What is the use of cryptocurrency in simple terms - Service
Technology is advancing rapidly and is being successfully incorporated into everyday life. There is a definite possibility that cryptocurrencies could replace regular money in the ne...
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Technology is advancing rapidly and is being successfully incorporated into everyday life. There is a definite possibility that cryptocurrencies could replace regular money in the near future. But despite their technological sophistication, crypto still has both advantages and disadvantages that may discourage some users.
How does blockchain work?
Cryptocurrencies are almost universally talked about. Even people with no interest in modern technology have heard of such funds. Unlike physical money, cryptocurrency cannot be stored in bank accounts, as it does not exist in the form of coins or notes that everyone is used to. Cryptocurrency transactions are stored and conducted using a remote database, the blockchain.
Blockchain consists of a continuous chain of blocks. It contains all records of transactions made using bitcoins or other cryptocurrency. Unlike conventional databases, these records cannot be altered in any way, only new ones can be added.
Pros and cons of cryptocurrency
The digitalisation of the world has made using cryptocurrency much more profitable than paying with paper money. Since cryptocurrency has no physical shell, it cannot be counterfeited. It is not tied to any physical address, and government agencies cannot monitor virtual currency activity, making it safe to use.
A virtual account is opened in seconds. There is no need to wait for approval as in the case of a bank, and the balance and transaction history can be viewed at any time, thanks to the open cryptotransaction system. In addition, bitcoin transaction fees and speed are much lower than bank transactions.
Despite its many advantages, the cryptocurrency has some disadvantages. These include:
- The inability to use virtual money in some countries, as cryptocurrency transactions are not allowed everywhere;
- cryptocurrencies are often used by fraudsters or other malefactors due to the fact that such currency is virtually untraceable, so you need to keep in mind the security rules;
- volatility of cryptocurrencies is influenced by many factors;
- frequent bankruptcies and closures of cryptocurrency exchanges, lack of reimbursement for losses due to loss of access to the crypto wallet;
- frequent attacks by hackers - we mentioned one of these, the 51% attack, in our glossary;
- the usage system may seem quite complicated for inexperienced users. To make it easier for you to understand the topic, we've described the basics of how cryptocurrency works.
Especially advanced citizens don't miss the chance to make money from crypto. The most popular and reliable ways to do this are mining or trading. Mining is the generation of cryptocurrency by means of computer technology in order to sell it in the market, while trading is the trading of currency by speculation.
You can also invest: it is a passive way of making money that does not require deep involvement in the market, but still requires the use of some kind of strategy. The main feature of this method is its long-term nature.
Passive ways of making money from blockchain also include stacking - users ensure that the blockchain works by storing money on a special algorithm. However, it is worth remembering that if the value of the tokens in frozen wallets drops, there is a risk of losing your savings.
Cryptocurrency is a modern payment tool, which in capable and reliable hands gives birth to new technologies not known before. For example, Factom can be used to create a modern database in which large amounts of information can be stored on a blockchain, and IOTA allows for the creation of novelties for the world of smart things. Many online shop owners are about to introduce cryptocurrency payment options as early as 2022.
In any country, it is possible not to fear the regulation of cryptocurrencies and to invest successfully with minimal risk. For example, buy bitcoin for cash at a bargain price on an anonymous exchange with an automated mixer or negotiate directly through an OTC transaction on Cryptex.