Before investing in cryptocurrency, you need to keep some important things in mind related to it. Today we will know what is a cryptocurrency and also what is a currency after all? So, let’s get started:
What is currency?
So, currency is the official currency of a country, it includes paper notes, coins. Each country has its form of currency i.e., currency which is maintained by the Central Bank of that country. The piece of paper that you and I use and which we are all running in the race to get is called fiat currency. If you are interested in bitcoin trading check the things to know when investing in bitcoin with your android device.
For a currency to be valuable, it must also have some characteristics?
It has three characteristics:
- It should be available to many people.
- Merchants should accept this as payment — For example, you go to a shop and if it is not accepted by the shopkeeper then this currency will not be valuable.
- Society —In this, you and all of us have to trust that it is valuable and will remain valuable even in the future. Then a currency will be accepted successfully.
Fiat Currency vs Cryptocurrency
You and I have always been using cash, but if you want money, then we have to go to the bank for it. That’s why the bank invented the debit card and credit card. By the way, whatever money is transferred from here to there through the cord is controlled by the government. This money is virtually available in your bank account, if you want to send this money to someone or make any payment, then you have to request it from your bank and according to your request, put your money in someone else’s account. In this, the bank verifies the money it is sending and to whom it is sending the money and then also charges the transaction fee for sending the money, all this is again in currency. But this does not happen in cryptocurrency, it can be sent directly from one account to another without any bank or middleman. This is because cryptocurrency works on decentralized blockchain technology. Which means that no single authority controls it.
Here globally all computers connected to a network process the transaction, this means that you can send money to whomever you want. This is because there is only one person who owns cryptocurrency and that is you, that is, cryptocurrency is completely decentralized. Inflation can happen at any time in fiat currency. The availability of cryptocurrency is limited, that is, no one can make available cryptocurrency coins tomorrow. So this means that if you are dealing in cryptocurrency then there will be no fear of inflation.
To Issue and govern
Its main criticism when it comes to official money is that it has seen a considerable lack of intrinsic value to derive its experiential value as legal tender with it. The official currency, that is, its value, is inseparably linked to all decisions made by central authorities, central banks and governments regarding fiscal policy and their monetary policy. If a legal tender is to be issued, it is first ordered by a central bank.
Also known as proof of stake for minting new coins or proof of working with blockchain networks. These rely only on consensus mechanisms with a limited supply of coins programmed with the protocol. You can mint currency or buy cryptocurrencies and fiat currencies through the exchange and you can also keep them as investments if you wish. Others can trade assets, which means you can exchange what you spend in exchange for services and goods if you wish.
