What are Cyptocurrencies? Explanation of digital currencies from A to Z

What are crypto or digital currencies? Today, Cryptocurrencies have become a global phenomenon known to most people, the most famous of which is Bitcoin, whose price continues to break records. Although everyone has heard about it, very few people actually understand cryptocurrencies, especially in the context of investing.

Questions and inquiries do not stop at what these currencies are. But despite the interest that is increasing day by day, and the attention directed to it by the giants of companies, financial institutions and stock exchanges, the world of Cryptocurrencies is still young and maturing. So it is important to understand what is Cryptocurrency? How it works? What are the investment opportunities it offers? What are the risks involved?

In your hands, a guide explaining Cryptocurrencies, in which you will find everything you need to know from A to Z:

What are Cryptocurrencies?

If we go beyond all the hype and complexity surrounding the concept of Cryptocurrency and simplify the meaning to a simple definition, we will find that Cryptocurrencies are nothing but a product of the technological and information revolution, which was born in 2009, and Bitcoin was the first Cryptocurrency that was launched. As of March 2021, there were more than 18.6 million Bitcoins in circulation with a total market value of approximately $ 927 billion.

They are currencies that do not have a physical presence in the form of coins or paper money, as the money is completely virtual and only exists on the Internet. It is released, in a decentralized form, by mathematical algorithms by means of computer programs. Not subject to the authority of banks and governments.

Is Cryptocurrency limited only to bitcoin? Of course not, there are thousands of Bitcoin alternatives called Altcoins such as Ethereum, Ripple, Litecoin ... where the term “altcoins” is used to refer to Cryptocurrencies other than “Bitcoin”. According to Investopedia, there were more than 4,000 Cryptocurrencies in circulation at the start of 2021. And more and more are being launched all the time.

The total value of all Cryptocurrencies in existence is about $ 1.5 trillion - Bitcoin currently alone represents more than 60% of the total value, meaning that the market value of the rest of the Cryptocurrencies combined does not exceed 40% of the total value of the Crypto market.

Everyone can make money from Cryptocurrencies by mining them, or simply buying and selling them at a higher price. There are Cryptocurrencies that are similar investment opportunities to Bitcoin, for more information about altcoins that provide huge investment potential, you will find it at this link: Best Cryptocurrencies for investment (new Cryptocurrencies).

Why are Cryptocurrencies so popular?

Most people know what Cryptocurrencies are, and they continue to increasingly attract investors and traders for several reasons, including:

- During the Corona epidemic, Bitcoin was able to challenge the traditional view of Cryptocurrencies as an unreliable store of value, unlike traditional safe havens such as gold. Where it set a record in light of the economic climate affected by the global health crisis.

- The increasing huge institutional investment in Bitcoin, after investing in it in the past was limited to amateurs and small investors, especially in light of the regulations, laws and legislations that were limiting the involvement of major financial institutions in Bitcoin.

- Many official authorities recognize Cryptocurrencies, and enact new regulations to invest in them. These legalization and regulation measures contributed to raising the level of confidence among dealers and investors, which opened the door wide for the massive influx of capital into the Cryptocurrency market by various investment institutions as well as hedge funds.

How do Cryptocurrencies work?

After you know what a Cryptocurrency is, we will move on to explaining how Cryptocurrencies work.

Most Cryptocurrencies are decentralized networks that rely on blockchain technology, including Bitcoin.

Each currency is essentially a computer file that is stored in a digital or crypto "wallet" and can be accessed via smartphone applications or internet-enabled devices. These files are transferable (in whole or in part) from person to person via blockchain technology, a unique encryption technology that allows for secure and transparent transactions. If you do not know what a "blockchain" is, then you actually do not know what Cryptocurrencies are and how they work!

Blockchain technology in simplified terms is a technology that allows a person (or company) to transfer assets of value to another person safely and without the interference of any intermediary.

From a technical perspective, a blockchain is just a chain of data blocks, hence the term "blockchains". It is managed by a group of computers not owned by any single entity. The blockchain network is not subject to any central authority. Because it is basically a shared and immutable record, and the information in it is open and available for anyone to view. Hence, anything built on a blockchain is inherently transparent. Also, blockchain transactions are free and have no direct cost.

