As you can understand by its name, cryptocurrency is a digital and not physically tangible type of currency. Cryptography secures this virtual currency and makes it almost impossible to counterfeit or double-spend.
This P2P (peer-to-peer) system allows anyone anywhere with a smartphone to receive and send payments. They are not carried around and exchanged in the real world; cryptocurrency payments are as digital entries to an online database describing specific transactions.
The transactions are stored in a public ledger (blockchain) when you send or receive crypto funds. You can keep digital currency in the digital wallet. There are two types of crypto digital wallets: Hardware wallets and cold wallets. The difference between these two wallets is that cold wallets are not connected to the internet and, therefore, safer.
Why do we call it cryptocurrency? Because it uses encryption to verify transactions, advanced coding is involved in maintaining and transmitting cryptocurrency data between wallets and public ledgers. It aims to provide safety and security.
They allow secure online payments without the need for third-party intermediaries. Crypto refers to different encryption algorithms and cryptographic methods that protect these entries, such as hashing functions, elliptical curve encryption, public-private key pairs.
The first-ever built cryptocurrency was Bitcoin which came out in 2009. People are interested in cryptocurrency because they wish to trade and earn profit.
Bitcoin (BTC) is the most popular, famous, and valuable cryptocurrency. An unknown person called Satoshi Nakamoto invented it and introduced it to the world through a whitepaper in 2008 and published the coin in 2009.
There are a lot of digital currencies in the world now that claim to have different functions and specifications. For instance, Ethereum’s token markets itself as gas for smart contract platforms, and banks use Ripple’s token (XRP) to help transfers between different geographies.
BTC is the most widely traded and covered crypto. Following its success, many other projects called altcoins were published. Some are forks or clones of Bitcoin, and some were made from scratch ( like Solana, Litecoin, Ethereum, Cardano, and EOS).
Spencer Montgomery (founder of Uinta crypto consulting) says, “As the Bitcoin network grows, it gets more complicated, and more processing power is required.” He adds, “The average consumer used to be able to do this, but now it’s just too expensive. There are too many people who have optimized their equipment and technology to outcompete.”
Mining releases new cryptocurrency units into the world, basically in exchange for validating transactions. Crypto mining led to increased demand for graphics processing units (GPUs). Mining tokens or coins can still be profitable. Crypto mining is legal in some places.
People can purchase or mine cryptocurrencies from exchange platforms. But how can anyone mine tokens or coins?
Crypto mining is a highly complex process. Crypto mining, though, also involves validating cryptocurrency transactions on a blockchain protocol and adding them to a distributed ledger. This process is very time and power-consuming. Computers with special software solve complicated cryptographic mathematic equations to mine crypto. This process involves downloading software that holds a partial or complete history of transactions that have happened in its network. Anyone with a computer and anyone who has an Internet connection can mine cryptocurrency. The energy- and resource-intensive nature of mining means that large firms have taken over the industry.
Why is it useful? Most prominently, crypto mining stops the double-spending of digital currency on a distributed network.
Proof of work cryptocurrencies needs enormous amounts of energy to mine. Approximately 0.21% of all of the world’s electricity goes to powering Bitcoin farms. That’s approximately the same amount of power Switzerland uses in a year. Most Bitcoin miners use 60% to 80% of what they earn from mining to cover electricity costs.
While it’s unreasonable for the ordinary person to earn tokens by mining in a proof of work (PoW) system, the proof of stake model needs less in the way of high-powered computing. At the same time, the network selects validators randomly based on the amount of crypto they stake. It does, however, need that you already own a cryptocurrency to join (If you have no crypto, you cannot stake).
Cryptocurrencies are decentralized, unlike centralized bank systems; this means that you do not have to open a bank account (it does not rely on banks to verify transactions). And no particular authority has control over your data which renders them theoretically immune to government manipulation or interference.
These decentralized digital networks are based on blockchain technology (a distributed ledger enforced by a disparate network of computers). The most popular cryptocurrency versions are Bitcoin and Ethereum; however, over 8,000 different digital currencies are in circulation as of January 2022.
Where can I use cryptocurrency?
Crypto is becoming more and more popular among various businesses, and even Tesla has announced that it will accept tokens or coins as payment. However, not all eCommerce sites let users purchase using digital currencies. Even if it is Bitcoin, businesses hardly get them for retail transactions.
The increasing value of these digital currencies has made them popular as trading instruments. They are also usable for cross-border transfers to a specific limit.
Cryptocurrency validation techniques
PoW (proof of work) and PoS (proof of stake) are two kinds of validation techniques for verifying transactions beforehand; they are added to a blockchain that rewards verifiers with more digital currency. These digital currencies usually use either PoS or PoW. Let’s go through them one by one.
PoW: This is a method of verifying transactions on a blockchain. In this method, an algorithm provides a mathematical problem that computers compete to solve. Each computer is often called a miner. They each solve a mathematical puzzle that verifies a group of transactions (block) then adds them to the blockchain ledger. The first computer to do so gets a small amount of reward for its efforts.
