Why Is Cryptocurrency So Important and Why Should You Care?

In the current times, it has become very important to learn about cryptocurrencies and the benefits they offer. This article starts from a very basic level and goes into the depths of understanding them and distinguishing them.


What Is Cryptocurrency?

Cryptocurrency is a digital currency, a payment alternative created using encryption algorithms, and it functions both as a digital currency and a virtual accounting system. A cryptocurrency is also known as a crypto, coin, token or digital asset. It aims to be a medium of exchange through a computer network that any government or bank does not control. 

How Does Cryptocurrency Work?

Cryptocurrency is built on the blockchain and exists digitally to secure transactions on the Internet. Cryptocurrencies don’t controlled by any regulator authority, but they use a decentralized system to record transactions and issue new units.

Traders and Investors can earn money from cryptocurrency by buying, selling and holding cryptocurrencies. Most investors purchase major coins such as Bitcoin, Litecoin, Ethereum, and XRP, then wait to trade them when their value rises. The market prices rise, and they can sell them for profit, or when the market prices fall, they can buy more cryptocurrencies and then hold or sell them later. 

What Are the Types of Cryptocurrency and Their Benefits?

The first type of Cryptocurrency is Bitcoin, which relies on blockchain technology. Bitcoin gets all the media attention when people talk about cryptocurrencies and digital assets, and often people can refer to Bitcoin as “Digital Gold”. But in fact, there are thousands of other digital currencies, and Bitcoin is not the only coin; those coins are called “altcoins,” or alternatives to Bitcoin.

Stablecoins are also cryptocurrencies created to represent a digital version of Fiat money. Within the market, they have been playing a significant role on a day to day transactions. Stablecoin is pegged their value to one or more fiat currencies and keeps reserves of those currencies as a guarantee of its value. For example, a USD coin or USDC is a stablecoin fully backed by U.S. dollars and dollar-denominated assets. The data from CoinMarketCap.com June 7,2022, USDC has $53 billion in market capitalization, and it has a value of $1.

Cryptocurrency and Blockchain Boom

The Internet has contributed significantly to the blockchain; it has transformed the physical world into a digital one where payments and transactions can be made online 24/7. No government controls the blockchain. More elite stores have accepted digital currency such as Bitcoin in recent years for payment. 

In January 2022, the data from CoinGecko reported that the total cryptocurrency market capitalization grew by 3 times compared to 2021 to close at ~$2.4 trillion, and it was briefly reaching a time height of $3 trillion. 

As the underlying blockchain technology keeps evolving, the number of crypto beginner traders also increases. From the latest report, which is based on last year’s rate of growth, a possible prediction by December 2022, the number of crypto customers is expected to reach 1 billion.

What Is the Difference Between a Coin and a Token? 

Coin and token have value, and both appear on a blockchain, an encrypted record of digital transitions that are visible to anyone. The crucial difference between a coin and a token is that a coin has its own blockchain while a token does not. For example, Ethereum has its own blockchain, and therefore, it is a coin, while ERC-20 tokens are issued on the Ethereum network. The ERC-20 tokens standard allows tech developers to create their own digital token inside the Ethereum network without building their own blockchain.

A digital token represents ownership, and there are many different types, including utility token, security token, payment token, non-fungible token (NFT), and DeFi token. You can buy, own, sell, or trade the tokens as they are valuable.

Types of Tokens

Utility Tokens

Utility tokens have a specific use case. Most of the tokens are created on the existing blockchain; for example, CoinField Coin (CFC) was built on the Ethereum blockchain. It gives its owner the right to get a discount when paying transaction fees on CoinField Exchange. Utility tokens can be brought during an initial exchange offering (IEO), and later they can be traded on their original exchange.

Security Tokens

Security tokens are issued for a tradable investment as a stake in an asset of a company, which tokenise the physical assets into digital security tokens. Real estate firms commonly offer them. Also, technology companies raise the capital. The investor can firstly buy security tokens offering (STO). The ownership of a security token must be verified through a record of its existence on a blockchain.

