Cryptocurrency - User Information
In 2019, it is difficult to find a network user who would not hear about the concept of “cryptocurrency”. This term is called virtual digital currencies, the basis of which is a unique digital code - it is not amenable to copy and is securely encrypted, so it is almost impossible to counterfeit coins. Many will immediately ask - what are the differences between cryptocurrencies and conventional electronic payment systems or bank accounts? Indeed, in fact, all these calculation methods are non-cash. But the caveat is that the contents on your card or wallet in EPS are confirmed by fiat money, while the crypt is not connected with national banks in any way and is issued on the Internet.
With the legal status of virtual currencies and its economic essence, nothing is clear yet. In addition, the main feature of cryptocurrencies is the absence of any internal or external administrators. For this reason, no banking organizations, tax and judicial authorities control over the funds of people using Bitcoin or one of its many analogues, is not available.
Why cryptocurrency is needed
Does the world in the digital age really need another alternative to cash payments, bank transfers and electronic payment systems? Practice has shown that it needs more than ever. Thanks to the features of technology, network users can make money transfers around the globe, regardless of their geographical location. They can also save money on commissions decently, since banks, intermediaries and other financial organizations are not involved during transactions. Consider these and other advantages in more detail:
- Security. The main principle of cryptocurrencies is maximum rationality and getting rid of unnecessary participants (intermediaries) in the transfer chain. This not only saves money, as noted above, but also makes payments more secure. Money is transferred from user to user like ordinary computer files, but since the information is securely encrypted and provided with an electronic signature, there is no question of even interception by even the most technically savvy hackers. The few cases of theft, if any, are usually associated with the negligence of the users themselves - for example, when a person accidentally “revealed” somewhere the authorization data of his cryptocurrency wallet.
- Anonymity. Modern electronic calculation tools have an obvious drawback - all statistics on financial transactions of EPS users and bank cards are collected and, if any interested person needs to receive this information, this is easy to do. Accordingly, a person’s life and all his accounts are at a glance, accessible to the state, tax services and even individuals (no matter how banks try to convince us that this is not true, but the fact remains - the user bases somehow get to those interested in them to partners of these same banks). Fortunately, cryptocurrency payments are fully protected from any third party intrusion. The network records only the fact of the movement of money from wallet to wallet (a transaction is indicated by a randomly generated sequence of numbers and letters), and the data on the amount
- Decentralization. Safe and anonymous transfers are made possible thanks to a unique way of storing and moving digital banknotes. A huge database - blockchain, stores information about coins issued and in circulation. The uniqueness lies in the fact that the system is completely decentralized, and instead of a single server, computers and other user devices are involved - their number is hundreds of thousands. This approach guarantees complete immunity to hacker attacks. In the case of any unlawful data changes, the system will quickly detect inconsistencies and invalidate them.
Thanks to these “three pillars” on which cryptocurrency rests, it has become a means of payment for a new generation without even being recognized by the state. Using electronic banknotes, you can make purchases on foreign Internet sites, pay utility bills and mobile communications, book a hotel or buy plane tickets. You can transfer any amount to an addressee from any country without worrying that the difference in exchange rates will make you say goodbye to a few percent. It is especially pleasant that cryptocurrency is also popularized outside the Internet - in many European countries, retail outlets have begun to introduce an instant method of calculating electronic coins using a special application for smartphones. This is even more convenient than bank cards already familiar.
But it is not so attractive cryptocurrency that can be settled by single settlements - banknotes issued via the Internet have huge potential as an investment tool. With its help, network users can not only protect their savings in the difficult times of the financial crisis and unstable political situation, but also significantly enrich themselves on the difference in exchange rates. Here are just a few of the features of the crypto that make it a welcome investment asset:
- Investing in crypto, you invest in new technologies - one of the most profitable areas of activity (success stories of projects such as Paypal, Apple, Microsoft, direct proof of this). Many cryptocurrencies go side by side with unique projects of various purposes - payment instruments, promising decentralized applications, services and exchanges. If any of them is in demand, this noticeably affects the exchange rate.
- High volatility. The rate of cryptocurrencies can change dramatically over a relatively short period of time, which translates into two advantages at once - high profitability, which most investment instruments are simply not able to give, and the ability to earn on currency speculation. The most striking example of enriching network users through crypto, of course, is Bitcoin. It was because of him, in fact, that the public craze for crypto assets began. At the dawn of its existence, it cost a mere penny, and a couple of years ago it started to grow and went up several thousand times. At one point, its price reached an impressive 17 thousand dollars for one coin. Other coins (altcoins), although they cannot boast of such results, are also quite good in value.
