All you need to know about cryptocurrency in 2021
A beginners guide to entering the world of crypto
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If you are not familiar with the world of crypto and blockchain. You’re probably living under a rock.
That’s why we’ve created this beginner’s guide for you to simplify the process of knowing crypto.
Cryptocurrency is a virtual transfer of value or money. We can do transactions, purchases, and investments through it. It only involves 2 parties. you can purchase and invest money without involving a third party I.g bank or government.
Cryptocurrency works under a technology called a blockchain.
The word “crypto” came from encryption techniques that are used for the security of networks. Cryptocurrencies don’t have physical existence( means no paperwork).
Many companies have their currencies. In our common language, we called them “tokens”. Cryptocurrencies are not entirely like tokens but both are used for the same purpose “exchange of value”.
How digital currency is different, from cryptocurrency?
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Digital currency is an electronic form of traditional currency authorized by the government and also regulated by banks. Digital currency is not encrypted, there is a risk of losing money. The transaction fee is comparatively higher due to bank commission.
A cryptocurrency is a digital form of currency that is highly protected, decentralize, backed by blockchain technology to make encryption easier. With a low transition fee because there is no third party involved.
Types of cryptocurrencies
1_Bitcoin _by far it is the oldest and most trusted and popular. It is growing rapidly.
2_Bitcoin
3_Ethereum
4_Ripple
5_Dogecoin _ is the cheapest cryptocurrency of 2021. Many experts think that investing in dogecoin is a good option.
How to Invest in crypto?
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Investing in cryptocurrency is not a risk-free option. But It’s worth taking a risk.
For investing in crypto the first thing you need to have is a digital valet.
For that make an account on an exchange platform. Figure out your budget and how much you want to invest. Spend some time and study the value and curve of crypto you want to invest in. Then, transfer your digital currency to buy and invest in cryptocurrency.
Most experts suggest long-term investments in crypto(at least for 10-years). Think long term instead of short term when investments are concerned. Invest in crypto for the diversification of assets.
Cryptocurrency mining
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Cryptocurrency mining is the process at which new coins are introduced into the system. Mining is also a technique where new transactions are verified by the network and penetrated the circulation.
From mining, You can buy crypto tokens or coins without investing your money into them. Miners are rewarded with coins after the completion of blocks of confirmed transactions.
How cryptocurrency mining works?
Mining is achieved by using complex computers that crack an extremely complex math problem(related to algorithms or currency cryptography).
The computer that solves the problem first is rewarded with the next blocks of coins and the same process repeats every time.
To hold the value of the currency, the supply of cryptocurrency coins is fixed. Bitcoin supply is fixed at 21 million After reaching the mark of 21 million the production of new bitcoins will be discontinued.
For that, after every 4 years, bitcoin halving occurs. Halving promises a decrease in the amount of bitcoin that every block contains. Halving drops the finite supply of bitcoin. In 2009 at the launch of bitcoin, every block contain 50BTC. Now, this has decreased to 6.25BTC drastically.
Crypto Wallets
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Technically, a Crypto wallet is a blockchain wallet that enables us to store, invest and purchase our cryptocurrencies, but you need a private key to access the crypto wallet. This private key is “proof of your ownership” of your digital money and allows you to make transactions.
You only need two things to make a transaction from your crypto wallet. The “private key” and “public key”.
The public key is like the usual bank account number you can share with others to receive and send money . The private key is more like a bank account password or debit card pin which you have to protect for security.
Crypto wallets are not like traditional wallets, they don’t hold our money despite they stocks information about public and private keys. By using these keys, we can send and receive money when our private key is encrypted.
The market cap of crypto currencies
Market capitalization is the total worth of stock shares in a company. The market cap of any token or coin is determined by the number of coins in circulation multiplied by the current price of the coin.
Cryptocurrency is a highly rising market. The total market cap of cryptocurrencies is estimated at $2.05T. Bitcoin has 50%of the crypto market share.
Legality status
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The impression of bitcoin is threatening for governments and paper currency due to scarcity of central control. Cryptocurrency’s decentralized nature has the potential to make it difficult for agencies to gather data on financial activity.
For this reason, cryptocurrency is completely banned and declared illegal in some countries. In June 2021, bitcoin was declared legal in the USA, the UK, Japan, and most advanced countries. But still, some developed countries banned the trading of bitcoin.
On 24 Sep, The central bank of China has prohibited all cryptocurrencies and declared all transactions related to crypto are regarded as illegal citing the concerns around the state’s security and national safety.
In short, it is significant to review crypto laws in specific countries.
Future of cryptocurrency
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Bitcoin is the best representation of crypto because it is the largest cryptocurrency valued by the market cap.
Considering bitcoin price fluctuation, bitcoin has gone from its highest peak of $60,000 this year in April to less than $30,000 in July. Due to this high potential volatility rate, experts suggested retaining less than 5% of your portfolio investment in crypto.
According to Kiana Danial, author of Cryptocurrency for Dummies.
He says “What I expect from Bitcoin is volatility short-term and the growth-long term”.
It is recommended to not put all your money in crypto instead Invest small. Keep a small percentage for crypto in your investment portfolio.
Energy consumption and environmental impact of Crypto
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Bitcoin is the largest cryptocurrency keeping that fact in mind we will be analyzing the reports related to bitcoin to estimate environmental impacts.
Cryptocurrencies eat up large quantities of electricity and are responsible for tones of carbon emission.
In 2017, bitcoin was calculated to have an energy consumption of 948MW, In Nov 2018, bitcoin was estimated to consume 45.8TWh annually, producing almost 22.9 million tonnes of carbon dioxide.
Is Bitcoin sustainable?
Bitcoin is not at all sustainable. The energy consumption rate of crypto is higher than the one whole country usage of energy.
Also, you can explore other cryptos that claim to be sustainable and more eco-friendly than Bitcoin and others. Check them out as well.
