Umair
Imagine living in a world where you can purchase a Manhattan-style luxury apartment at the heart of New York City you have been dreaming of for ages, all while sitting at the corner of your cozy home. What if I told you that you can earn real money and generate passive income simply by playing video games? Guess what? Cryptocurrency, popularly known as “crypto” can make that possible using blockchain-based virtual payments. Sounds intriguing right?
Cryptocurrency has emerged as a transformative force that has disrupted traditional finance bringing endless opportunities in the global economy. It is more inclusive than fiat (INR, Dollar, and Euro) currencies. It is a part of decentralized finance and is not controlled by any centralized authority, making it a fascinating and popular medium of exchange.
So, what is cryptocurrency exactly and why is there some much hype surrounding it? Let’s find out.
Crypto is a form of digital currency that has value and is an alternative mode of payment for digital products and services as well as real-world assets.
So, is crypto real money? The simple answer is, no. It does not have a physical form like a dollar note or coins. Do not get caught by the graphic images of gold Bitcoins or other digital currencies. They are simply an artist’s representation. Cryptocurrencies cannot be felt or seen.
Cryptocurrency is a digital token or virtual currency that is secured by strong cryptography that is encrypted and prevents counterfeits or double-spending.
Cryptocurrencies are not stored or regulated by a bank or a central entity. Banks do not verify these transactions. Cryptos are decentralized and verified through encryption, an advanced coding mechanism that verifies the storage and transfer of cryptos from one wallet to another.
Now, you may ask, if cryptocurrencies are digital tokens, then why do we need a wallet?
In the world of decentralized finance, cryptocurrencies or any other digital currency are stored in digital wallets. These digital wallets are applications, software, or electronic devices that use passwords to securely transfer and store cryptocurrencies.
The technology behind cryptocurrency is blockchain. A blockchain is a decentralized distributed ledger that records and stores crypto transactions. Now, what does a decentralized distributed ledger mean?
Blockchain is a distributed ledger where multiple copies of the same transactions are saved across different computers. Once recorded, these transactions are immutable and irreversible and cannot be changed.
The very essence of cryptocurrency is decentralization. A cryptocurrency transaction takes place within the blockchain’s peer-to-peer network, directly between the peers. These transactions are not controlled or regulated by any third party or bank.
Cryptocurrencies are created through a process called crypto mining.
Crypto mining is a process to mint or generate new coins like Bitcoin that are added to the circulation. Miners solve complex mathematical problems using hardware devices and software and in return earn rewards.
Let’s take a simple example to understand the concept of mining. Visualize that you are in your mathematics class and the teacher asks everyone to solve a difficult problem. The first student to solve the question is applauded and cheered by the teacher and the whole class. Crypto mining is similar, the only difference is that the first miner to generate the cryptographic number is rewarded with a cryptocurrency and the process continues.
Not all cryptocurrencies are generated through mining. Some are generated through a hard fork. A hard fork is an upgrade of the blockchain network where it splits into two branches, the old version, and a new blockchain. The new fork or chain runs in the updated rules and creates a new cryptocurrency.
Cryptocurrency trading is the purchase and sale of cryptocurrencies through a decentralized crypto trading exchange.
Crypto trading operates through peer-to-peer (P2P) transactions without any centralized server.
If you are looking to venture into crypto trading follow these simple steps:
· Choose a crypto trading platform like a decentralized exchange (DEX). Some popular DEX platforms are Uniswap, Binance DEX, etc.
· Create your account and complete the verification process like KYC (Know Your Customer) and AML (Anti-money Laundering) regulations.
· Fund your account. You can use fiat currencies to buy cryptos.
· Place your order in the crypto exchange.
· Transfer your funds to a secure wallet.
Now that you have bought cryptocurrencies, you need a digital or a crypto wallet. A wallet can be a hot or cold wallet.
· Hot wallets are online wallets or software that are connected to the internet or another device. They are protected by private keys and passwords. Public keys are the addresses used to send and receive crypto.
