What is cryptocurrency and who invented it?
Cryptocurrency is a digital payment system that allows users to send money without any intermediaries like banks or other financial institutions. This system has the same use cases as other digital banking apps- making payments to friends and online shopping. However, the underlying technology is completely different compared to the traditional banking system.
The first cryptocurrency was Bitcoin, it was outlined by Satoshi Nakamoto in a 2008 paper titled Bitcoin: A Peer-to-Peer Electronic Cash System. Until today, many cryptocurrencies have been founded creating different utilities than the electronic cash system. For example, the second most valued cryptocurrency is Ether. Ether is a native cryptocurrency of Ethereum which is a platform that allows the use of blockchain in a programmable way. It supports smart contracts which are an essential tool behind decentralized applications (dApps).
According to CoinMarketCap data, there are more than 20,000 cryptocurrencies with a total market cap reaching 960B USD (for 27.06.2022).
What makes cryptocurrency different?
Cryptocurrencies are based on blockchain technology which makes them decentralized. It means that unlike the dollar or euro there is no central authority that governs the whole network. Using simple words, cryptocurrency is a digital form of cash with some additional features that common currencies don’t have.
Moreover, cryptocurrencies are permissionless, which means that no one can stop you from using them. They function 24 hours a day, 365 days, which means that you can transfer any value to anyone around the globe without the intervention of intermediaries. Centralized services might freeze your accounts or prevent making transactions. Cryptocurrencies are also a cheap and fast payment method, your money can be sent within seconds no matter where the recipient is based. To use cryptocurrencies, you don’t need to share your personal data, there are lots of apps that let you participate in the crypto network anonymously.
Where can you buy cryptocurrencies?
There are many ways to purchase cryptocurrencies. The first step is to convert fiat currency into cryptocurrencies. You can buy them on exchanges like Hotbit, from private sellers, or in crypto ATMs.
Where can you store cryptocurrencies?
You can store cryptocurrencies on custodial or non-custodial wallets which will be described in the following articles. There are many types of them, so it is easy to choose the best option for yourself.
Advantages of cryptocurrencies
- Convenience of sending transactions. Cryptocurrencies can be sent offline and wherever you are to the person from halfway around the world. Transaction fees are relatively cheap to the amount you can send.
- Cryptocurrency market is open 24/7. Unlike the stock market, you do not have to wait for the market to open. You can send, receive transactions, buy crypto on exchange whenever you want.
- Cryptocurrency investments can make profits. Over the past decade, the market cap of the whole cryptocurrency market reached roughly 3 trillion dollars in 2021.
Disadvantages of cryptocurrencies
- Volatility of the market. It is not a shocking situation when the price of digital assets decreases sharply. That is why you should not invest more than you afford to lose..
- No possibility to refund or cancel the transfer. It is one of the disadvantages of blockchain technology. Once you send assets to the wrong address or use a wrong blockchain, it is not possible to retrieve your funds in 99% cases.
- Cryptocurrency field is vulnerable for scams. Scammers often use social media sites to trick people into various suspicious investments, but also for phishing.