Cryptocurrency is a form of currency existing only in the virtual space and can only be obtained by trading products and services among users. Cryptocurrency transactions do not require users have traditional bank accounts. Rather, online accounts known as digital wallets are used to store cryptocurrency funds. Just like a wallet in the real world, though, losing or having it stolen means a loss of your funds.
A Look at Cryptocurrency History
DigiCash was the first form of virtual currency developed for the sake of anonymous transactions nearly two decades ago, which marks the birth of cryptocurrency. However, the DigiCash system went down in flames in 1998. Then, Bitcoin surfaced ten years later and was the first to introduce the word “cryptocurrency” into our vocabulary, which has evolved and become a massive phenomenon since then. Today, some of the most popular cryptocurrencies in use in addition to Bitcoin are Litecoin, Ethereum, and Dogecoin.
How Cryptocurrency Operates
Cryptocurrency works in almost the same fashion as traditional fiat currency. People can make purchases by their virtual coins anywhere it is accepted without the usual hassles of transferring funds. Users can make contributions and investments, as well as trade their cryptocurrencies for both fiat currencies and other altcoins (alternative coins).
Users can also take part in what is known as “mining” to acquire more digital coins. For example, Bitcoin mining entails working through complex mathematical algorithms using a computer to enable transactions on the overall payment platform, and those who are able to get through the mining processes are compensated with the coins.
Pros of Cryptocurrency
Benefits are aplenty for those who make purchases by cryptocurrency. During transactions, users need to divulge much less personal information compared to making a purchase by credit card. Additionally, each transaction only takes one click, and the processing times are often very short. Users also have the option to make purchases anonymously to protect their personal information.
Cryptocurrency provides numerous benefits to sellers as well. Transaction processing times are fast; they usually take no longer than an hour. Cryptocurrency transactions also cut out the need for a middleman such a bank or another financial institution. Direct deposits are also usually accepted globally, which is indicative of more growth and opportunities in the future.
What Makes Cryptocurrency Better Than Fiat Currency
Some advantages become obvious considering the increasing popularity of cryptocurrency compared to traditional currency. Cryptocurrency eliminates the need for currency exchanges among countries as users can use the same type of cryptocurrency in every country in the world where it is accepted. Counterfeit is out of the question, which lowers the risk of fraudulent transactions. As opposed to hard cash and precious metals in some cases, cryptocurrency ownership can in no way be deemed illegal.
Although cryptocurrency comes with only a few risks, the virtual payment system does have some downsides. For instance, if you have chosen a cryptocurrency that is struggling to become popular, there might be some considerable loss in value. Though not very likely, strict cryptocurrency regulation in certain countries is not out of the question, which could potentially put a damper on things.
At the end of the day, however, cryptocurrency offers a level of convenience and security no other payment system is equipped to provide. Its benefits outweigh its risks and setbacks, which is slowly making cryptocurrency an essential part of the digital age.
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