PoS: Some cryptocurrencies use proof of stake to reduce the amount of power necessary to check transactions. This method allows for a higher number of transactions to occur. Each person can verify transactions based on the amount of crypto they choose to temporarily lock up in a communal safe or to stake for the chance to join the process.
One can buy cryptocurrency on P2P networks and exchanges. Watch out for fees, however, as some of these platforms charge what can be prohibitively high costs on small crypto purchases. Bitunivex charges a reasonable amount.
Currently, many users use the crypto market to invest and earn profits. This area is somehow new and therefore on the rise. Investors can buy tokens or coins from popular exchanges like Bitunivex.
Investing in cryptocurrencies and other ICOs (initial coin offerings) is very risky and speculative, and this article does not tell you what to do. Remember that each person’s situation is unique, and a smart trader must consult before making any financial decisions.
Are Cryptocurrencies Legal?
Fiat currencies get their authority as mediums of the transaction from the monetary authorities or the government. For instance, each dollar bill is backstopped by the Federal Reserve. However, that is not how digital currencies work; public or private entities do not back them. Consequently, it is difficult for them to make a case for their legal status in different financial jurisdictions throughout the world.
El Salvador is the only and first country to allow Bitcoin as legal tender for monetary transactions (December 2021). In other countries, crypto regulations vary by jurisdiction. For example, China has taken another approach and has banned cryptocurrency exchanges and mining within its borders. On the other hand, cryptocurrencies are legal in the European Union.
Function of Cryptocurrency
As formerly mentioned, crypto is a digital, encrypted, and decentralized medium of exchange. Unlike fiat currencies (physically tangible money), there is no central power that manages and sustains the value of a cryptocurrency. Instead, these tasks are widely distributed among cryptocurrencies users through the internet.
You can use crypto to purchase common goods and services; however, most people invest in crypto as they would in other assets, like stocks or valuable metals. While cryptocurrency is a new and exciting asset class, buying it can be risky as you must take on a fair amount of research to understand how each system performs thoroughly.
Cryptocurrency advantages and disadvantages
Cryptocurrencies aim to revolutionize financial infrastructure. Cryptocurrencies are a novel paradigm for money. They wish to streamline existing financial architecture to make it cheaper and faster.
Here are some advantages and disadvantages of these digital currencies.
1-The decentralized network allows for more privacy and security for classified transactions and gives anyone complete authority over their data and assets.
2- It makes the transfers easier between two parties without the need for a third party like banks or credit card companies.
3- Private keys and public keys and different kinds of incentive systems like proof of work or proof of stake secure these digital assets.
4-They are faster than standard money transfers. We can point out. Flash loans in decentralized finance as an example.
5- Crypto investments can bring profits. Crypto markets have skyrocketed in worth over the past decade.
6-It is an easy and cheap way to transfer money across borders.
1-They are actually pseudonymous; however, they leave a digital trace that agencies like the Federal Bureau of Investigation (FBI) can decipher; this gives the possibility of the government being able to track the financial transactions of ordinary citizens.
2- It has become an exciting field for criminals for activities like money laundering and illicit purchases and hackers who use it for ransom-ware activities.
3- Although crypto blockchains are highly secure, other crypto repositories like wallets and exchanges can be a target for hackers.
4- Cryptos traded in public markets have issues concerning price volatility. Surges and crashes are inevitable when it comes to digital assets.
Consensus in Cryptocurrency
Both PoS and PoW depend on consensus mechanisms to verify transactions. The majority of ledger holders have to check and approve each transaction.
For instance, a hacker cannot manipulate the blockchain ledger unless they manage to get at least 51% of the ledgers to match their fraudulent version; this makes fraud almost unlikely.
You can use this type of decentralized digital currency to make purchases; however, it is not a form of payment with mainstream acceptance just yet. Many online retailers accept Bitcoin, but it is still far from the norm. It is intriguing to mention that you can use crypto for gift cards. You may also be able to put crypto to a debit card to make purchases.
You can use crypto as an alternative investment option outside of bonds and stocks. If you want to make your purchases securely and spend crypto at a retailer that accepts it, you can use your tokens or coins.
If you wish to make a purchase and pay a person or retailer who accepts crypto, you have to make a wallet, a software program that interacts with the blockchain and allows users to receive and send crypto. You can take a minute to make your wallet on the Bitunivex platform, a reliable fiat and crypto exchange platform based in Australia.
Some transactions might take longer than others, but Bitunivex ensures that you make your trades ASAP and charges a reasonable fee. You can go through customer services and read its policies before making your account on the website.
Best Way to Buy Crypto in Australia
When it comes to tokens and how they work, things might get a little confusing for users who think they might lose their assets because of a small mistake. If you live in Australia and wish to purchase tokens, Bitunivex is a global fiat and crypto platform handling your request. Australia is one of the countries that are ahead in the crypto industry.
Bitunivex is in Sydney, Australia, which aims to make the trading process as effortless as possible for its users. You can create your account and start your journey as a trader right now on the website.