Bitcoin, Ethereum, LiteCoin and etc. are the topics that have attracted a lot of attention in recent times. The crypto investment market is becoming more active than ever. The post will introduce how cryptocurrency works
What is a cryptocurrency?
Cryptocurrency is
digital money, that is, money in the form of digital bits. Cryptocurrencies are
only used in the electronic environment serving electronic payments through
information systems including computer networks, Internet and electronic means
stored in the database of the issuer (3rd party). This means, you can't handle
it and can only be used on electronic media.
Cryptocurrencies are
represented in the form of a monetary pen (a form of currency used by recording
in the Bank's accounting books) on an account that the customer (buyer) opens
at the issuer.
Or it can be
understood that electronic money is a means of payment that is secured with a
digital signature. Like paper money it functions as a means of exchange and accumulation
of value.
If the value of paper
money is guaranteed by the issuing government, then for electronic money, its
value is guaranteed by the issuer by committing to convert electronic money
into paper money as required by the owner.
How cryptocurrency works
When participating in
cryptocurrency trading, you do not need to use your real name, nor do you have
to register at any bank. What you need when you join crypto exchanges is an
email and a self-set password.
Cryptocurrencies run
on a public ledger called Blockchain - a table that records all the
transactions that take place, is constantly updated and cannot be changed.
You will probably
also hear about the term "mining" and this is how cryptocurrency
units are created. Specifically, this is a process of processing and
confirmation quickly on the electronic money network, or simply using a
computer to hunt for the highest value cryptocurrency.
Investors will have
to buy cryptocurrencies through exchanges, also known as brokerage firms, and
store them on these platforms in exchange for other investors. To be able to
buy cryptocurrencies, it is imperative that you use crypto wallets from
exchanges.
Pros - Cons of cryptocurrencies
Advantages
●
Cryptocurrencies
are generally considered a scientific and technological advancement in the
monetary and financial field. Therefore, it has certain advantages compared to
the current circulating paper currency in the market:
●
Convenience
in transactions: If you deposit money at banks, you may be limited to transfer,
withdraw money in 1 day, with electronic money, you have the freedom to trade
regardless of space, time.
●
Cryptocurrencies
cannot be counterfeited: Because they do not exist in physical form, and each
cryptocurrency exists under a single sequence of encrypted bits on the
Internet.
●
High
security, no identity revealed when transactions anonymously
●
Very
low transaction costs.
●
Profitability
is very high, especially for small value coins
●
Safety
and environmental protection.
●
Has
the potential to develop e-commerce.
Defect
Besides the
advantages mentioned above, there are still some disadvantages to
cryptocurrencies. This causes many difficulties for users such as:
●
Using
is not too easy: For those who are used to using technology, this problem is
not too difficult. But for those who have little chance of exposure to
technology, creating a cryptocurrency wallet and managing it is quite
difficult. Not being careful is also deceived easily.
●
Cryptocurrency
prices often fluctuate up and down, which is difficult to predict. This is
similar to the stock market ups and downs. Traders are at risk of losing or
losing capital if they do not regularly monitor fluctuations.
●
As
a place for money laundering criminals: Perhaps this is the biggest downside.
For the same reason, there are countries that don't yet accept coins as legal
tender.
●
Hackers
are now the primary target of hackers and are also associated with other
illegal activities
●
Investing
easily leads to financial bubbles on the Internet
Should we invest in cryptocurrency?
It is difficult to
say whether to invest in cryptocurrencies at the moment or not, especially
Bitcoin because the latter cryptocurrencies receiving more investment and
preparation have surpassed Bitcoin.
If you have a small
or medium amount of money, you can invest in a currency that has a low market
value but is more profitable and faster than a coin of great value.
However,
cryptocurrency is not an ideal choice for busy people because the price of
money is constantly fluctuating. Without regular monitoring, profitability is
very low, even losing quickly.
So:
You SHOULD invest
only when you have time to watch continuously because the volatility of cryptocurrencies
is huge and you need to really understand the currency you invest.
You SHOULD NOT invest in a movement without fully understanding what cryptocurrency is and how to evaluate the market, because the risk of loss is very high if you do not really understand the currency you invest and know. seize the right opportunity.