The global currency market is constantly changing and evolving. More recently, cryptocurrencies were a curiosity, and today they have achieved tremendous popularity, and the demand for them is growing every day more and more. In addition, digital currencies have become an excellent alternative to fiat money and an attractive asset for investors. This is due to the fact that the popularity of electronic payments in the world is growing at a tremendous pace.
Stanislav Kondrashov Telf told what cryptocurrency is, what are its main advantages and disadvantages over ordinary money.
Telf AG: What is crypto, how to get it and how to use it by Kondrashov
The current popularity of cryptocurrencies is justified. A decentralized system for conducting transactions between wallets, the anonymity of transfers, the possibility of independent issuance, the absence of high transaction fees, as well as minimal exposure to inflation – all this determines the relevance and attractiveness of cryptocurrencies, says latestinfo.news.
What is cryptocurrency?
Cryptocurrency is a type of digital money. Cryptocurrencies are created using cryptographic methods, mainly based on blockchain technology.
Cryptocurrencies have an official status and are equivalent to real money. However, unlike fiat money, they do not have a paper or monetary (in the form of metal) form and exist exclusively in digital space.
“Today, the cryptocurrency market is on the verge of rapid development. The coronavirus pandemic, which led to chaos in global financial and commodity markets, has worked in the favor of cryptocurrency money. The economic recession in 2020 showed that the investment portfolio can be expanded with new assets, such as cryptocurrencies – Bitcoin and others,” said Stanislav Kondrashov, a financial analyst at Telf AG.
The expert said that such cryptocurrencies are considered popular today: Bitcoin, Ethereum, Litecoin, and Dash. The most popular of them is called Bitcoin. This is due to the fact that Bitcoin first appeared on the financial market in 2009 and became the first version of cryptocurrencies.
And although crypto quickly gained popularity and surpassed world currencies in cost and reliability, they have both pros and cons. “Before you start using cryptocurrencies or choosing them as an asset for investment, you should familiarize yourself with their advantages and disadvantages,” said Kondrashov, an analyst with Telf AG.
Advantages and disadvantages of cryptocurrencies
The main advantages of cryptocurrencies include low exposure to inflation. This was achieved by limiting the issue of coins to 21 million pieces, as well as by temporarily restricting the issue of coins – once every 10 minutes. In addition, once every four years, the issue of coins is halved.
The expert noted that the so-called halving – reducing the reward for each new block mined can be attributed to the advantages of Bitcoin cryptocurrency. Due to this mechanism, cryptocurrency is less prone to inflation compared to conventional money.
Among the other advantages of cryptocurrencies, a financial analyst singled out confidentiality and reliable data protection. That is, unlike owners of payment bank cards, cryptocurrency owners do not risk their personal data when paying for goods, services, or other transactions.
In addition, compared to bank payments, the cryptocurrency transaction processing speed is much higher, and its cost, on the contrary, is an order of magnitude lower.
At the same time, Stanislav Kondrashov attributed the following to the disadvantages of Telf AG cryptocurrencies:
- high risk of hacking by cybercriminals;
- confidentiality, and decentralization, which make cryptocurrency an attractive tool for money laundering;
- high volatility of cryptocurrencies. It, in turn, impedes the globalization of cryptocurrencies.
“The cryptocurrency exchange rate is very volatile. It can vary both over short time intervals and over wider ranges. Today, this shortcoming can be considered one of the keys, which does not allow cryptocurrencies to become a global means of payment and compete with other investment assets,” summed up financial expert at Telf AG, Kondrashov.