- Low exposure to inflation. If you have available funds, it would be logical to want to protect them from depreciation, which in the current economic situation comes so quickly that no bank deposit can save. Cryptocurrency is not as attached to the economy as fiat money, so it can play the role of a kind of refuge. But you need to understand that not all coins are suitable for this purpose. The deflationary ones include Bitcoin, Ripple, Stellar and several others.
Despite all the positive aspects, one should also take into account the negative features of cryptocurrency as an investment tool. The lack of state control and high volatility really allow you to increase your capital in the shortest possible time, but at the same time make such investments extremely risky. A lot of people who invested too much in Bitcoin lost their money after last year's collapse in its value. If you plan to invest, you should diversify the risks by selecting several assets for investment, and make sure that there are prerequisites for growth or at least maintaining the price at the current level.
How to buy cryptocurrency and where is it better to store it
By purchasing digital currency, everyone uses it for their own purposes. Some buy in order to conduct transactions in the future, others in order to earn money. One way or another - buying a currency, a person invests money in it. There will always be a risk of losing investments in disadvantageous courses. Therefore, the choice of the method of buying a crypt should be approached competently and competently. It is important to initially study all types of cryptocurrencies in order to choose the most promising one. You can view the rating of digital currencies on Coinmarketcap or other popular resources for collecting statistics. After a person decides on the choice of cryptocurrency, then you need to choose a method of purchase. There are several of them:
Online cryptocurrency wallet
The most demanded now is an online wallet. Popular wallet services allow you to exchange digital currencies for money and vice versa. The procedure does not require much effort. It is enough to create an account on the site and choose the currency that a person prefers to give and which to buy. The disadvantage of such a wallet is the commission, which is often unjustly overstated. Otherwise, there are only one advantages:
- Quick access to funds from any device with Internet access and a browser.
- Several methods of protection (for each service they are different, but without special keys, two-step authentication via a mobile phone and the ability to restrict access by IP is usually not enough).
- Lack of mandatory verification (if you want to remain anonymous, no one will bother you).
- A large number of available cryptocurrencies into which you can convert your savings.
- Ability to work with small amounts of money.
Separately, it is worth noting a rather atypical kind of wallet - an account in an electronic payment system. Some EPSs, in the wake of the popularity of cryptocurrencies, have opened accounts equivalent to these currencies. For example, Webmoney, well-known in Russia and the CIS, now allows you to create a WMX account (as well as WMH and WML) - the tokens of these accounts are not cryptocurrency as such, but their cost is identical to the real rate of a particular crypto: Bitcoin, Litecoin, etc. The system user can replenish the account by any means that are relevant for rubles, hryvnia or other common currencies, make exchange operations inside the wallet, or withdraw tokens at the current rate for a real cryptocurrency wallet. There are commissions, but they are quite acceptable.
Cryptocurrency exchanges for exchange and purchase
You can also make a cryptocurrency purchase using the exchange. To do this, just register on the site. After authorization, the account is replenished. Only then is the digital currency that the person wishes to acquire selected. Users send orders to make a purchase, and when a person receives a confirmation of the transaction, he becomes the owner of the cryptocurrency. This method is very effective. Since it allows you to make a purchase of any currency. The disadvantages of this method are: a long wait for an order confirmation, payment of a commission, hacker attacks. The latter, of course, is not commonplace, but on the Internet they periodically write about mass hacking of accounts on various exchanges. So you should be wise in choosing the site with which you plan to collaborate.
Beginners who are just starting to get acquainted with cryptocurrencies often choose exchanges than special crypto wallets to store small volumes of Bitcoin or other cryptocurrencies. Since cryptocurrency is increasingly becoming part of our reality, there are more and more exchanges every day. Let's consider some of them:
- Exmo Exchange - takes its first place on this list. This is a promising, constantly evolving exchange, which is used not only by beginners, but also quite large investors. More recently, the enlargement of the exchange has occurred due to the merger with a large foreign company, which allows considering it already on an international scale. There are not so many coins on this exchange, but the main, in-demand promising crypto coins on the exchange are present. Exmo Exchange almost always supports all forks, which allows you to earn extra money. If you regularly engage in currency speculation on this exchange, then at the end of each month the exchange pays a bonus, which also brings% of income. One of the popular features of the project is the internal exchange point. This is one of the most reliable and promising cryptocurrency sites.
