{"id":1198,"date":"2021-10-01T15:27:42","date_gmt":"2021-10-01T15:27:42","guid":{"rendered":"https:\/\/readyretiree.com\/?p=1198"},"modified":"2021-10-03T20:33:35","modified_gmt":"2021-10-03T20:33:35","slug":"cryptocurrency-benefits-and-risks-a-deep-dive","status":"publish","type":"post","link":"https:\/\/readyretiree.com\/cryptocurrency-benefits-and-risks-a-deep-dive\/","title":{"rendered":"Cryptocurrency: Benefits and Risks. A Deep Dive"},"content":{"rendered":"

Cryptocurrency: Benefits, and Risks<\/strong> <\/p>\n\n\n\n

The words cryptocurrency and blockchain shouldn\u2019t be used interchangeably. However, the only way to understand how Cryptocurrency works is to understand Blockchains. Blockchain refers to the underlying technology that is used to generate a cryptocurrency. The cryptocurrency itself is a medium of exchange, and it can be used to purchase goods and services. However, the vendor must be willing and able to accept the cryptocurrency in order for the transaction to be complete. At this time, certain cryptocurrencies work best for specific types of transactions and some coins really have no function at this time. While some doubt the value of popular tokens like Bitcoin and Ethereum, the future of this technology is wide open and has a ton of potential.<\/p>\n\n\n\n

What is a Blockchain?<\/h2>\n\n\n\n

Blockchain is a term that refers to a public recording ledger, which is open to viewing by all of the users. This allows verification of the transaction records. Some users refer to the block as a page of a financial transaction book, and the entire book would be synonymous with the blockchain. This is basically a verification system that enables the value of the currency to be created. Once the cryptocurrency is generated, it can be used as a medium of exchange. The users give it the market value instead of any link to a physical commodity like gold, for example.<\/p>\n\n\n\n

Transactions can be done online, which reduces the amount of time needed to spend shopping. This is done through cryptocurrency exchanges like Coinbase, for example. The digital wallet is a feature of these services, and this helps users to keep track of their digital currencies while conducting transactions online. These transactions are tracked in an open ledger that is decentralized: This ledger is the blockchain. It tracks all of the buying and selling of the currencies, and anyone who holds crypto can view the ledger. Effectively, the blockchain functions as a public records document.<\/p>\n\n\n\n

Blockchain Proofs<\/h3>\n\n\n\n

Blockchain technology is the foundation for all cryptocurrencies. It\u2019s helpful to understand how a blockchain works and how it enables the existence of cryptocurrencies. This is just an overview of blockchain technology, as the subject can be extremely in-depth. One critical aspect of the blockchain that shouldn\u2019t be overlooked is the fact that it doesn\u2019t automatically cause structural changes to the financial system in general.<\/p>\n\n\n\n

This was a possibility during the early years of the technology, but the application defaulted to replication of existing structures instead of building more equitable structures from the ground up. The second option tends to be less favorable to the investor class, so it lags behind the material investment. As a result, miners can expect to spend up to 80 percent of their electricity costs on mining this new currency while actual human beings remain unable to afford their own electric bills.<\/p>\n\n\n\n

Profits can be generated by using cryptocurrencies in the same way that cash or credit is used when making purchases. However, blockchain technology also enables other types of financial transactions as well. This is one method of circumventing the restrictions and regulations imposed by traditional financial institutions, for example. However, this option isn\u2019t widely available to the public, and it requires some specialized skills and educational background to execute successfully.<\/p>\n\n\n\n

Each user has access to a kind of copy of the entire blockchain. This allows verification of the entire book or blockchain. The term blockchain also refers to the underlying mathematical procedures used to create and validate the proof of transaction. These proofs give the cryptocurrency its value, and blockchain technology is the method used to generate the proofs.<\/p>\n\n\n\n

The cryptographic nature of the proofs makes it possible to create a cryptocurrency like Bitcoin. The users of cryptocurrency have a collective impact on the value of digital currency. This is why the use of Bitcoin tends to increase its value over time; the more that people use this currency, the more user confidence increases.<\/p>\n\n\n\n

