The cryptocurrency buzz has baffled several investors who have no idea what these new digital coins are all about. Many people are shocked to see the high volatility of these currencies, going from $1,000 to $20,000 in one year and back to $7,000 in just one month.
Here is a cryptocurrency primer that will help you in understanding these coins in less than 5 minutes.
- What is cryptocurrency?
Cryptocurrency is a digital currency that exists only on digital, decentralized ledgers hosted over thousands of computers worldwide.
- Which country do cryptocurrencies belong to?
Cryptocurrencies don’t belong to any country. They are not issued by a central bank; therefore, they are not backed by any government.
- Is it legal to use cryptocurrencies?
Depending on where you live, it may or may not be legal to use cryptocurrency payments. Countries like Japan and Australia are more open to their use while China and USA don’t consider them legal tender.
- What backs cryptocurrencies?
Cryptocurrencies are backed by a software called blockchain. It is an incorruptible and transparent digital ledger technology that is 100% transparent and is available for anyone to scrutinize.
- Does a transparent ledger create security problems?
No. Digital ledgers are more secure. While the blockchain transactions can be hosted on thousands of computers, the users are 100% anonymous. Your personal details cannot be leaked through the ledger.
- Who is the owner/CEO of bitcoin?
Bitcoin doesn’t have an owner or a CEO. There is no person or group that controls this blockchain. Other cryptos, like Litecoin and Ripple work on the same technology, but are developed by corporations/groups/foundations. They have CEOs and developers.
- Who makes cryptos?
Cryptos are not minted anywhere. New coins can only be brought into existence through a process called mining. There are dedicated miners who solve tough mathematical problems. With every solution, a few new coins are produced in the ledger. A percentage of these coins are offered to the miners.
- Are crypto coins physically available?
No. They only exist digitally and do not have any physical presence whatsoever.
- Can you pay with digital currencies everywhere?
You can only make payments with crypto coins to a merchant who accepts them. It is still a new technology because of which adoption rate is low. However, it is expected to rise in the next few years.
- Are these currencies a scam?
No. Bitcoin or other currencies are not a scam. They are legitimate technology products. However, you should apply due diligence before investing in a crypto coin.
- How to purchase cryptos?
Cryptocurrency exchanges help you in buying bitcoins or other digital coins. You will have to register there with your email address. Most exchanges these days ask for KYC compliance details too. Once done, you can buy and trade in any currency. You can also transfer them to a wallet and use for payments.
- How to get real money for cryptos?
You can do so through exchanges. You can sell all your crypto holdings for the current market price and that money will be deposited to your account with the crypto exchange. You can then withdraw the money to your real bank account.
Hope this solves most of your queries related to crypto coins. Still have questions? Feel free to ask us in the comments below.