Facts about cryptocurrencies you must know is written to aware people about cryptocurrencies.
Cryptocurrencies are the new rage for investors to make big money. These cryptocurrencies utilize encryption to generate money and verify transactions that have left the stock market in the dust since the year began.
So, if you want to invest in cryptocurrency, you must know the following facts:
1. Digital currencies are exceptionally volatile in nature
Cryptocurrencies are exceptionally volatile in nature.
The fact is, virtual currency trading occurs on various cryptocurrency exchanges rather than a central exchange, that’s why they are volatile.
Starting of the year, the aggregate market cap of all cryptocurrencies combined has increased by more than 3,200% as of Dec. 18.
The risk factor is always on high. So, cryptocurrencies are not for chicken-hearts.
2. Cryptocurrencies have no fundamental backing
Cryptocurrencies are not backed by a central bank or a government like the U.S. dollars or any other currency around the world.
They also have no tangible fundamental factors with which to help derive an appropriate valuation. Whereas you can look at the earnings history of a publicly trading stock to estimate its worth, or the economic performance of a country with regard to GDP growth to value a currency like a dollar, digital currencies have no direct fundamental ties. That’s why valuing cryptocurrencies in a traditional sense especially is very difficult, if not impossible.
3. Do you know there are more than 1,300 cryptocurrencies?
In the world of cryptocurrencies, you must have heard about bitcoin and with good reason. It was the first tradable cryptocurrency that was brought to market, and it currently covers 54% of the aggregate $589 billion market cap of all cryptocurrencies.
However, it’s far from alone. There are more than 1,300 other virtual currencies that investors can buy, of which over two dozen have a market cap that’s in excess of $1 billion.
4. The blockchain is where the real value lies
Blockchain technology is the infrastructure that cryptocurrencies like bitcoin are founded on.
It’s a digital and decentralized ledger that records payment and transfer transactions in a safe and efficient manner.
It’s also the big reason why big businesses are so excited.
5. “Miners” play a crucial role
However, cryptocurrency transactions need to be verified, and the blockchain regularly enlarged, to account for new transactions and payments. This job falls to a group of folks known as cryptocurrency miners.
Crypto-mining involves using high-powered computers to solve complex mathematical equations on a competitive basis in order to verify and log transactions. Being the first to do so often entitles the miner to a reward, which is given in the form of cryptocurrency coins and/or transaction fees associated with a block.
Though the hardware and electricity costs can be enormous, mining can also be extremely rewarding. The graphics-card hardware needs of miners have been a big reason why NVIDIA and Advanced Micro Devices have seen a double-digit percentage surge in sales recently.