written by M. Arshad Sohail
Table of content
1-
What is Cryptocurrency
2-
How does cryptocurrency created?
3-
Features of cryptocurrency
4-
Cryptocurrency how does work?
5-
Storage of cryptocurrency
6-
Key steps
7-
How do exchange works?
8-
What are different types of cryptocurrencies?
9-
Cryptocurrency Scams
10-
History
of cryptocurrency
11-
Difference between cryptocurrency and
conventional currency.
12-
Future of
cryptocurrency
13-
Advantages and disadvantages
14-
Best
cryptocurrency to invest
15-
FAQs
1-What is
cryptocurrency?
Cryptocurrencies are digital
currencies secured by cryptography. It can act as a medium of exchange to sell,
buy or trade goods and services without the need for an intermediary such as a
bank.
A cryptocurrency is an encoded
string of data representing a unit of currency. Peer-to-peer networks called
blockchains monitor and organize cryptocurrency transactions such as buying,
selling, and transferring, and also serve as secure transaction ledgers. By
utilizing encryption technology, cryptocurrencies can serve as both a currency
and an accounting system.
A cryptocurrency is a digital or
virtual currency that is meant to be a medium of exchange. It is quite similar
to real-world currency, except that it has no physical embodiment and uses
cryptography to work.
For example, with Bitcoin, a
miner will only be rewarded with Bitcoins after a block is added to the
blockchain, and only then can new Bitcoins be generated. The limit for bitcoins
is 21 million; after that no more bitcoins will be produced. Because
cryptocurrencies are digital assets, they cannot be held physically – they only
exist online.
2- How is cryptocurrency created?
What is mining Mining is the
process by which new coins are put into circulation. It is done using computers
to solve computational math problems and is done to secure the network.
Mining relies on distributed
ledger technology (often referred to as "blockchain"). Blockchain is
an independent public peer-to-peer network that is currently unregulated.
Blockchain securely stores a series of time-stamped records (cryptocurrency
transactions) within a decentralized network.
3- Features of cryptocurrency
a) Non-refundable
It is very difficult for anyone
but the person who owns the cryptocurrency to move it. Since the owner owns the
private key, he has a unique code to access it. Once transactions are recorded,
they cannot be changed.
b) Limited offer
Most cryptocurrencies have a limited and
predetermined supply. There are different kinds of cryptocurrencies that trade
differently.
c) Cryptocurrencies with N26
N26 has a number of resources to
help you understand the latest developments in the world of finance. From
cryptocurrencies for beginners to the details of What is a crypto wallet?, N26
is by your side every step of the way, allowing you to make informed financial
decisions backed by reliable information.
4-How does cryptocurrency work?
Cryptocurrencies are designed to
work in different ways.
Some cryptocurrencies are meant
to act like money; function as a means of payment. Others have more in common
with traditional investments such as stocks, bonds or funds.
Cryptocurrencies are largely
unregulated, which means there can be a high level of risk involved in
investing in them.
5-Crypto currency storage?
A cryptocurrency wallet gives you
access to cryptocurrencies and allows you to buy, store and hold them. Some
wallets only support one type of coin, while others support more.
Each wallet has a private and
public key. You can think of the public key as your wallet address because,
like a bank account number, people use it to send cryptocurrency to your
wallet. The private key works like a PIN or password; you enter it to send and
receive cryptocurrency. Your wallet can be on an external device, software, PC,
smartphone or online account linked to the exchange.
6 -Key Steps to Buying
Cryptocurrency?
• Step 1: Choose the best
cryptocurrency exchange.
• Step 2: Open a business account
and confirm your email. Connect your phone now.
• Step 3: Verify your
identification in the third step. Next, fund your account.
• Step 4: Buying and Investing in
Cryptocurrency.
• Step 5: Save your
cryptocurrency.
• Step 6: Choose a strategy in
the last step.
7-How do exchange wallets work?
Wallets stored on exchanges are
called hosted web wallets, which means your keys are stored online by a trusted
third party.
This gives you the ability to
recover your password if you forget it, but you don't have ultimate control
over your funds because they are stored by someone else (and therefore at risk
of hacking).
