Furthermore, blockchain is an open source network. This means developers can work autonomously to improve its functions.
The more efficient a blockchain ecosystem becomes, the easier it is for corporations and governments to adopt it as part of their regular operations.
What are the most popular types of cryptocurrencies?Among the 18,000-plus cryptocurrencies in existence, Bitcoin and Ethereum are the two largest cryptocurrencies by market capitalization. Bitcoin, the original and largest cryptocurrency, was developed in 2009 as an alternative monetary asset. It was meant to be an alternative to the U.S. dollar and other fiat currencies. Although some vendors may accept Bitcoin as payment, most investors view it as a speculative investment.
Ethereum is the second-largest cryptocurrency by market cap. Unlike Bitcoin, Ethereum was not designed to function solely as an alternative monetary asset. Instead, it was designed as an innovative ledger technology to help companies securely transport data, store data, and build new programs and applications.
In short, Ethereum is a massive digital ecosystem through which digital information and computer applications can be transported, stored, and even created.
What does crypto aim to achieve?Some cryptocurrencies, like Bitcoin and Tether, were developed to serve a monetary function. Others, such as Dogecoin and Shiba Inu coin, are considered “meme coins,” developed as novelty items whose values rely on popularity and trading.
Many, if not most, cryptocurrencies were developed to solve challenges within the blockchain ecosystem, such as transmission speed, scalability, security, energy efficiency, and cost efficiency.
How can I invest in crypto?You can purchase crypto through a cryptocurrency exchange or any financial institution that can broker a cryptocurrency transaction.
Once you purchase cryptocurrency, you can secure your crypto coins in a digital wallet, online wallet, or hardware wallet.
What are the risks of investing in crypto?Here are a few of the more common risks in cryptocurrency investment:
Volatility risk. Crypto prices frequently exhibit extreme swings during certain economic or market conditions. Liquidity risk. Some cryptocurrencies trade with light volume, and thus can be easily manipulated by buyers with large capital resources or sellers who he a large stake in a given currency. Cybersecurity risk. Your crypto can be stolen if a bad actor has access to your crypto wallet’s private key.Overnight risk. Because crypto trades 24/7, your holdings are subject to adverse fluctuations overnight.Vanishing risk. There are factors that he caused certain crypto coins to vanish; these instances are rare and unique to particular coins.The bottom lineAlthough the original idea behind cryptocurrency was to create an alternative monetary asset, many investors purchase cryptocurrency not as money, but as an alternative asset or a way to invest in its underlying blockchain technology. Crypto is an emerging field, not unlike the technology sector in the 1990s. There are plenty of brilliant ideas in the crypto world, but not every blockchain innovation will find its way to mainstream use. So, if you’re planning on investing in cryptocurrencies, proceed with a healthy dose of caution.