There are contradicting opinions on the currently booming cryptocurrency. Some critics see it as merely a temporary hype that ends abruptly when the bubble bursts at the latest, as there can be no unlimited further price increase. Proponents and retailers who are already very successful in online business, on the other hand, see it as the gold of the future and an incredibly large market of possibilities. They are also the ones who assume that there will be a steadily rising trend towards the future, which will bring far more to light in addition to the around 6,000 currencies that already exist.
As a beginner, you can also take part in it, you don’t have to be a crypto expert. A few basic knowledge of the market and of course the risks are sufficient, because once you have acquired crypto money, you can leave the buying and selling to professional platforms or a trading robot like Cryptohopper, which does all the work.
But what makes the digital currency so popular? What are the differences between cryptocurrency and regular currency? What advantages does it offer compared to conventional payment methods? In the following, we will look at all of these points.
Even if digital currencies such as Bitcoin, Dash, NEO, Litecoin, and Ethereum exist only in the form of complex combinations of letters and numbers on the internet, they have to be generated in some form. This process is called mining and, comparable to a real mine, the crypto money is also “mined.” However, this happens solely through state-of-the-art information technology, which builds up a so-called blockchain and continuously extends it.
The blockchain can be thought of as a web-based, public, decentralized accounting system in which every single transaction is recorded, verified and encrypted using a mathematical formula. This creates blocks full of information lined up in a row and makes every movement traceable in a very transparent manner.
Compared to physical currencies such as the Euro, US dollar, or the Swiss Franc, cryptocurrency is exposed to significantly more severe exchange rate fluctuations, as speculation is ongoing around the world.
Advantages of Cryptocurrency
The big plus of blockchain technology is that it makes the use of third parties such as financial institutions superfluous, because the transactions can be carried out directly between one person and the next. The system controls itself, so to speak, since the entire network must verify all newly entered data records before they can actually be stored and thus successfully carried out.
- The omission of an intermediary means that processing is much faster, as, for example, a bank would otherwise also take a certain processing time for online payments by credit card. Crypto payments can therefore be made around the clock in real-time.
- The transaction fees are much lower.
- There is no costly exchange into foreign currency in international trade because all processes can be carried out in one and the same uniform currency.
- The public documentation in the blockchain creates transparency, every transaction is visible to all interconnected members of the network.
- Cryptocurrency is forgery-proof.
- The use of anonymous codes creates data security and protects privacy.
- The crypto assets are stored on the cell phone or laptop, so cashless transactions can be carried out in no time, such as a flight booking, hotel reservation, or ordering a pizza delivery.
- Your own wallet, the electronic wallet, is secure and can be managed independently without a higher-level authority being able to set a transfer limit, for example.
- Since human intervention is very limited and everything happens because of computer programming, the system is less prone to errors.