What is crypto currency? A crypto currency is a digital or virtual currency that can be distributed without requiring the presence of a central monetary authority such as a government or a Central Bank.
- Separate units of crypto currencies are categorized as coins or tokens. They are utilized for purchasing of products or services, identical to physical currency and some are employed to help run computer networks for more compound financial transactions.
- A crypto currency is produced through a complex process called mining. In this process, computers solve mathematical formulas in order to establish authenticity of transactions.
- The process of mining a crypto currency is a thorough, energy intensive process, and has remarkable environmental impacts. Some other crypto currencies are generated through other and less energy intensive methods.
- The straightforward way to get a crypto currency is to buy it from other users.
- Here are some of the well known examples of crypto currencies are Bitcoin, Ethereum, Litecoin, Dash, Ripple etc.
HOW DOES CRYPTO CURRENCIES WORK?
- Crypto Currencies do work on the block chain technology. They are protected by Cryptography. Cryptography is a technique used to secure the data from unauthorised entry by the use of encryption methods.
- Use of block chain makes crypto currencies of the most protected currencies since it eradicates the risk of forging and double use of the same.
PERKS ASSOCIATED WITH CRYPTO CURRENCIES
- Crypto currencies are now widely perceived as the currency of the future.
- Crypto currencies make it possible to undertake and manage the money supply without establishing any central authority, hence reducing the risk of inflation.
- They are a good substitute to the conventional currency because they do not require any physical handling of money and other issues related to the traditional currency.
- This can be a source of indirect income through a process called staking.
RISKS ASSOCIATED WITH CRYPTO CURRENCIES
- There is no central authority to exert the control over crypto currencies, so the prices of crypto currencies can change briskly. This wobbly and unstable characteristic of crypto currencies makes it tough for a person with restricted economic resources to invest.
- The environmental footprints of Bitcoin are eminent and cannot be overlooked.
- Governments and Central Banks around the world have not yet fully resolved on the issue of handling and monitoring of crypto currencies.
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THE FUTURE OF CRYPTO CURRENCY
- Some economic experts have a firm belief that crypto currency is the future of financial market.
- Efforts to increase the reliability of crypto currencies by improving Block chain and other technologies may validate the trust of people in this new type of financial tool.
- Experts do believe that crypto currencies may prove to be a substitute to the conventional currency and may replace the latter one to a great extent. However, this is not likely in foreseeable future.
- The security front, technical policy and legal aspects of crypto currencies are witnessing formidable improvements. That will help to improve the performance of crypto currencies to a great extent.
- It is indubitable, however unsettling, truth that crypto currencies retain the potential to transform not only world of finance, but it may have a long lasting impacts on world politics and international institutions as well. Once the public is confident about crypto currencies’ uses, functions, and security, and reliability, it will embrace crypto currency as it has embraced any new technology.
Bottom line: No matter how promising it looks, crypto currency is a high-risk investment. Since the technology is still in emerging stages, patience and faith are required to see its sphere of functions clearly.
So if you are interested to invest in this volatile asset, ensure that you do not invest all your capital in the hope of phenomenal returns. When it comes to return of investment, calculative but prudent risk is better than outright gambling!