- Livecoin exchange - this cryptocurrency exchange is very similar in functionality to the Exmo exchange, but with a large number of coins. A distinctive feature of this exchange is that there is practically no minimum amount for input, that is, to start using the exchange, you do not need to buy cryptocurrency for an amount that is beyond the reach of an average network user. There is a minimal minimum for withdrawal, but no more than on other similar sites.
- Yobit.net exchange is one of the most popular cryptocurrency exchanges, it has good technical functionality. The network has enough negative reviews about this exchange, nevertheless, the exchange works and many start with it. It is simple and convenient, there are rare coins on the exchange.
In order not to be disappointed when working with any exchange, you must follow the basic rules. First, special attention should be paid to the sum of the minimum input and output for each operation, because this criterion can change. This is necessary so that the coins are not lost. Secondly, it is necessary to go through the verification procedure without fail, because without this there can be no access to the withdrawal of funds. If you follow these simple rules and take care of the security of your account, your money will always be safe.
Getting crypto using an exchanger
The next way is exchangers. This method allows you to make a purchase of cryptocurrency for the electronic currency of popular payment systems or fiat money through a bank transfer. As elsewhere, you will have to pay a fee in the exchangers, plus you need to pay attention to the rate at which the exchange operation is performed. What is nice, many exchange services allow you to use a mobile application. This method allows a person to make a purchase from anywhere in the world, being away from a stationary computer. It is enough to install the program on the phone and go to your profile, where the entire list of possible operations, the saved statistics on previous payments and other useful information will be available. When storing cryptocurrencies, hardware wallets should be preferred. The cost of these devices starts at sixty dollars and more, but this is a quite adequate fee for the safety of your electronic savings. If your account on the online wallet site can still be hacked in rare cases, or if you yourself accidentally display private data, then in the case of hardware wallets, reliability goes to a new level. Money is protected by private keys encrypted on the device itself, PIN-code and account with optional connection. What is nice, many wallets are equipped with additional functions like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. but this is quite an adequate fee for the safety of your electronic savings. If your account on the online wallet site can still be hacked in rare cases, or if you yourself accidentally display private data, then in the case of hardware wallets, reliability goes to a new level. Money is protected by private keys encrypted on the device itself, PIN-code and account with optional connection. What is nice, many wallets are equipped with additional functions like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. but this is quite an adequate fee for the safety of your electronic savings. If your account on the online wallet site can still be hacked in rare cases, or if you yourself accidentally display private data, then in the case of hardware wallets, reliability goes to a new level. Money is protected by private keys encrypted on the device itself, PIN-code and account with optional connection. What is nice, many wallets are equipped with additional functions like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. or you yourself inadvertently light up private data, then in the case of hardware wallets, reliability goes to a new level. Money is protected by private keys encrypted on the device itself, PIN-code and account with optional connection. What is nice, many wallets are equipped with additional functions like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. or you yourself inadvertently light up private data, then in the case of hardware wallets, reliability goes to a new level. Money is protected by private keys encrypted on the device itself, PIN-code and account with optional connection. What is nice, many wallets are equipped with additional functions like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. many wallets are equipped with additional features like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level. many wallets are equipped with additional features like a touch screen or a unique software interface that turns on when the device is connected to a PC. Although, I must admit, recently online wallets have taken security / functionality to a whole new level.
One of the main advantages of cryptocurrencies is the opportunity provided to users to independently participate in the issue of banknotes. If in the case of ordinary electronic and paper money the button from the printing press is in the hands of the state, then the situation with the crypt is somewhat different - in addition to the issuance by the creators themselves of the nth number of coins one-time or in part, they give people the opportunity to earn money by mining coins. This process is quite specific and deserves a separate detailed material, which will be published in the article, but for now only briefly outline the features and nuances of this activity.
Mining is the extraction of banknotes by using the computing power of a user's computer. By installing special software on the computer, a person initiates a computational algorithm, performing automatically the operations necessary to maintain the cryptocurrency network. Currency, in fact, serves as a reward for the time spent on calculating new information blocks and resources expended.
Mining cryptocurrencies can be divided into two areas:
Normal mining (on your PC or other device). When a cryptocurrency project just starts, an average computer with a good graphics card is usually enough for calculations, but gradually the complexity of the calculations increases, which makes mining on the same configuration already less profitable. Therefore, network users invest in powerful hardware and even create specialized “farms” - platforms with many video cards that work around the clock for the benefit of their owner. It is logical that the long-term operation of a PC at maximum power leads to two problems: high electricity bills and premature component failure. Many new currencies on your home PC are now profitable to “mine”, but already quite old Bitcoin - no.
