If there’s one thing to describe cryptocurrency, it’s that it’s volatile. As the newest kid in the currency block, there is literally no history to determine what is normal or not in its price plunges and market behavior. But what exactly is cryptocurrency?
Cryptocurrency is a digital asset designed to function just like real money but with no physical form–it’s completely online. It was first implemented in 2009 with the creation of Bitcoin. It is maintained and managed by cryptography, acting as its security measure. Cryptocurrency gained an increasingly huge following over the years but it was not until April 2013 that it captured significant investor and media attention when it peaked at over $266/coin.
However, cryptocurrency is without its infamy. It’s highly volatile and unpredictable.
With all the unpredictability going around, why exactly should you invest in cryptocurrency? Why trust a market where there’s no way to figure out what the risks is and when the next price dip would happen? Here are the top five reasons by https://elitetrading.de/trading-software/bitcoin-circuit/, why now is the time to invest in cryptocurrency.
Every day, we hear of data breach and theft on the news. Cybersecurity is one of the major flaws that we are facing in a world full of online transactions and cashless systems. However, cryptocurrency might be the answer to that. There are two reasons why the cryptocurrency economy is as secure as it is now.
The first reason is that the whole system is based upon cryptographic security. Rather than rely on banks and their I.T. departments to secure your money and banking details, cryptocurrency relies on the math. By doing so, your account is unlike to ever be compromised. This is made possible by blockchain – a continuously growing list of records, called blocks, which are linked and secured using cryptography. By relying on a proof of work system, where a transaction is set and cannot be changed as soon as it is confirmed in the blockchain. Upon confirmation, the transaction becomes a part of the blockchain’s record of transactions and cannot be changed and can most definitely not be forged. On top of that, completing a transaction lets almost everyone across the network know about it and hence adds another layer of emphasis to its security. With the blockchain, investors can be safe in the knowledge that no one outside of the miners can get involved in your transactions.
This transaction process is completed by miners as they are the only who ones who can confirm a transaction. Miners spread the transactions across the network after stamping them as legitimate and legal, during which every node adds it to the blockchain. Both blockchain and proof of work systems are unique to cryptocurrency.
The second thing that makes the system secure is the fact that the individual coin funds are locked in a public key cryptography system. With this, only the owner of the private key can send cryptocurrency. Once again, using cryptography, it is nearly impossible to break this scheme.
Anonymity and Privacy
On top of being a highly secure form of currency, cryptocurrency also comes with the bonus of having a pseudonymous nature. This was once an attractive advantage to those dealing in the dark web, but the anonymity and privacy are also a huge plus to everyday investors and traders. Anonymity and privacy, on top of security, are both founding features of cryptocurrencies. On the most basic level, it prevents external parties, organizations, and governments from knowing what you’re buying or investing on. It also masks how much you spent and with whom you transact with.
This pseudonymous feature means that neither a transaction nor an account to which they are sent are ever connected to real-world identities. There are crypto addresses that are made up of seemingly random chains of around 30 characters which-once given to a person – makes it almost impossible to track to them. However, it is certainly possible to analyze the transaction flow but this does not make it any easier to connect the real-world identity of the user with the address.
Obsolescence of Paper Currency
With the advent of money being mostly digital, it is not much longer before paper currency becomes the minority. With currency transaction systems such as credit cards and PayPal, it’s only logical that the next step would be to get rid of the physical form altogether and transition into a 100% digital currency.
Cryptocurrency is the first iteration of that.
One of the key reasons that cryptocurrency trumps traditional currency is quantitative easing – the introduction of new money into the money supply by a central bank. By operating under a controlled supply, there would be no need to print money. Most networks even limit the supply of their crypto even when the demand is high. For instance, Bitcoin production decreases over time and is set to reach its final number sometime in 2140. The monetary supply of a cryptocurrency in the future can be roughly calculated today thanks to a schedule written in the code. Despite being likened to gold and silver in that the supply is highly limited, cryptocurrency is as legitimate a currency as traditional and FIAT currency.
Lower Inflation Risk
Traditional world currencies are controlled by their governments. As such, when a particular government messes up with their policies or faces an economic crisis, the currency suffers heavily. This could lead to a heavy fluctuation of value and the need to print more money. Cryptocurrency is not faced with this problem.
Cryptocurrency is a global currency. Many of its investors believe that it has a lower falling risk compared to traditional currencies. On top of that, it does not depend on government policy so it is prone to hyperinflation as well as complete collapse of currency.