Making large financial transactions, investing huge amounts of money, looking for assets to grow the savings, etc can be a daunting process. This is particularly true if you are relatively new to this process and have little to no idea as to how things in the financial sector work. Not everyone can be adept with regard to these matters. It takes special interest and effort to ensure seamless growth and profit and even then, there can be factors beyond one’s control that may affect the investment.
Cryptocurrencies: Originally, the matters of investment were pretty straightforward and simple. Buying land, gold, creating fixed deposits, or investing in the stock market and mutual funds would be the way to go. The last few years, however, have introduced the world to a whole new sector of investment. A sector that is so good that it is automatically luring investors in and more and more people are willing to put in their hard-earned money into this arena. This is the sector of cryptocurrency.
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What are cryptocurrencies?
Simply put, cryptocurrencies are online and digital currencies that can be used to make trades or buy and sell goods and services online. There are several different forms of cryptos that are present in today’s market however, a few of them are more popular and profitable than the others. Many people all over the world are looking to buy cryptocurrency in this era as they are recognizing the potential profits and possible returns associated with it.
However, this is a relatively new arena that has originated and gained full-blown traction only in the last few years. There are a lot of undiscovered territories that have been untapped as the patterns and trends have not been completely analyzed yet. Here are a few terms that you must be aware of if you are considering investing in cryptocurrencies.
- Bitcoin: This list could not be complete without the inclusion of the top cryptocurrency that is dominating the minds of the people and the market. It is the first and the most valuable crypto in the market since its inception. Launched in Jan 2009, the value has only seemed to rise despite seeing some rapid and major fluctuations. Only 21 million bitcoins are allowed to exist at any given point in time and therefore, there is a demand for this currency.
- Altcoin: Everyone has heard of and knows bitcoins. Altcoin is a slightly newer term. In essence, any coin that is not a bitcoin is called an Altcoin. There are thousands of Altcoins present in the market today with more and more emerging each day. The values for these are erratic as some of the coins are here to stay while the others fizzle out as quickly as they emerged. Some of the popular Altcoins are – Ethereum, Dogecoin, Cordana, Solano, Tether, etc.
- Blockchain: This is a digital ledger that keeps a complete record of all the transactions that take place with regard to a certain cryptocurrency. This is the underlying technology and system behind cryptocurrencies. The word arises from a result of sequential blocks that stack/build upon each other and this creates the permanent ledger of the transactions. All the transfers are recorded in real-time and are updated simultaneously on the devices that operate the blockchain. The records cannot be changed or altered showing complete transparency.
- Wallet: Like any real wallet, a digital wallet is meant to store the cryptocurrencies that you have purchased. These can be of different types – a software wallet would be governed by the internet and therefore is considered less safe. Being susceptible to malware and hacking, you would need to be cautious while using a software wallet. Contrarily, a hardware wallet is an external device that can be connected to laptops or smartphones using a USB. All the transactions would be stored on this device.
- Decentralization: This is the reason why cryptocurrencies have been gaining popularity and appeal to the masses. It transfers all the power regarding one’s money to themselves instead of it being governed by third parties like banks, government authorities, institutions, etc. No central authority controls the money so the users have a complete awareness of where and how their money is being spent.
- Ethereum: ETH is the second-largest crypto that exists in the market today. With a market cap of roughly $487 billion, it has been dominating this spot for a while now. The creators are coming up with ways to make Ethereum reach new heights. They are also coming up with newer systems and cryptos.
- Mining: This is the process by which people can gain access to more cryptocurrency coins. For example, currently, out of the 21 million, 19 million bitcoins have been mined leaving a mere 2 million left. The mining process requires a complex system of computers with high-end programming and processors to make this procedure smooth and successful.
- Public and Private Key: The address of your wallet (comparable to the bank account number) is how one can explain the concept of a Public Key. This address would be important to conduct any transaction. The user will require the public key to transfer the amount to the sender’s wallet. Similarly, a private key is like a password that is unique to the transactions and the wallet. Only upon entering the correct private key would you be able to access the value of your cryptos that are stored in the wallet.
- Stablecoin: These are cryptocurrencies wherein the price is attributed in a manner that it is pegged to another source like fiat money, cryptocurrency, assets, or commodities. These sources are ‘stable’ in nature and are not susceptible to erratic fluctuation. They are open and global and easily accessible to any person on the internet.
- Market cap: In terms of cryptocurrency, market capitalization means the total value of all the coins that have been mined. $3 trillion dollars is the current market cap that is inclusive of all the cryptos that exist in today’s day and age. This is arguably the most investment that has gone into an asset.
Understanding and educating yourself about these common terms would help you gain an edge over the other peers in the same arena. More knowledge minimizes the error quotient which would, in turn, lead to better investment and higher profits.
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