Most exchanges allow you to keep
cryptocurrency in your online account. Cryptocurrency exchanges are completely
digital and, like any virtual system, are vulnerable to hackers, malware and malfunctions.
Although exchanges take steps to
keep their platforms secure, wallets provided by exchanges can be hacked. A
serious hack could bankrupt a cryptocurrency exchange.
8 – What are the different types
of cryptocurrencies?
Bitcoin (BTC), Ethereum (ETH),
Tether (USDT), USD Coin (USDC) and Binance Coin (BNB) are some of the popular
ones.
Cryptography in Bitcoin
Transactions
In a normal bitcoin transaction,
first there are the details of the transaction: who you want to send bitcoins
to and how many bitcoins you want to send. Then the information is passed using
a hashing algorithm. Bitcoin uses the SHA-256 algorithm. The output is then
passed through a signature algorithm with the user's private key used to
uniquely identify the user. The digitally signed output is then distributed
over the network for other users to verify. This is done using the sender's
public key.
Users who check a transaction to
see if it is valid or not are known as miners. Then the transaction and several
others are added to the blockchain where the details cannot be changed. The
SHA-256 algorithm looks something like the image below.
Bitcoin vs. Ethereum
Now you know that Bitcoin is a
digital currency that is decentralized and works on blockchain technology and
that it uses a peer-to-peer network to conduct transactions. Ether is another
popular digital currency and is accepted on the Ethereum network. The Ethereum
network uses blockchain technology to create an open-source platform for
building and deploying decentralized applications.
Similarities
Bitcoin and Ether are currently
the largest and most valuable cryptocurrencies. Both use blockchain technology,
in which transactions are added to a container called a block, creating a chain
of blocks in which the data cannot be changed. For both, the currency is mined
using a method called proof of work, which involves a mathematical puzzle that
must be solved before a block can be added to the blockchain. Finally, both
Bitcoin and Ether are widely used around the world.
Differences
Bitcoin is used to send money to
someone. The way it works is very similar to how currency works in real life.
Ether is used as a currency on the Ethereum network, although it can also be
used for real-life transactions. Bitcoin transactions are done manually, which
means you have to do these transactions in person when you want to do them.
With Ether, you have the option to make transactions manually or automatically
– they are programmable, meaning that transactions take place when certain
conditions are met. In terms of timing, it takes about 10 minutes to complete a
Bitcoin transaction – that's how long it takes to add a block to the
blockchain. With ether, it takes about 20 seconds to complete a transaction. As
of May 2020, 1 Bitcoin equals $8741.81 and 1 Ether equals $190.00.
Cryptocurrencies have unique
properties and perform different tasks and functions. In the UK, they fall into
the following categories, most of which (except CBDC) can be bought on various
exchanges.
#basicsofcryptocurrency
9-Cryptocurrency Scams?
There are scams in the
cryptocurrency world. To avoid becoming a victim of fraud, it is good to be
aware of scams.
i) Fake applications or websites
There are fraudulent apps or websites that
look very similar to well-known apps and websites. Always use a website with a
small lock icon next to the website address and an https link. If you're using
an app, make sure it's verified.
ii) Fraudulent Emails
they may look like emails you
received from a legitimate business. Always check the address the email came
from to confirm it is from a real company.
iii) Unrealistic claims
some scammers guarantee that you will make an
exorbitant profit, release money or receive large payouts with guaranteed
returns. Fraudsters cannot back up these claims with details or truthful explanations.
10-A Brief History of
Cryptocurrency
In the caveman era, people used a
barter system in which goods and services are exchanged between two or more
people. For example, someone might exchange seven apples for seven oranges. The
barter system fell out of popular use because it had some glaring flaws:
• People's needs must match - if
you have something to trade, someone else must want it, and you must want what
the other person has to offer.
• There is no common measure of
value - you have to decide how much of your items you are willing to trade for
other items, and not all items can be split. For example, you cannot divide a
living animal into smaller units.
• Goods cannot be easily
transported, unlike our modern currency that fits in a wallet or is stored in a
mobile phone.
