CRYPTOCURRENCY

What is Cryptocurrency ?

Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called Blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.

Selecting a Cryptocurrency

There is no single best cryptocurrency, but there are best cryptocurrencies for certain use cases. For example, Bitcoin is the best cryptocurrency to use as a reserve asset because it has the most widespread adoption and a finite supply.

Most of the best cryptocurrency projects are in the top 50 market capitalization of cryptocurrency. Most small market cap cryptocurrencies have questionable use cases or have underdelivered on their promises. Small market cap cryptos are generally riskier than larger market cap coins like Bitcoin and Ethereum.

It’s important to invest in cryptocurrencies that have a solid team backing the project. To get information about a cryptocurrency, it’s best to read the cryptocurrency’s whitepaper. This will give you an idea of how the crypto works and what its intended use is.

Decentralized finance (DeFi) cryptocurrencies are some of the hottest altcoins of 2021. Altcoins are a general term for any cryptocurrency other than Bitcoin. DeFi tokens are typically built on Ethereum’s blockchain and replace traditional banking functions with code. Popular DeFi tokens like yearn.finance, Compound and Uniswap are up over 500% in the past 6 months.

Here are the top 5 DeFi tokens ranked by market capitalization:

• Uniswap (UNI)
• Aave
• Synthetix
• Maker (MKR)
• Solana

Non-DeFi altcoins have also seen a significant increase in value over the past year. Ethereum, the largest altcoin by market cap, has risen from $90 to over $1,800 in less than 1 year. Ethereum has gained a lot of interest due to the variety of financial applications being built on its blockchain.

How many cryptocurrencies are there? What are they worth?

More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on May 27, 2021, was more than $1.7 trillion — down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $735 billion — down from April high of $1.2 trillion.

Why are cryptocurrencies so popular?

Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:

• Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable
• Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation
• Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems
• Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.

What is Cryptocurrency exchange?

A cryptocurrency exchange called a Digital Currency Exchange (DCU). It is a business that enables you to trade digital currencies or cryptocurrencies. Many cryptocurrency exchanges offer to trade Bitcoins, Ethereum, XRP (Ripple), WazirX, Altcoin, etc.

How do I buy cryptocurrency?

While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency. To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. WazirX is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell Bitcoin and other cryptocurrencies. Also, a growing number of online brokers offer cryptocurrencies, such as eToro, Tradestation and Sofi Active Investing. Robinhood offers free cryptocurrency trades (Robinhood Crypto is available in most, but not all, U.S. states).

How do I protect myself?

If you’re looking to buy a cryptocurrency in an ICO, read the fine print in the company’s prospectus for this information:

• Who owns the company? An identifiable and well-known owner is a positive sign.
• Are there other major investors who are investing in it? It’s a good sign if other well-known investors want a piece of the currency.
• Will you own a stake in the company or just currency or tokens? This distinction is important. Owning a stake means you get to participate in its earnings (you’re an owner), while buying tokens simply means you're entitled to use them, like chips in a casino.
• Is the currency already developed, or is the company looking to raise money to develop it? The further along the product, the less risky it is.

It can take a lot of work to comb through a prospectus; the more detail it has, the better your chances it’s legitimate. But even legitimacy doesn’t mean the currency will succeed. That’s an entirely separate question, and that requires a lot of market savvy.

But beyond those concerns, just having cryptocurrency exposes you to the risk of theft, as hackers try to penetrate the computer networks that maintain your assets. One high-profile exchange declared bankruptcy in 2014 after hackers stole hundreds of millions of dollars in bitcoins. Those aren’t typical risks for investing in stocks and funds on major U.S. exchanges.

Should you buy cryptocurrency?

Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin.