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You may 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 getting rich overnight may have crossed your mind often. And cryptocurrency gives you the freedom to take advantage of it. On a simpler level, this digital currency is a virtual mode of exchange that doesn’t face the same problems as physical money. 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 taken hold over the past decade. Like any other currency, cryptocurrency is designed to be a medium of exchange. As this is a digital medium of exchange, it should be considered as limited entries available in a database. For clarity, think of popular online games like Farmville. In this game, you have to make sure your farm thrives by planting seasonal crops, buying essential items (like tractors or pigs) and earning income. Your earnings in the game are represented in the form of coins, and these coins can be used to purchase anything within the game universe. Cryptocurrency is similar in the sense that these are also digital currencies. The difference is that instead of using it in a video game, you use it in real life.
Now, this is just one end. If we think of these as limited entries in a database, what is that database? The database works with 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 guarantees fast processes, transparency and ease of payment. To understand how Blockchain works, you can read our previous blog.
Another thing to understand about cryptocurrencies is that they have their value. These values are unrelated to traditional currencies. The value of the different cryptocurrencies varies based on 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 simply a type of cryptocurrency. To be honest, this cryptocurrency is the best known (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, in the same way that there are many different types of traditional currencies (such as dollars, yen, rupees, etc.), there are different types of cryptocurrencies, each with different values.
If you are planning to invest in cryptocurrencies (or are just looking to learn more about this new medium of exchange), the following are a few types you should know:
Bitcoin (the first ever digital currency): The market cap for Bitcoin as of November 3, 2018 is $ 112,735,453,936, with a single coin worth $ 6,760.98.
Ethereum (this is the fastest growing cryptocurrency after Bitcoin and allows builders to build apps, something that wouldn’t work with Bitcoin)
Ripple (unlike all other cryptocurrencies, Ripple doesn’t work 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 November 25, 2018 from Coin Market Cap.
Using cryptocurrencies in the real world
Purchase of goods
Currently, Bitcoin is the most accepted cryptocurrency, however things are changing. Apple recently authorized the use of 10 cryptocurrencies for App store purchases, and many other organizations and merchants are following the suite. Buyers can use cryptocurrencies on websites that accept them (such as Overstock, Newegg, Gift Off, Open Bazaar, and Bitify). Slowly, digital currencies are becoming the norm. However, it will take some time for them to become the primary mode of all transactions around the world, particularly in third world countries which can rely on paper currencies much longer than others.
Accept as payment
Companies and individual consultants can use cryptocurrencies as a form of payment. Platforms like Maester Protocol allow individual consultants to offer their services at a per-minute rate and facilitate instant payment for these services the moment calls are finished. Other than that, using gateways like CoinPayments, CoinGate, Cryptonator, and BitPay can also help you get crypto payments (without the added benefit of connecting with potential customers, of course!).
Also, if you are wondering if you can use these payments in your daily life, it is worth knowing that there are at least 1,800 Crypto ATMs located in 58 different countries.
Invest
People also look to cryptocurrencies as viable investments. However, it is worth remembering that cryptocurrencies are quite volatile, with values skyrocketing one day and then dropping the next. It will help to talk to cryptocurrency experts before investing your money in them for long-term investments. On the other hand, investors also argue that stock markets tend to rise and fall even sporadically. So investing in cryptocurrency isn’t risk-free, but it can be a great investment if you play your cards wisely.
Do people really use cryptocurrencies?
While the applications and potential of cryptocurrencies are all very interesting, the real question is: are more people adopting cryptocurrencies? Consider the following charts showing the wallet address growth for Bitcoin and Ethereum and see if you can answer this question!
There are currently more than 24 million Bitcoin wallet addresses while there are more than 31 million Ethereum wallet addresses.
Legality of cryptocurrencies
Cryptocurrencies can be used in three forms: fiat, commodity, and exchange. Legal tender refers to coins or currencies that can be used as payments. Different countries have different positions on how to use cryptocurrencies.
For example, the United States, Australia, Sweden, Switzerland, New Zealand are some examples of countries where the use of cryptocurrencies for transactions is completely legal. In fact, the Treasury Department in the United States has published several guides on how people can use cryptocurrencies. It is also used as legal tender in the European Union.
On the other hand, some countries only allow trading and do not allow the use of cryptocurrency as legal tender. For example, Canada and Vietnam allow the use of cryptocurrency as a bargaining chip.
Conclusion
Cryptocurrency is certainly the future of currencies. There are many benefits to cryptocurrency, such as the fact that it works with Blockchain technology, which makes it:
- Easy to monitor
- Tamper proof
- Transparent
- Fast (in terms of transactions)
As a consumer, it is vital to understand how this currency is growing and whether your country is for or against. Before you know it, the laws and current financial structure may change overnight, with completely new ways of paying and earning!
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