Frequently Asked Questions on Cryptocurrency

Anyone interested in crypto for beginners should know the following:

  • Cryptocurrency, generally referred to as crypto, is a type of payment, which can circulate without a central monetary authority like a bank or government. It is a digital asset comprising highly encrypted and secure online transactions.
  • Unlike traditional currencies, crypto is decentralised and is typically finite in number. It is sometimes equated to precious metals, including gold and silver.
  • This currency is typically created through mining involving a complex problem-solving process usually solved by powerful computers. Essentially, when you exchange cryptocurrency, more of it is introduced in the world.
  • Most cryptocurrencies use blockchain technology to manage and record transactions.
  • There are over 10,000 listed cryptocurrencies with a total worth exceeding $1.7 trillion, with Bitcoin being the largest traded cryptocurrency in terms of market capitalisation, followed by Ethereum and Tether.

As a bitcoin cryptocurrency investor, you should be aware of the security of digital tokens and choose an exchange after considering the following factors.

  • You should choose a bitcoin exchange known for transparency since crypto is not legally regulated. You can identify reliable bitcoin exchanges by evaluating its audit exchange and reports that show the company's financial health.
  • You must also choose a bitcoin exchange based on how smoothly trade is conducted on it. Evaluate the turnaround time for transfer and settlement of bitcoin and see if the exchange offers a lock-in pricing system so that the buying/selling price of the crypto does not fluctuate.
  • Consider the market reputation of the exchange and review its goodwill critically. Conduct adequate research and seek professional guidance before choosing an exchange. You can find this information on various online forums where you can get unbiased opinions and first-hand accounts from other crypto investors.

The below are some pros of cryptocurrency:

  • No scope for frauds, scams, or declined payments.
  • All payments are 100% encrypted, so they can never leak, nor can anyone check your payment information.
  • You can securely and immediately transfer cryptocurrency ownership without any fees, hassles, or paperwork.

The cons of cryptocurrency include the following:

  • Banks or government entities do not regulate the cryptocurrency market, which means there is scope for illegal activities.
  • The losses associated with cryptocurrencies are significantly higher since there is no ownership or authority. You cannot reach out to a company to file a claim for technical errors. You cannot file reports against anyone in case of losses.
  • The cryptocurrency market is unpredictable and highly volatile. You should not invest unless you are well-versed with it. You need an aggressive risk appetite, excellent research and analysis skills and should be prepared for all kinds of volatile situations.

Ethereum's London Hard Fork are a set of 5 Ethereum improvement proposals that aim to change the speed and incentivisation of Ethereum mining. Since Ethereum is regarded as an inflationary cryptocurrency, there is no limit on its count and miners are rewarded with fresh, new coins each time they validate a block. They are then compensated with transaction fees paid by users. However, per Ethereum's London Hard Fork proposal, once the update is rolled out, miners will not receive income from transaction fees, thereby reducing the supply of this cryptocurrency and giving it a much-required boost. This update aims to make transaction fees more predictable for investors using blockchain technology.

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