital currency which is build on blockchain technology. Cryptocurrencies don’t rely on banks to verify transactions, it’s a peer to peer system which allows anyone to send and receive payments through digital wallets.
As of 2021, there are about 106 million investors who are using cryptocurrencies. Also, it’s estimated that by 2025, the blockchain market will grow by $39.17 billion
How Does CryptoCurrency Work?
The cryptocurrencies are created through a process called as mining which involves usage of specialised computer processors to solve mathematical puzzle.
Cryptocurrencies are built on blockchain technology, which allows you to maintains the ledger when a crypto is moved from one wallet to another.
What is Blockchain?
A blockchain is a distributed ledger which records each and every transaction happening in the crypto space.
Each transaction in the crypto space is checked using one of the following validation techniques:
- Proof of Work
- Proof of Stake
Proof of Work
Proof of Work is a process of verifying transactions on a blockchain in which an algorithm provides a mathematical problem that computers try to solve.
Proof of Stake
Proof of Stake is a process in which each user is limited in verifying transactions by the amount of cryptocurrency they’re willing to stake.
Proof of Stake excludes mathematical problem solving process, so it’s more efficient that Proof of Work, allowing faster and smoother verification and confirmation times for transactions.
What are the Important Terms used in Cryptocurrency Space?
Decentralized: Decentralized means the currency is not backed by any central bank of any financial institution
Wallet: It’s a place where you store your cryptocurrencies
Exchange: Exchange is a place where you can buy and sell any cryptocurrency
Distributed Ledger Technology (DLT): It’s a decentralised digital record, the records can be stored across multiple locations simultaneously. Blockchain also functions as DLT but it serves multiple purposes.
What are Different Types of Cryptocurrencies?
The first one and the most popular one, Bitcoin was founded in 2009 by Satoshi Nakamoto. It is currently trading at $30,114 (as on 15th May 2022)
Ethereum is the second popular cryptocurrency after Bitcon. Ethereum was developed in 2015, it’s commonly know as ETH and is currently trading at $2,078 (as on 15th May 2022)
Tether is another cryptocurrency which was founded in 2014, it’s commonly know as USDT, and is currently trading at $1
Binance Coin (BNB)
Binance Coin was developed in 2017, it’s commonly know as BNB, and is currently trading at $307.89 How to check Cryptocurrency Current Trading Price?
There are multiple website through which you can check their current trading price which includes
What are different Crypto Exchanges?
There are different crypto exchanges which you can use to do crypto trading including
So crypto is an amazing space to be in but be careful as the volatility is very high, so you need to have deep understanding before investing into the crypto world or consult crypto advisors who can help you get started with your crypto investing journey.