Cryptocurrency is a term that is currently being discussed by the general public. But the presence of cryptocurrency itself raises many pros and cons. So, what exactly is cryptocurrency ? And why has it aroused so much interests around the world?
Here, Coinomo wants to explain a little about what cryptocurrency is . So for those of you who want to know, just check the following article.
What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that is made possible by cryptography. With the existence of cryptography, digital currency or cryptocurrency becomes almost impossible to counterfeit.
Well, here are some definitions of cryptocurrency from its characteristics and uses:
- Digital: Cryptocurrency is a currency that only exists in the digital world, so cryptocurrency does not exist in a physical form.
- Peer-to-peer: Cryptocurrencies can be used for transactions from one person to another online .
- Decentralized: In conventional money transactions, it generally always involve third parties such as banks, in the cryptocurrency world you will not encounter such third parties. Everyone is responsible for their own assets.
- Encrypted: Security in cryptocurrencies is guaranteed. Each user has their own code to transact cryptocurrency . Every time a transaction is made, the user cannot see who the transaction was made by. There will be no real name appearing in every cryptocurrency transaction , making it almost impossible to commit personal data theft. Moreover, there are no rules about who can use cryptocurrency and what it is used for.
- Global: Cryptocurrency transactions can be done by anyone and anywhere. Every transaction can be carried out freely even between countries without the use of expensive swift system.
From the definition above, we can conclude that cryptocurrency is a digital currency that can be used for transactions between users without the need to go through a third party. In addition, cryptocurrencies can also be used to transact globally and anonymously.
Besides being used as a transaction tool, in fact many users use cryptocurrency as an investment instrument . This is due to the fluctuations in the price of cryptocurrencies in terms of US dollar.
Since its presence in the world, cryptocurrency initially only had a function as a transaction tool, but as cryptocurrency developed , now the digital currency can function as:
1. Transaction Tool
Yep! In accordance with the original purpose of cryptocurrency , the first function of cryptocurrency is as a transaction tool. You as a user can use cryptocurrency to buy goods or services.
Especially now that there are so many companies, services, and countries that accept cryptocurrency as a means of payment. Bitcoin is one of the most commonly used cryptocurrencies for transactions.
Alternatively, cryptocurrency can also be used as an investment asset . That’s because when cryptocurrencies are getting more and more popular, their prices continue to rise sharply. For example, the price of Bitcoin in 2013 was still US$ 22, but now the price has reached US$ 47,000.
No wonder many people become “suddenly rich” after investing in cryptocurrencies . The principle of cryptocurrency prices is the same as the principle of supply and demand, namely the price will rise when there is a lot of demand.
The more people who invest in a cryptocurrency asset , the price of that asset will increase, or the term is experiencing a bull market . Although it can provide a fairly large return , keep in mind that cryptocurrency investments are in the risky investment category .
In addition to long-term investments, it turns out that cryptocurrencies can also be used for trading or buying and selling in the short term. This is because the fluctuations in the price of crypto assets are quite high, which makes many people prefer to become traders in order to get faster profits.
But even so, both investing and trading crypto still has its own risks. Therefore, we must be wise before starting to invest or trade in cryptocurrencies.
Examples of Cryptocurrencies
This year, there were more than 2000 types of cryptocurrencies publicly traded. Well, here are some examples of the most popular cryptocurrencies in the world.
Bitcoin is the world’s first decentralized cryptocurrency and is the most popular to date. Based on the site coinmarketcap.com , Bitcoin is ranked first as the most popular digital currency.
Bitcoin was released in 2009 by a group or person under the pseudonym Satoshi Nakamoto . At the time of its initial release, Satoshi Nakamoto declared that Bitcoin was only available for 21 million pieces worldwide. Therefore, many treat Bitcoin an investment asset because of its limited supply.
Well, Ethereum is the second best cryptocurrency after Bitcoin. Ethereum is a decentralized open source blockchain system . Ethereum is also the first Altcoin to pioneer Smart Contract technology .
Smart contract technology allows a programmer to create or release applications for computers or smartphones that are decentralized and run on the Ethereum blockchain .
The value of Ethereum itself continues to increase. Its good fundamentals also make this one cryptocurrency suitable to be used as one of your crypto investment assets.
3. Binance Coin
Released in 2017, originally Binance Coin or BNB ran on top of the Ethereum blockchain with ERC-20 tokens . But now Binance Coin or BNB has transformed into the original currency of the Binance Chain blockchain .
Binance Coin is released by Binance which is one of the largest cryptocurrency exchanges in the world. No wonder so many people are interested in investing in Binance Coin or BNB.
Binance Coin or BNB has had very good growth over the past year. Binance Coin or BNB also became the top 5 crypto assets with the largest market cap in the world.
Advantages and Disadvantages of Cryptocurrency
Well, after knowing some examples of cryptocurrencies, here are some of the advantages and disadvantages of cryptocurrencies.
1. Advantages of Cryptocurrencies
- Fast: Transactions in cryptocurrency are very fast compared to transactions at banks. While international interbank transfers can generally take up to days, transactions in cryptocurrencies only take a few minutes to a maximum of 1 hour even though they are transacting between countries.
- Universal: As previously explained, crypto transactions can be done by anyone all over the world.
- Transparency: Every cryptocurrency user can see all transactions that have been made. Even though it is transparent, users will not know who the transaction was made by, because it is only in the form of numbers without any identity.
- Personal Control: Since cryptocurrencies are decentralized, each user is responsible for their own crypto assets and money.
- Cheap: Transactions in cryptocurrency only involves very little network fees, (normally a few cents or a few dollars) compared to the expensive SWIFT banking transfer system or credit card system, costs of transactions in cryptocurrencies are extremely cheap.
2. Disadvantages of Cryptocurrencies
- Vulnerability to Crime: Since no one knows who or what is behind a cryptographic code, people might use cryptocurrencies for monry laundering, because Crypto users can do anything without being traced. This is the reason why Identity Verificaition (or KYC) becomes more and more important.
- Still Considered Illegal: Many countries in the world still consider cryptocurrencies to be illegal and do not support buying and selling transactions in their country.
- Has a Risk of Being Stolen: Because it is digital, of course cryptocurrencies still have a risk of being stolen by others. It can be stolen through hacking or if you forget your wallet password , the crypto in the wallet can also be lost. That’s because no party manages your account, all assets owned are your own responsibility. However, with the release of custodial wallet, cryptocurrencies are becoming easier to store and use.
That’s an explanation of what cryptocurrency is. Are you interested in investing? Coinomo can help you to do just that.
At Coinomo you can also trade cryptocurrencies , invest in DeFi (Decentralized Finance), and learn about blockchain technology . Investing cryptocurrency on Coinomo is safe, easy, and profitable!
Come on! Download Coinomo Now