Cloud mining. For a small amount, any interested person can rent computing power on the servers of the cloud mining service, mining cryptocurrency remotely. The user of such projects does not need to worry about setting up programs, preserving computer hardware and updating it - the service staff will do this for him. Mining in the cloud is even more profitable, since servers are often located in regions where the cost of electricity is significantly lower than in most countries. This allows cloud mining companies to rent entire hangars for their equipment, charging a fee for its rental.
Many, of course, will ask - why do they need this fuss with rent, when they can independently obtain currency? Everything is very simple, just like in the case of the gold rush. While searchers in the mines delved into the mud, searching for precious metal, enterprising individuals were guaranteed to enrich themselves by supplying them with food / drink, entertainment and equipment. Also with cryptocurrency - you can’t be completely sure that the investment will pay off, too many different factors are taking place.
The issue of cryptocurrency value
There is a certain category of people who are skeptical of cryptocurrency projects and their tokens. They consider them nothing more than a soap bubble, hyped around, like the famous MMM from the late Sergey Mavrodi. Real money, they argue, should have some basis - the state currency, for example, is confirmed by its gold and foreign exchange reserves. And what foundation does Bitcoin and similar projects have? Nothing? At first glance, it really seems that he is not provided with anything. But in practice, it relies on the uniqueness of the technology and a streamlined algorithm that made it possible to make an anonymous currency with a wide range of applications, forging which is actually unrealistic.
Consider another well-known life example - the famous social network VKontakte from Pavel Durov. It would seem that an ordinary site for communication and information, and even borrowed the lion's share of ideas from the notorious Facebook. But this site has occupied an empty niche, has grown into a multimillion-dollar user base, and has found advertisers, partners and investors. No one in their right mind will say now that VK is a dummy and is worth nothing. The same is true with popular cryptocurrencies. The demand, manufacturability and cost of maintaining the network’s operability provide value no worse than the gold and foreign exchange reserve.
The most popular cryptocurrencies
The market for a new generation of electronic money is estimated at hundreds of millions of dollars and every year it only grows in capitalization. More and more promising projects appear, therefore it is quite logical that even more or less financially savvy people begin to get lost in all this diversity. If you don’t know which asset to look at first, use our TOP-5:
- Bitcoin The most famous currency that has caused a real cryptocurrency craziness for a large number of Internet users. In recent years, there has been such a stir around it that the price has jumped to an impressive 17 thousand per coin. People swept away all the top video cards from store shelves to mine coins, and made large investments on cryptocurrency exchanges. Now the situation has somewhat settled down, but the value of the asset is still a decent amount - $ 9,790 (as of July 2019) and even shows growth.
- Ethereum At the moment, this is the best alternative to the aforementioned Bitcoin - it is characterized by a more advanced algorithm than the founder, the ability to launch other blockchain projects based on it. The cryptocurrency market crash at the end of last year affected Ethereum, but in the end, the project’s business went uphill. Now the cost of one token is $ 211. There are prospects for further growth, confirmed by the plans of the creators to further develop this blockchain.
- Ripple If you look at the exchange rate of XRP coins, comparing it with other financial assets, you can mistakenly assume that it does not carry any potential. But this is far from the case. The current price of $ 0.31 per coin is the result of a Ripple price increase of more than 30 thousand times. In addition, financial experts predict a great future for a unique system of international currency transfers being developed on the basis of the project (a more advanced analogue of the notorious SWIFT). Total market capitalization is steadily approaching $ 15 billion.
- Litecoin. Litecoin creator Charles Lee managed to turn his coin into one of the most popular alternatives to Bitcoin in two incomplete years (from 2011 to 2013). Among its distinguishing features are: equality of all participants, the presence of open source code and transparency of operations, which is not at the expense of anonymity. Everything related to the personal information of the participants of the money transfer is properly encrypted. If we talk about improvements with respect to BTC, the most striking thing is the 4-time decrease in the time of block generation and a greater number of coins issued. LTC is currently trading at $ 94 apiece.
- Bitcoin Cash. Another Bitcoin hard fork. The transaction speed gradually increased - first, due to a block size of 8 MB, and then 32 MB. This decision by the developers had a positive effect on throughput. Bitcoin Cash users make their payments with small fees (up to $ 0.01), and the still low network load does not lead to the formation of long queues with unconfirmed transactions, which are often observed in the case of older Bitcoin. On the other hand, there is a drawback in the form of automatic adjustment of the complexity of calculations, which often destabilizes the network and increases the volatility of the currency.