Payment Tokens

A payment token’s purpose is to serve as a medium of exchange to store value and unit of account. The biggest cryptocurrency that uses for payment is Bitcoin. It works in a similar concept as Fiat currencies, and its value is dependent on the laws of supply and demand. Higher demand and lower supply bring in more significant value, while lower demand and greater supply will decrease its value.

Non-Fungible Tokens

Each non-fungible token (NFT) is unique and represents a specific asset, and the data of the ownership will live on the blockchain that can’t be duplicated or altered. NFT can be traded or exchanged for one another. As NFTs have gained in popularity and digital artwork has sold for millions of dollars, it has received media attention, and in the first half of 2021, NFT sales hit $2.5 billion. Investors can collect digital artworks and be able to sell them online. Here are examples of NFTs that were sold from 2020 to 2022: 

Beeple’s digital artwork auctioned for a record $69 million, according to DW.

A CryptoPunk NFT sold for $1.8 million at Sotheby’s first curated NFT sale, according to reuters.com.

Twitter CEO Jack Dorsey auctions an NFT of his first tweet, which sold for $2.9 million, according to CNBC.

How to Buy Cryptocurrency? 

To start buying Cryptocurrency, you will need to open an account with the cryptocurrency exchange. For example, at CoinField, you can begin your crypto journey by following 5 simple steps: 

  1. Sign up for an account at CoinField.com
  2. Verify your email and phone number  
  3. Once done, you need to log in to the CoinField platform and go to settings to upload the required documents based on our KYC/AML policies. For more information, please visit this blog.
  4. Fund your account with Fiat currencies. 
  5. Select the Cryptocurrency you prefer and click ”Buy”.

After your account has been fully verified, you can deposit funds into your account for free via SEPA transfer and buy any cryptocurrency such as Bitcoin, XPR, CoinField Coin, etc. 

The Future of Finance and the Role of Cryptocurrencies

Cryptocurrencies are the first alternative to traditional banking systems. They also have a decisive advantage over traditional payment methods and asset classes. Simply put, you can think of cryptocurrencies as Money 2.0, the new cash available on the Internet. It has the potential to be the fastest, easiest, cheapest, and most secure way of exchanging value. And it’s the most universal thing ever in the world. Cryptocurrencies can be used to purchase goods or services or held as part of an investment strategy. Cryptocurrency is not possible to manage by the authority because such entities do not exist. No matter what happens to the government, your Cryptocurrency will remain safe. 

Cryptocurrency offers equal opportunities, no matter where you were born or live. As long as you have a smartphone or other device that can connect to the internet, you have access to cryptocurrencies just like everyone else. 

Digital currencies create unique opportunities for expanding economic freedom around the world. The essential boundlessness of cryptocurrencies facilitates free trade, even in countries where the government strictly controls people’s finances. In a country where inflation is a big problem, cryptocurrency can be an alternative option to the Fiat currency.

Conclusion

The adaptation of blockchain technology will continue to expand. The cryptocurrencies will improve payment speed, lower transaction costs and improve the overall efficiency. People use cryptocurrencies to pay for goods and services as they buy/ sell or trade on the Internet. Furthermore, blockchain technology has enormous potential to transform the financial section with transparent accounting and allow people from every corner of the globe to access capital funds. 

Today, there are many new movements in the cryptocurrency space. Peer to Peer crypto-backed loans allow people to lend cryptocurrency directly to the borrower as new yield-generated methods for investors. 

Buying virtual land in the metaverse with cryptocurrency is also possible. Furthermore, some governments have started to accept Bitcoin. For example, El Salvador allows citizens to use Bitcoin in all transitions alongside the U.S. Dollar. All these indicate that cryptocurrency has become widely used and gained more acceptance among early adopters.

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