After people realized that the
barter system wasn't working very well, the currency went through several
iterations: In 110 BC, an official currency was minted; in 1250 gold-plated
florins were introduced and used in Europe; and from the 1600s to the 1900s,
paper currency gained widespread popularity and eventually came into use around
the world. This is how the modern currency as we know it was born.
#howcaninvestincryptocurrency
Modern currency includes paper
currency, coins, credit cards and digital wallets – such as Apple Pay, Amazon
Pay, Paytm, PayPal and so on. Everything is controlled by banks and
governments, which means that there is a centralized regulatory body that
restricts the functioning of paper currencies and credit cards.
11- Difference between
traditional currencies and cryptocurrencies?
Imagine a scenario where you want
to repay a friend who bought you lunch by sending money online to their
account. There are several ways this can go wrong, including:
• A financial institution may
have a technical problem, such as its systems not working or machines not
working properly.
• Your account or your friend's
account may have been hacked - such as a denial-of-service attack or identity
theft.
• The transfer limits for your
account or your friend's account may have been exceeded.
There is a central point of
failure: the bank.
This is why the future of
currency lies in cryptocurrency. Now imagine a similar transaction between two
people using a Bitcoin app. A notification will appear asking if the person is
sure they are ready to transfer bitcoins. If yes, the processing will take
place: The system will verify the identity of the user, check if the user has
the required balance to complete the transaction, etc. Then the payment will be
transferred and the money will come to the recipient's account. All this
happens in a matter of minutes.
Cryptocurrency thus removes all
the problems of modern banking: There are no limits to the funds you can
transfer, your accounts cannot be hacked, and there is no central point of
failure. As mentioned above, there are more than 1,600 cryptocurrencies
available as of 2018; some popular ones are Bitcoin, Litecoin, Ethereum and
Zcash. And every day a new cryptocurrency appears. With how much growth they're
experiencing right now, there's a good chance there will be plenty more to
come!
12-The future of cryptocurrency
The world is clearly divided when
it comes to cryptocurrencies. On one side are advocates like Bill Gates, Al
Gore and Richard Branson who say cryptocurrencies are better than regular currencies.
On the other side are people like Warren Buffet, Paul Krugman and Robert
Shiller who are against it. Krugman and Shiller, who are both Nobel laureates
in economics, call it a Ponzi scheme and a vehicle for criminal activity.
In the future, there will be a
conflict between regulation and anonymity. Since several cryptocurrencies have
been linked to terrorist attacks, governments would like to regulate how
cryptocurrencies work. On the other hand, the main emphasis of cryptocurrencies
is to ensure that users remain anonymous.
Futurists believe that by 2030,
cryptocurrencies will occupy 25 percent of national currencies, which means
that a significant part of the world will begin to believe in cryptocurrencies
as a method of transaction. It will be increasingly accepted by traders and
customers and will continue to have a volatile nature meaning that prices will
continue to fluctuate as they have for the past few years.
This concludes our cryptocurrency
course. If you want to learn more about blockchain (the underlying technology
behind cryptocurrencies like Bitcoin), check out Simplilearn's Blockchain
Basics. To learn even more and get a blockchain certification to boost your
resume, take the Blockchain Certification Course.
If you have any questions in the
article “what is cryptocurrency”, please ask in the comment section below. Our
experts will get back to you as soon as possible.
#cryptocurrency the future
13- ADVANTAGES AND
DISADVANTAGES OF CRYPTOCURRENCY
5- Advantages of cryptocurrency
While cryptocurrencies are a
relatively recent invention (Bitcoin, for example, started in 2009), they are
definitely here to stay, with all their benefits. From the prospect of big
returns to 24/7 trading on an ultra-secure, transparent infrastructure, the
cryptocurrency world has a lot to offer – if you know how to tap into it.
1. High risk – and the potential
for high rewards
There are more than 10,000
cryptocurrencies on the market today, and each of them has its own
peculiarities. However, all cryptocurrencies have a few things in common – such
as their tendency to experience sudden jumps (and drops) in value. Prices are
primarily driven by the supply of coins from miners and the demand for them
from buyers. And this supply and demand dynamic can lead to high returns. For
example, the price of Ethereum roughly doubled from July 2021 to December 2021
– quite a payoff for investors who got in at the right time.
