These days it is not uncommon to hear or see news about cryptocurrency or blockchain technology. Discussions and arguments about Bitcoin and Ethereum (and many other names for it) are very much alive and practically everywhere. But what is cryptocurrency? In simple terms, it is a digital or virtual form of an asset. Encryption is used to generate money and verify transactions. Coding is used to keep data secure, hence it is hard to counterfeit. Despite its current popularity, it is not all that new — Bitcoin, the first cryptocurrency, was actually launched in 2009 by Satoshi Nakamoto, an unknown person or group using that alias.
The allure of trading in cryptocurrencies dramatically increased in 2017, as the price of Bitcoin skyrocketed in the thousands. The major argument for trading in Bitcoin comes from the fact that there is no central agency, such as a government, that issues or regulates policies about cryptocurrencies. And as such, this makes it easy for dark web black market transactions to proliferate. Opinion on cryptocurrency is divided, because while some are very much into it, there are those who caution others not to get on the bandwagon. As it is a very fast-paced space, here are five things you need to know about cryptocurrency before taking the plunge.
- Blockchain technology
Well-known brand names such as Microsoft, JPMorgan Chase, and Mastercard are testing blockchain technologies via small-scale projects using a version of Ethereum’s blockchain. The hype and interest lie in the blockchain technology itself, which is a digital, virtual, and decentralized ledger. And because it is decentralized, there is no central hub where all this data is stored. In the place of one major data center, information about a certain blockchain is scattered across the world in various servers and hard drives. This is why big businesses are excited about it.
- Due diligence is required
As with any other kind of investment, you need to do your homework. Just because you joined in on the fun does not mean you’ll just have to wait for things to rise in the short run. It is important to conduct due diligence on the team and technology by referring to cryptocurrency sites like The Coin Offering, where you can receive guidance and insight on the future potential of your investments.
- Market volatility
At this point, because of the inclusion of various players — most of whom are individuals rather than institutions — it leads to a very unpredictable and increasingly volatile market. This is especially due to the fact that trading occurs on various cryptocurrency exchanges rather than only one central exchange. Also unlike the dollar in your pocket, it does not have any fundamental backing from the government.
- Much to choose from
Although Bitcoin was the first tradable cryptocurrency that was launched into the market, and despite the fact that it makes up 54% of the market cap, there are a whole lot more of them out there. There are about 1,300 virtual currencies to choose from.
- Global regulations
There is no central authority when it comes to cryptocurrency, hence different markets regulate the cryptocurrencies and exchanges in varying ways. This influences the way investors interact with each other depending on where they are located. It is Important to note that despite the craze, cryptocurrency is not accepted everywhere. It is banned in several countries including Bangladesh, Bolivia, Ecuador, Kyrgyzstan, Morocco, and Nepal.