Learn all about cryptocurrency, including its benefits and drawbacks, and discover how to buy it in this comprehensive guide. Find out how you can benefit from the unique features of crypto and
what to watch out for when investing in this exciting new asset class.
What is Cryptocurrency?
A cryptocurrency is a virtual digital asset based on blockchain technology secured by mathematical algorithms called cryptography, making it almost impossible to forge. Simply put, Cryptocurrency is a digital currency that can be used to purchase goods and services without any physical coin, currency, or bill. Most cryptocurrencies work on decentralized networks based on blockchain technology and a distributed ledger enforced by an authorized network of computers. This means all online transactions are completely secure. An important point to note is that Cryptocurrency is independent and not regulated by any central authority. Hence, they are free from any government manipulation or interference.
“Digital Money designed to be used virtually.”
Advantages of Cryptocurrency
Cryptocurrency has stirred a revolution in the financial infrastructure. However, numerous differences exist between the theoretical ideal of decentralized currency and the practical implementation. Here are a few advantages of Crypto:
● Secure and Private: Blockchain technology, the basis of cryptocurrency, ensures user anonymity. Cryptography or complex mathematical algorithms assures high levels of security.
● Decentralized, Transparent, and Immutable: The entire crypto ecosystem functions on shared ownership. Herein, data is available to only approved members and is tamper-proof.
● Hedge against inflation: There is a cap on mining crypto. Hence, this limits the supply making it at par with gold and an excellent investment in times of inflation.
Disadvantages of Cryptocurrency
We know that cryptocurrency is digital; sometimes, speculations can lead to a substantial rise or fall of a given coin. Here are a few disadvantages of Crypto:
● Not widely understood: Cryptocurrency is a relatively new concept and still gaining momentum. Witnessing the enthusiasm amongst the people to learn and understand cryptocurrency, LotusX has developed its education platform, Disrupted Global, where you can sign up for various short courses and
enhance your knowledge.
● Prone to high risks: Cryptocurrency is a high-risk and reward case. They are highly volatile and highly speculative. They are risky for various reasons.
● No Underlying Value: Cryptocurrency has no underlying value. The value is determined by the demand and supply equation.
● Legal issues: Cryptocurrency has a restricted use or ban in many countries, making its legality highly questionable. However, it may not be legal in India yet, but it is regulated.
How to buy Cryptocurrency?
If you’re stepping into the crypto world, terms like Bitcoin, Ethereum, Polygon, Cardano, etc., can be daunting. However, thanks to accessible information, learning and investing in cryptocurrency with these easy-to-follow steps is relatively simple.
- Choose a Crypto Trading Platform.
First, choose a crypto trading platform to trade or invest in cryptocurrency. A cryptocurrency trading platform like LotusX has relatively low fees and a user- friendly interface with advanced performance charts and multiple trade types. While many brokers claim to be “free” and sell your information to large brokerages in return. LotusX ensures client security and runs strict KYC protocols.
- Create and Verify the Account
Post deciding on a cryptocurrency trading platform, sign up to open an account. Irrespective of the platform and the investment, you must verify your identity through a valid passport or a driving license and a selfie to crosscheck if it’s the same person as on the documents. This is a crucial step to meet the regulatory requirements and prevent fraud. - Deposit Money to Invest
One needs to ensure having funds in their account to buy crypto. You can deposit money into your crypto account by paying through a debit card or linking your bank account. - Place Cryptocurrency Order
Once you have money in your account, you can place your cryptocurrency order. With hundreds of cryptocurrencies to choose from, you can enter the ticket symbol of the currency while placing an order. For instance, Bitcoin is BTC. Then enter the number of coins you’d like to purchase. Here is how you can easily trade crypto on LotusX. - Choose a Storage Method
Cryptocurrency exchanges or trading platforms are not secured by the Reserve Bank of India. Hence, a secure storage place for your crypto tokens is essential. While you may have few storage options if you buy cryptocurrency via a broker, you have various options if you choose exchange as a medium for your purchase. You can leave the crypto on the exchange and store it in Hot wallets or Cold Wallets.
Hot wallets are crypto wallets stored online and run on internet-connected devices like tabloids, phones, or computers. Hot wallets run a higher risk of theft but are more convenient. Cold wallets aren’t connected to the internet, making them the ultimate option for holding cryptocurrency. They work as external devices, like a hard drive or a USB drive. However, if you lose the associated key code or the
device breaks, you may be unable to retrieve your cryptocurrency.
Most Popular Cryptocurrencies and should you Invest?
It is important to pay attention to the crypto-influence today. Bitcoin undoubtedly is the leader of the pack, followed by Ethereum, Binance Coin, Cardona, and many more. You must study the market conditions before investing, whether a new or a regular investor.
In short, Cryptocurrency is a great investment. There are rounds and speculations of crypto being the future of money. However, one should perform due diligence before investing.