2. The blockchain technology that
underpins cryptocurrency is inherently secure
Some of the main advantages of
cryptocurrencies are not associated with the currencies themselves, but with
the infrastructure that supports them. That's the blockchain – a decentralized
ledger for data storage that tracks every transaction made on it. Once you make
a record on the blockchain, it can never be erased. And with the blockchain
stored decentralized on multiple computers, no hacker can access the entire
chain at once; all information stored in it is safe forever good.
3. Goodbye to traditional banks -
hello to a fairer and more transparent financial system
Overall, our financial system
revolves around third-party intermediaries that process transactions. That
means if you make a transaction, you're putting your trust in one or more of
these intermediaries—and the recession of the early 2000s made many people
wonder if that was a good idea. Blockchain and cryptocurrencies offer an
alternative. They can be viewed by anyone, anywhere, so you can participate in
financial markets and make transactions without any intermediaries.
4. Crypto trades around the clock
Another advantage that
cryptocurrencies have over banks is that crypto markets are always open. With
coin mining and 24/7 transaction recording, you don't have to wait for the
NYSE, NASDAQ or any other exchange to start trading on a given day if you want
to buy, sell or trade cryptocurrencies. This has had such an impact that
mainstream exchanges are considering trading shares outside normal banking
hours - although that may still be a long way off. So for investors who are on
the go 24/7, cryptocurrencies could be the best way to generate income outside
of regular business hours.
5. Cryptocurrencies could help
investors beat inflation
Cryptocurrencies are not tied to
a single currency or economy, so their price reflects global demand rather
than, say, national inflation. But what about the inflation of cryptocurrencies
themselves? As an investor, you can rest easy for the most part. The number of
coins is limited so the amount available cannot get out of control and thus no
inflation. Some coins (like Bitcoin) have an overall cap, others (like
Ethereum) have an annual cap, but either way this approach keeps inflation at
bay.
5-disadvantage of cryptocurrency
That's a lot of glitter, but is
the outlook for cryptocurrencies really that golden? Let's look at some of the
disadvantages. Some are easy to solve, others less so - but it's always worth
keeping them in mind.
1. Understanding cryptocurrency
takes time and effort
Cryptocurrencies can take a while
to get the hang of. Unless you're a digital native, the concept of
cryptocurrency (let alone blockchain) can feel anything but second nature. And
trying to invest in something you don't really understand is a risk in itself.
There are plenty of online resources to help you (including the N26 blog series
on cryptocurrencies), but you'll still need to spend some time to really
understand the pros and cons of investing in cryptocurrencies.
2. Cryptocurrencies can be an
extremely volatile investment
While the price of a
cryptocurrency can shoot to dizzying heights (with attendant benefits for
investors!), it can just as quickly sink to terrifying lows. So if you're
looking for steady returns, this might not be the best bet. The cryptocurrency
market inherently favors speculation, and its relatively small size makes it
more vulnerable to price fluctuations. This in turn can cause confusion with
the value of the coins - one of the main disadvantages of cryptocurrency.
3. Cryptocurrencies have not yet
proven themselves as a long-term investment
While cryptocurrencies have
become widely known and continue to gain popularity, it's worth remembering
that they've only been around for a little over a decade. The concept only really
emerged with the publication of the Bitcoin white paper in 2008. Stock markets,
on the other hand, can look back on a century of history. The London Stock
Exchange, for example, was founded in 1801. Gold has been a proven store of
value for millennia. But cryptocurrencies? No one really knows what will happen
to cryptocurrencies in the future – and you have to be brave to step into these
uncharted waters as an investor.
4. Crypto has serious scalability
issues
You could be forgiven for
thinking that digital currencies work at lightning speed – and they do, to an
extent. But at some level, they encounter major problems that make it difficult
to expand them on a large scale. Cryptocurrency providers themselves admit that
this is a problem, with the people behind Ethereum saying that the blockchain
has reached "certain capacity constraints" that slow down the speed
of transaction processing. This can be a frustrating experience for those
involved in the transaction, not to mention the potential financial losses it
can cause.
