Technology has revolutionised the way we communicate, work, and even the way we shop and pay for goods. In this time and day, businesses and consumers don’t always prefer being paid in or conducting transactions using cash anymore. Because of this movement, contactless payments are popular more than ever. Digital payments provide a way for consumers to pay for their items in a way that is more convenient for them.
And right now, cryptocurrencies are emerging as a new payment system.
The majority of people have probably already heard of Bitcoin and cryptocurrencies by now. Bitcoin was the first cryptocurrency that broke into the mainstream, and ever since then, other cryptocurrencies have slowly made a name for themselves in the financial market. There are currently more than 2,000 cryptocurrencies in the market, and more are being created every day.
Research suggests that the majority of people might have already heard of Bitcoin, but not all of them understand exactly what it is. So, what is Bitcoin, is it secure, and how do you invest in it? Hopefully, we can answer all your questions in this article.
What are cryptocurrencies?
Cryptocurrencies are digital payment systems that operate on the concept of decentralisation, meaning that they do not rely on banks to verify their transactions and instead use the computers on their network to do so. It is a peer-to-peer system that allows anyone from any part of the world to send and receive payments. For cryptocurrencies, instead of physical money, the payments that are used are purely digital, represented by entries in a database that describes specific transactions. When cryptocurrency funds are transferred, the records of the transaction are recorded in a public ledger. Cryptocurrencies are usually stored in digital wallets.
Cryptocurrency got its name from the encryption methods that are used to verify the transactions on the network. There is a lot of coding involved in the storage and transmission of data between crypto wallets and public ledgers. Encryption exists in cryptocurrencies to provide an additional layer of security. To trade various cryptocurrencies on a safe platform, turn to Bitcoin System.
How secure are cryptocurrencies?
Blockchain technology is the foundation of cryptocurrencies. This term refers to the way in which transactions made in the network are recorded into blocks and attached with time stamps. It is a fairly technical process but what comes out of it is a digital public ledger that provides increased transparency while being difficult for hackers to break into and tamper with.
As another layer of security, all transactions require a two-factor authentication process. When you log in, you will be required to provide a username and password to conduct a transaction, but after that, you might still have to verify your identity using other methods, like providing a verification code sent as an SMS to your personal phone.
But just because there are securities in place, it doesn’t mean that cryptocurrencies are unhackable. There have been cases of hackers going after cryptocurrency start-ups and have made hits amounting to hundreds of millions of U.S dollars.
In order to safely invest in cryptocurrencies, we have some tips for you:
- Research exchanges
Before you fully commit and invest, you need to learn about cryptocurrency exchanges first. Exchanges serve as platforms where you can buy and sell cryptocurrencies. There are over 500 exchanges to choose from, so do your research, read reviews, and get as much information as possible before you move forward.
- Diversify your investments
As with any good investment strategy, keeping diversification in mind is important. This mindset also holds true for investing in cryptocurrencies. For example, a lot of advisors would tell you not to put all of your investment into crypto. Because there are thousands of cryptocurrencies out there, it would be wise to branch out and spread your investment among several currencies.
- Prepare for volatility
Cryptocurrencies are known for being volatile, so you should prepare yourself for price fluctuations. If you know that you do not react well to dramatic swings in prices, then cryptocurrencies might not be for you.
Cryptocurrencies might be growing in popularity right now, but do keep in mind that it is still in its infancy. Remember that investing in newly established assets will be challenging, so it’s important to be prepared.