Cryptocurrency and its influence on the new generation

The world we live in is constantly changing: be it in terms of environment, politics, science-related innovations, technology, or money. One of these reforms, the use of cryptocurrency, significantly modified today’s world.

The history of cryptocurrency can be traced back to the 1980s when it was called cyber-currency. Later in the 1990s, David Chaum’s company launched the first-ever cryptocurrency called eCash.

Ever since then, the idea of cryptocurrency started gaining popularity and rose to its peak in 2009. Cryptocurrency usage has become the talk of the town, serving as the primary determinant of investment.

However, it would be better to know what it is, its pros and cons, and the associated trading variables beforehand.

This article provides insights into the popular use of cryptocurrencies.

What is cryptocurrency?

An increase in the trend of online shopping hyped the use of cryptocurrency. It is a digital currency that uses cryptography i-e encrypted algorithms as its security feature.

Cryptocurrency is not issued by a central authority. Hence it is vulnerable to outside interference from a country’s government. Cryptocurrency promoted the idea of decentralized finance (DeFi). It can be used as a currency as well as a virtual account.

Virtual accounting offers the benefit of controlling your tasks and finance without being physically present.

Cryptocurrency offers an efficient, flexible, and cost-effective approach. This is
one of the major reasons behind its skyrocketing success and popularity. In the
year 2022, more than 300 million people own cryptocurrency.

Source: freepik.com

Types of cryptocurrency

Bitcoin is the first cryptocurrency that emerged in the year 2009. Numerous other businesses began launching their own cryptocurrencies as a result of Bitcoin’s success. A survey shows that there are currently more than 6000 types of cryptocurrencies active in the world.

Altcoins and Shitcoins were modeled after Bitcoins. In order to compete with Bitcoins, these currencies offered more advanced features. However, altcoin continues to lag behind bitcoin in terms of providing security to its users just as Bitcoin does.

Currencies like Bitcoin, Ethereum, Tether, Binance coin, XRP, and USD coin are some of the most popular cryptocurrencies.

Source: Pixabay.com

How it works

Blockchains

Blockchains are playing a significant role in powering the system of cryptocurrency. A blockchain system works by storing information in blocks. When a block gets filled, the information gets stored in another block. A chained link between blocks is created, hence creating a blockchain. Blockchains store information in a digital format. It guarantees the security of a user without the involvement of a third party.

Value of cryptocurrency

The value of anything in technology is a user-driven factor. It works on the principle of ‘the more; the better’. In the same way, the value of cryptocurrency is determined by the number of people purchasing it. Among all the cryptocurrencies, Bitcoin and Ethereum are highly valuable. There’s a large increase in the number of people owning Bitcoin in 2022.

Crypto Wallets

To store digital currency, crypto wallets are used. Each owner is given a private key to access his digital currency. He can spend, receive and send his currency. Crypto wallets keep the private key secure. Crypto wallets are characterized by hot wallets and cold wallets.

Hot Crypto Wallets

These wallets remain connected to the Internet all the time. Even though they offer a convenient and faster way to transfer and receive payments, they are vulnerable to hackers and scammers. Hot crypto wallets are free to use.

Cold Crypto Wallets

These wallets are more like hardware-type wallets. Cold wallets are small devices that look like USBs. Cold wallets are more secure than hot wallets because they require a pin to be accessed. Among all the benefits cold wallets offer, the fact that they are difficult to operate and costly, sometimes makes them less preferable to use.

Where it is used

Cryptocurrency is substantially used to do business online through investments. However, this thing should be kept in mind that the prices of goods may fluctuate on daily basis. In an online business, the price at which you are buying something might be much higher or much lower tomorrow.

Cryptocurrency also enables a person to earn passive income without buying more cryptocurrency assets. To provide an easy way to shop online and make investments, crypto credit, and crypto debit cards are used. PayPal also supports payment using cryptocurrency.

How to exchange cryptocurrency

Source: Freepik.com

To be able to use cryptocurrency, you need to get your flat money e.g dollar to be exchanged for a particular cryptocurrency first. There are many trading platforms in the world where you can buy, sell and exchange your cryptocurrency through different orders.

Two main crypto exchanges working in the world and their detail is as follows:

Centralized Exchange (CEX)

CEX is managed by a single organization. It offers a convenient way to convert your money into cryptocurrency. Crypto trading is done mainly through a centralized exchange.

However, centralized exchange violates the ethics of cryptocurrency usage. Since one of its working conditions is to make the users’ identity known at the time of exchange, the users often get unhappy.

Moreover, the centralized exchange needs to store users’ data for a short term (for trading purposes), hence making it vulnerable to hackers and malware.

Decentralize Exchange (DEX)

Unlike a centralized crypto exchange, DEX offers direct transactions without violating the transparency of a user. But the drawback of this exchange is that it does not offer a user-friendly approach, both in terms of interface and currency conversion.

It does not always allow a direct dollar to crypto conversion. This means that without crypto possession, you won’t be able to operate with DEX.

Lawfulness and Cryptocurrency

The legality of cryptocurrency varies substantially from country to country based on the country’s jurisdiction. While it is legal in some countries, its use is declared illegal in others.

Out of a total of 195 countries, 111 countries allow its use and trade. These include the United States, Canada, France, Germany, Japan, Spain, and The European Union.

Since it is a decentralized currency, it could be used in evils such as drug trafficking, money laundering, and other illegal activities. This is why many countries consider this virtual currency a threat to their well-being and therefore somehow restrict its usage. These countries include countries with implicit bans such as Bahrain, Cameroon, Zimbabwe, Kuwait, and countries with absolute bans such as China, Iraq, Morocco, Nepal, Qatar, etc.

Security and Cryptocurrency

No wonder cryptocurrency has brought jaw-dropping success to millions around the globe but for some people, it has brought nothing but misery. Digital currency provides you options for efficient and feasible trade with lots of risks. The use of cryptocurrency is much similar to a gamble where you can lose all of your assets in just one go.

A report issued by CNBC indicated a loss of $14 billion in the year 2021 due to cyberattacks; not to mention one of the biggest crypto heists in August 2021. Investors lost a sum of $610 million in a cyber attack. However, half the amount i-e $342 million got recovered in the year 2022.

The Internet contains a long list of cryptocurrency thefts which indicates that cryptocurrency should be handled with great care. In a world full of scammers, it is important to go for secured systems and beware of the attacks.

Risks associated with cryptocurrency

Even though the use of cryptocurrency has become popular nowadays, it is always advised to be cautious. The digital currency working on encrypted algorithms is vulnerable to cyber-attacks.

Source: Fool.com

Since it is a decentralized currency, there is no intervention from a third party, thus making it uninsured. This currency needs to be stored in crypto wallets which also have risks associated with their use. Furthermore, it is difficult to convert this digital currency into a tangible currency.

Methods for safe dealing

It is always in a person’s best interest to have a good knowledge of things beforehand. Cryptocurrency, even though it is popular, might be a newly emerging trend for some people in the world. So, before going for its use it would be better to know what it really is, where it is used, and how it works.

For those who use cryptocurrency, it is better to look out for a safe crypto wallet that offers maximum security to your assets. In addition to this, it is recommended to have a backup strategy
in case you are confronted with an unexpected situation of scams.

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