However, the energy required to produce these proofs is quite high; some experts estimate that over half of the energy used to mine the cryptocurrency is used just to pay for the electricity. This calls into question the long-term solvency of the current methods, but it\u2019s not a hot issue at this point in the game. This is most likely a future consideration that must be mentioned in order to present a fair view of the topic.<\/p>\n\n\n\n

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What is Cryptocurrency?<\/h2>\n\n\n\n

The names of popular cryptocurrencies have been circulating for some time, and they are slowly gaining more acceptance as a medium of exchange. However, this process takes a lot of time. Many vendors still don\u2019t accept any cryptocurrencies as a payment method at all. This restricts the value of the currency, and it makes the market less accessible to users. Online payment companies like PayPal help to propel the normalizing of cryptocurrencies by creating an option for account holders. This is how cryptocurrencies gradually come to be viewed as a valid method to make payments online.<\/p>\n\n\n\n

Cryptocurrencies are both decentralized and digital. There is no central monetary authority that creates and regulates this form of money. The Internet\u2019s culture makes it a prime location for the new system to take hold, and many vendors now accept Bitcoin and other digital cryptocurrencies in exchange for products or services offered online. There are software programs that enable people who have cryptocurrencies to buy and sell online. This software is commonly called a digital wallet. Some of them have user-friendly interfaces that can be used from mobile devices, for example.<\/p>\n\n\n\n

Many people recognize the most commonly used cryptocurrency, which is Bitcoin. There are other cryptocurrencies, like Ethereum and BitClout, Zcash, and many more. These other cryptocurrencies are less widely used than Bitcoin. Since the usage rates partially determine the value of the currency, name recognition does have value. Currently, there are around 5,000 different types of cryptocurrencies already circulating in the economy. These are used to purchase products and services, and they are even used in trading assets.<\/p>\n\n\n\n

Why Use a Cryptocurrency?<\/h3>\n\n\n\n

Each type of cryptocurrency is best used to conduct a particular type of transaction. For example, certain cryptocurrencies are optimal for use as a proxy for cash transactions. There are other currencies that function better for doing a peer-to-peer style of transaction online. Peer-to-peer networks are also common, and these networks allow investors to use cryptocurrencies for transactions. Depending on the platform being used, there might be flat rates and percentage-of-use fees involved. There are many different kinds of cryptocurrencies on the market. Each one should be researched in order to determine the best functionality of the particular digital currency.<\/p>\n\n\n\n

Cryptocurrency Exchanges<\/h3>\n\n\n\n

Decentralization of exchanges for conducting cryptocurrency transactions is a new phenomenon. These sites are hosted by third parties, and they function to secure the transactions during transfers. The types of transactions might involve various assets. The function of the exchange is similar to that of traditional financial institutions like banks and credit unions; however, the decentralized aspect of the online digital currency exchanges makes them unique on the market. The centralization of some aspects of the exchange is also revealing. The transactions can still be conducted through various institutional authorities; decentralization isn\u2019t an immovable feature of the exchanges.<\/p>\n\n\n\n

The methods used by the decentralized exchanges enable a higher degree of security. For example, hackers are less able to break into the system and steal assets. Because the methods used to conduct the exchanges bypass asset transfers during the trade, this particular risk is minimized. The transfers that involve liquidity is different, and these transactions might require the release of digital currencies to the exchange platform. Maintaining the volume of transactions is a key feature of this model. However, low trading levels can have a material impact on the value of the systems. This is one of the key features and risks of online decentralized currency exchanges.<\/p>\n\n\n\n

Get Started With Crypto<\/h2>\n\n\n\n

Below are some of our favorite platforms and exchanges to begin investing<\/keyword> in Crypto. Take a look at our in-depth reviews and overviews to help get you started.<\/p>\n\n\n\n

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  1. \n\t\t\t\tCoinbase<\/a>\n\t\t\t\t<\/li>\n\n\t\n\t
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    Coinbase is a trading platform that allows you to exchange cryptocurrency. Coinbase was founded in 2012 and has over 10 million customers worldwide. Coinbase offers its users the ability to buy, sell, or trade Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and many other coins. Coinbase also offers a growing list of complementary products, such as Coinbase Wallet and Coinbase Pro.<\/span><\/p>\t\t<\/div>\n\t\t\n\t\t\t\t\t

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    \n\t\t\t\t\t\tPros:<\/strong>\n\t\t\t\t\t\t