The talk of Cryptocurrency is not new; from being a Cryptic entity and a super niche interest of a few, it is now a mainstream sensation in the world of finance. So, how did we get here?
Is it the popularity of Instagram or the fact that big names like Elon Musk, Snoop Dogg, and Game Of Thrones Star Maisie Williams are investing in it? Plus, it is tempting to at least try out when every day we hear about new billionaires getting their fame for Cryptocurrency.
So, what is Cryptocurrency? Why is it gaining such fame, and what pros and cons should you be aware of if you wish to try it as an investor?
What Is Cryptocurrency?
Cryptocurrency means any form of digital currency. The existence of this currency is limited to the virtual world. However, you can buy Cryptocurrency through the digitized version of your fiat currency. Plus, you can sell your Cryptocurrency and withdraw the fiat currency you gained, but you can never touch or feel the ‘Cryptocurrency’ itself.
One can mine Cryptocurrency (in terms of Bitcoin). Mining is when you solve complicated mathematical problems and create new Bitcoin. Cryptocurrency is stored, and every transaction goes through a private ledger. In terms of digital currency, it is called Blockchain.
What Is Blockchain?
It is a shared ledger where information can be stored. It is one of the safest online ledgers to save information because one can add information but never delete it. In addition, the information is connected through different computers, so one piece of information cannot be altered or penetrated without altering all the other computers.
This is to ensure that every party in the Blockchain ledger can have the information, but no infiltration is possible because of the lack of a key. However, Blockchains like Bitcoin and Ethereum are the top Cryptocurrencies Blockchain.
Pros & Cons Of Cryptocurrency
Now that you know the basic functioning of Cryptocurrency, here are the top Pros and Cons which you should be aware of.
Pros Of Cryptocurrency
The advantages of being a Cryptocurrency Investor.
1. Adoption To Change & Evolution
History has witnessed that currency or commodities for transactions in the human race have seen a few changes. From the barter system to exchanging bronze coins to the paper currency that we are now dealing with.
Moreover, we were in time for a new financial evolution that marks the economy of the human race. With the increase in technological invention and the overall evolution of the digital world, a digital currency is a change we should be adopting.
Even big companies have started introducing it as their newest transaction method, and both parties are enjoying its exclusive benefits. Therefore, you should jump on the bandwagon of this new evolution.
2. Easier For Businesses To Conduct Transaction
Business transactions have been easy with this no-barrier method. All someone needs is a Cryptocurrency investment account, a digital wallet, and a stable internet connection for them to complete a transaction. However, many businesses are now also bringing new methods of transaction with the help of Crypto QR codes.
Plus, some of the advantages of businesses taking up this method are:
- Easy transaction through boundaries.
- Lessening of cashback scams by customers, which is when they claim a credit card scam for a transaction they have made post buying something.
- Getting niche superiority by providing something more than competitors.
3. Anyone Can Do It
There is a gap between the rich and poor regarding Cryptocurrency. Almost everyone can do it. They just have to keep the volatility in mind and buy at the right time. Invest for the long term, and study the market.
Sometimes novice investors do not even buy a whole Cryptocurrency, but part of it, and then make it whole gradually. Cryptocurrency doesn’t discriminate against anyone, and you do not have to have something in your account to prove any credibility.
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4. No Geographical Border
Often we get confused when transacting money to a different country. This is because of the varied currency difference. However, when it comes to Cryptocurrency, the value is the same all over the world.
Plus, you are allowing the safest transaction through Blockchain. You will be able to send money anywhere in the world, with the least issues. There is no conversion or withdrawal of fiat money.
If Cryptocurrency is introduced for all travel endeavors, traveling all around the world would be much easier. This is why many digital nomads are transferring their main source of the transaction to Cryptocurrency.
Cons Of Cryptocurrency
Now that you have understood the advantages, here are some of the common disadvantages that you might face as an investor of Cryptocurrency.
1. It Is Not Really Anonymous
Cryptocurrency is always sold with the name of being ‘anonymous’ since Blockchain is decentralized at the end of the day. However, it is not the same as being totally anonymous.
Some investors have even called it ‘pseudonymous’ because even regular investors do not have access to your information. However, some higher entities, like the Federal Bureau Of Investigation (FBI), will be able to access the information. Thus, the government has eyes on the transaction made in Cryptocurrency Blockchain.
2. Popular Hub For Criminal Activities
Recently, Cryptocurrency has become the biggest hub of criminal activity. We are talking about being a transaction method for the dark web, ransomware stealing confidential data. In short, anything, where transactions could be anonymous can be carried out through this Blockchain ledger.
These illicit activities are skyrocketing because of the lack of a centralized body controlling them. It is only when some major crimes occur through Cryptocurrency that the authority is concerned.
Some have even theorized that some of these crimes are being carried out through digital currency.
- Money laundering.
- Transaction for illegal trafficking.
- Buying and selling drugs and other illegal items.
3. Mining Is Not That Easy
We often talk about mining and how it is helping everyone to become rich without investment. But, that is a big ‘sugar coat’. Mining is not easy unless you are a mathematical genius or have one by your side.
On the other hand, mining won’t be possible if you do not have access to high-end technology and computers. These on themselves cost a lot, and technically this is not a ‘zero investment’ route to Cryptocurrency.
Learning about volatility, gathering knowledge, starting small, and learning risk management would be better.
Should You Invest?
Overall, Cryptocurrency is a good investment, and if you are slightly put off by the cons, then remember every investment has some disadvantages. Whether it is Cryptocurrency or stocks, they are all volatile!
Yes, the volatility of Crypto is a little high, but you are also getting the scope of huge profit. Plus, it will get easier if you learn some risk management theories and stay safe and wise through transactions.
So, start your learning today before you make your first investment!