· A cold wallet or cold storage is an offline wallet that is not connected to the internet and is considered safer than a hot wallet. They are protected by private keys that prevent unauthorized access to funds.
Apart from digital wallets, some crypto exchanges offer wallet services.
Decentralization — One of the greatest advantages of cryptocurrencies is that they are decentralized meaning they are not controlled by their creators or any other entity. It promotes financial inclusivity allowing anyone to participate in crypto trading even with a limited investment threshold.
Protects against inflation — Cryptocurrencies like Bitcoin have a fixed supply which counters against inflation. During the Bitcoin halving that occurs every four years, the Bitcoin reward or supply is halved or reduced to 50 percent increasing Bitcoin prices significantly.
Facilitates cross-border transactions — Overseas transactions are cheaper and easier with cryptocurrencies. As cryptocurrencies are less regulated, they can be easily transferred through digital transactions. All you need to have is a digital wallet and secure internet connectivity.
Highly scalable — Crypto transactions are executed with a single click of your finger. It takes a few minutes to complete the transaction, unlike lengthy traditional transactions.
Greater privacy — Crypto transactions are peer-to-peer and do not reveal the identity of traders to a third party. The whole idea of decentralized crypto trading is based on confidentiality and privacy. These transactions offer greater security than traditional trading.
Governance protocol — Crypto miners and traders become a part of a broader crypto community. Crypto token holders earn rewards for their performance and have governance rights to take part and make important decisions that impact the development of the blockchain and crypto community.
Broader investment opportunities — Cryptocurrency is a part of digital finance and is rapidly evolving. It has opened new investment opportunities where people can take part in digital transactions, and buy and sell products and services easily without the intervention of a centralized party.
Volatile — Cryptocurrencies are volatile and subject to market price swings. Frequent price fluctuations and a lack of standard regulatory protocols lead to volatility.
Regulatory challenges — The crypto industry is not properly regulated. There is still an absence of proper jurisdictions that may hinder crypto trading, especially cross-border transactions.
Frauds and scams — Since the industry is unregulated, it attracts fraudsters and scammers. Digital wallets like hot wallets are online and can be hacked by cybercriminals who may steal private keys and passwords.
Bitcoin (BTC) — The one crypto that tops the list in popularity is undoubtedly Bitcoin. Also known as “digital gold,” it recently came into the limelight after hitting its all-time high of $100,000 following Donald Trump’s US election victory. The coin is predicted to be one of the top players in 2025.
Ethereum (ETH) — After Bitcoin, Ethereum promises to hold the second position and be a dominant contributor to the decentralized finance economy.
Solana (SOL) — Solana has a high-performing blockchain network and is predicted to be a major player throughout 2025. The Solana ecosystem is driven by new innovations and could expand further in the coming years.
Dogecoin (DOGE) — The popular and accessible meme coin holds a special place among crypto enthusiasts and is backed by Elon Musk. It has the potential to witness a significant rebound in 2025.
Cryptocurrencies have emerged as an alternative payment system. It can be used for a variety of services:
· Simple and easy cross-border payments. Blockchain-based crypto remittances are easy, faster, and can be easily converted to native currencies.
· Crypto facilitates micropayments that can be used to buy in-game assets, royalties, etc.
· Many e-commerce platforms allow customers to shop online using crypto.
· Cryptocurrency is a speculative asset. Many traders use the volatility of cryptocurrencies to make profits.
· Crypto boosts the online gaming industry. Gamers can earn and use crypto while playing games and use them to purchase other in-game assets.
· Maximize financial transactions. Crypto traders can trade anonymously and protect their identity.
· Enhances financial inclusion. Crypto can help the unbanked population to take part in digital transactions using crypto wallets without the need for a bank account.
Cryptocurrency is reshaping the traditional financial industry and is revolutionizing the way how we interact and trade with money. However, the industry is still at a nascent stage and is subject to speculation and market volatility, and it is important to study the market and understand the risks before venturing into crypto trading.