5. Cryptocurrency beginners are
vulnerable to security risks
Cryptocurrencies may not have the
risks associated with using central intermediaries, but that does not mean they
are completely without security issues. As a cryptocurrency owner, you can lose
the private key that gives you access to your coins – and with it, all your
holdings. And then there's hacking, phishing, and all the other attempts to
gain control through malicious means. This is something that seasoned investors
are wary of, but newer investors are more susceptible to these kinds of traps.
14- The best cryptocurrency to
invest.
There is no cryptocurrency that
is significantly better than all the others. It comes down to personal
preference, but there are things you might want to watch out for. Think about
your individual risk tolerance; can you lose a substantial part of your
investment if the value of your chosen coin plummets? Are you only using the
coin to generate revenue or are you hoping to pay with it as well? Is it just
the money, or do you want to invest in a coin with a broader social or
environmental impact? One easy approach is to simply pick the market leader,
Bitcoin. It is the original cryptocurrency and at the same time the one that
has built the largest information base.
What are the advantages and
disadvantages of Bitcoin?
Bitcoin, which trades under the
abbreviation BTC, comes with a number of benefits. It has a cap of 21 million
coins, is guaranteed to be inflation-proof, and its high prices certainly offer
investors room to reap the rewards. And Bitcoin is the most widely used
cryptocurrency for payments. Of course, this has its drawbacks. Bitcoin's
blockchain infrastructure starts to slow down once it exceeds seven
transactions per second (a real problem when you consider that Visa processes
around 1,700 transactions per second!). And because it's the most well-known
cryptocurrency of all, it's a prime target for hackers and fraudsters of all
stripes. For more information about Bitcoin, see our, what is Bitcoin? Article.
What else should I know before
trading cryptocurrencies?
Cryptocurrencies can be a
minefield for new investors. From unfamiliar terminology to complex technology,
it's a topic that takes some getting used to. As with everything, there are benefits
and risks involved in trading cryptocurrencies, but N26 is here to help.
Whether you want to pay for your daily necessities with Bitcoin or use another
coin to boost your investment portfolio, we can show you all the pros and cons
of cryptocurrency.
# images and types of cryptocurrency
15 -free questions (FAQ)
1. What are the most popular
cryptocurrencies?
Consider buying Ravencoin,
Ethereum and Bitcoin today and keep forever. Due to their volatility,
cryptocurrencies are best suited for those who can tolerate risk. For these
investors, investing in leading cryptocurrencies now, while the market is
unreliable, can pay off in the long run. One of the largest cryptocurrency
exchanges in the world, Binance, has its own coin called BNB. Although Binance
Coin was first designed as a token to pay for discounted transactions, it is
now used to make payments and purchase various goods and services.
2. Are cryptocurrencies
securities?
Crypto derivatives such as
Bitcoin futures are offered on the Chicago Mercantile Exchange, the largest and
most comprehensive financial market in the world. According to the Securities
and Exchange Commission (SEC), Ethereum and Bitcoin are not securities.
3. How do cryptocurrencies work?
Digital currency or
cryptocurrency is an alternative payment method developed using encryption
methods. By utilizing encryption technology, cryptocurrencies can function as
both a medium of exchange and a virtual accounting system. In order to use
cryptocurrencies, you need a cryptocurrency wallet. Blockchain networks power
cryptocurrencies. Blockchain is simply a growing collection of digital blocks
that serve as a ledger. Blockchain's distributed ledger allows data to be
stored on multiple computers in a network. Nodes are individual computers that
verify and store data.
4. How to invest in
cryptocurrency?
Opt for the bitcoin exchange of
your choice. Then create an account with a bitcoin exchange. Spend fiat money
to fill your account. Choose the cryptocurrency you want to buy. Place a buy
order for the cryptocurrency of your choice.
5. What is the minimum amount you
can invest in cryptocurrencies?
You can buy or sell digital money
for as little as $2.00 ($2 or €2) denominated in your home currency.
6. How many cryptocurrencies are
there?
There are already more than
12,000 cryptocurrencies and the rate of growth is simply astounding. The number
of cryptocurrencies more than doubled between 2021 and 2022. By the end of
2021, the market had added approximately 1,000 new cryptocurrencies per month.
bitcoin and cryptocurrency shapes
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