Of course, the mere fact of the presence or absence of a specific cryptocurrency project in this list does not yet indicate its prospects / futility. History has seen many examples when ideas that are rather strange at first glance eventually gained immense popularity and brought millions to people who embodied them in reality. The same thing with investment - the most profitable are often assets in which the general public could not see the real potential. This also applies to the cryptocurrency industry as a whole.
What awaits cryptocurrency and blockchain technology in the future
Blockchain-based electronic money has always been the subject of fierce debate. One category of people - septic tanks and haters, spoke rather unflattering about digital transactions and storing money in the form of assets based on an encrypted code. The main argument in the dispute was usually (and now is) a comparison of Bitcoin and similar currencies with the notorious financial pyramids. They say, wrappers wrapped up people who are unsupported and valuable only as long as there is hype among those who are ready to invest and try to mine people. One can only partially agree with this statement - in the situation with BTC there really was a place for unjustified “hype”, but in fact $ 13-14 thousand is quite a fair price for a coin, according to leading financial analysts.
Cryptocurrencies have certain problems with recognition at the state level. Some countries approved a new type of asset and legalized in some way (some even thought about issuing their own currency), while others introduced bans on the use of these payment instruments at the legislative level. In most cases, the reason for the dissatisfaction of the authorities is commonplace - undermining economic indicators. Indeed, the turnover in the national currency is thus reduced, banks lose their interest, and people easily shy away from various levies and taxes. But sometimes there are more “exotic” arguments against. For example, in Indonesia, Algeria, and Pakistan, people are still debating whether the crypto is against the Islamic religion.
At the moment, cryptocurrencies (even those known as Bitcoin) do not have sufficient capitalization and prevalence to shake the financial system that has been tested for centuries. When it comes to paying utility bills and settlements at most retail outlets, fiat money is still involved. Although libertarians, cryptanarchists, and simply tech-savvy people are increasingly looking toward anonymous and profitable online payments. Plus, the blockchain technology itself has much greater potential than a regular means of payment or investment tool. On its basis, projects are already being developed that will affect productivity in such important areas for mankind as metallurgy, energy, finance, etc. The list goes on and on.
But we will not make forecasts for the long term - the prospects for the next couple of years are much more accurate. Most analysts point to the inevitable rise in the price of Bitcoin, and after it, almost the entire cryptocurrency market, and only a few believe that its value will fall to 2 thousand dollars per coin. And favorable forecasts are really worth believing, because the cue ball, which is in decline, has managed to rehabilitate itself after breaking through several alleged lows, to rebound and rush up again. Now network users have got an excellent opportunity to make a profitable investment and collect cream, waiting for the growth of the value of the selected asset. Well, of course, no one cancels the wide scope for speculation - cryptocurrency prices fluctuate even throughout the day,
Summarizing all of the above, we briefly list the main points that allow you to get a basic understanding of cryptocurrencies and their purpose:
- Cryptocurrency is a new generation digital currency that can serve as an effective substitute for traditional currency payments. Its main advantages are security, decentralization and anonymity, provided by advanced technologies in the field of data encryption and the participation of user systems in network support.
- The number of cryptocurrencies currently stands in the thousands. The most famous is Bitcoin - a project authored by a certain Satoshi Nakamoto, who has become the absolute leader in cost and prevalence.
- The monetary unit of the cryptocurrency is tokens / coins. They can be obtained in various ways - through exchange, buying for fiat money, trading on exchanges, mining (mining - using the power of computer hardware to calculate information blocks).
- Cryptocurrency can be used to make anonymous payments, purchases in online stores and other financial transactions on the Internet. Due to its high volatility and technological potential, it offers great opportunities for earnings for traders and investors.
- The cost of cryptocurrency banknotes is affected by the technology on which the blockchain is based, market demand, complexity of production, the presence of competitors with projects similar in principle to the work. High-profile events such as the launch of a new exchange or the massive hacking of online wallet accounts can also influence.
- The current status of the cryptocurrency as a means of payment is not defined. In the USA, Japan, Canada and many other countries, it was officially recognized and legalized. In some regions, including the Russian Federation, they have not reached a common opinion on this issue. There are also countries where a ban on operations with crypts is imposed - up to criminal punishment.
- The prospects for cryptocurrency technologies in the long term are more than positive, but experts' forecasts regarding the situation in 2020-2021 are significantly different. Some argue that strong growth awaits the entire crypto, others talk about stabilization, and skeptics predict another break of the price bottom.
Of course, this is just a superficial look at cryptocurrencies in general - a kind of introduction to the topic. If you want to receive more detailed information on various nuances of working with crypto, mining, blockchain technologies and other issues related to financial topics, be sure to check out other materials on this site.