The reason people like blockchain enthusiasts is that it:

Decentralization. It is not owned by a single entity.

Unchangeable. No one can tamper with the data inside it

Transparent. Anyone can track the data in it

How can I get Cryptocurrencies?

While most currencies, including Bitcoin, are available for purchase in US dollars, some Cryptocurrencies require that you pay using Bitcoin or another Cryptocurrency. Cryptocurrencies can also be obtained through an online process called "mining".

To independently purchase Cryptocurrencies such as Bitcoin or Etherum, XRP, Cardano, and Dogecoin, you will need an e-wallet and it is an online application that can hold your currency. You can also buy Cryptocurrencies from a financial broker, where you have to create an account, and then you fund your account to buy your favorite currencies. A growing number of online brokers offer the ability to buy and trade Cryptocurrencies, where you can create a wallet and buy and sell Bitcoin and other currencies.

Do I need thousands of dollars to buy bitcoins?

Buying Bitcoin does not require investing thousands of dollars, as the currency is divided into smaller units known as satoshi. Bitcoin units can be purchased for 50, 100, or 1000 dollars.

Although the price of Bitcoin is the most valuable of any other Cryptocurrency, in addition to being the first Cryptocurrency to be launched, there are many other Cryptocurrencies that have proven their strength and arouse the appetite of investors and traders.

How is Cryptocurrency mined

While many invest their money in buying Bitcoin, others choose mining.

The process of mining Bitcoin is very similar to the process of searching for gold in its underground mines, but here we do the process of mining the currency through a computer or a special device. It is the process of documenting transactions made by Bitcoin by other users, in which the individual working in mining is rewarded and earns him an additional profit from that Cryptocurrency.

And in order to get the mining equipment and its supplies, you have to invest a large amount of money, because the mining process becomes more difficult with the passage of time and needs higher mining resources and cost.

Is buying it the only investment method?

Most of the investors tend to buy Cryptocurrencies and hold them for a while in the hope of increasing their value, although this is a popular way to invest in Cryptocurrencies, but it is not the only way.

It has become possible to invest in Cryptocurrencies through trading contracts for difference. Where CFDs are based on anticipating the fluctuations in the value of a particular currency over time, and instead of buying and actually owning it, the investor invests in the fluctuation of its value, which allows some investors to reap profits from the rise in the price and even from its decline.

Are Cryptocurrencies a good investment?

Most of the investments in Cryptocurrencies are speculative purchases, which explains the incredibly high and low price fluctuations. And before you invest in Cryptocurrencies, it is best not to invest money that you cannot afford to lose, and remember that no one can guarantee that you will earn, as is the case with any investment. Anyone who promises you a guaranteed return or profit is likely a fraudster.

And it also does not mean that the investment is well-known and well received, that it is good or safe. This applies to cryptocurrencies, just as it does to traditional investments.

Shares trading is generally less risky than investing in Cryptocurrencies, but the return from stocks is naturally lower, so the higher the risk, the higher the returns.

How do I detect cryptocurrency fraud?

As people become increasingly interested in Cryptocurrencies, fraudsters are finding more ways to use them.

Watch out for any person or destination:

They guarantee you a profit and not a loss

They promise to double your money in a short time

They promise you free money in dollars or Cryptocurrencies

They convince you that investing in Cryptocurrencies does not require any experience or skill.

What are the factors that determine the price of the crypto currency?

After you know what Cryptocurrencies are? You should now know what is driving its value up and causing it to decline!

Usually the value of any Cryptocurrency at any time depends on supply and demand. Cryptocurrencies may be suitable for traders looking for a trading instrument that carries a high risk and has a potentially high return.

These are the most important factors affecting Cryptocurrencies:

Media hype: When Cryptocurrencies are headlines and headlines, it is usual to see an influx of new traders, and this pushes prices up. On the other hand, negative news may send prices down.

- Selling wave: When traders who bought a currency at a low price engage in a selling wave to take profits, it is likely that the price of that currency will decline to a certain level. This could cause other traders to panic and followed by a rush to sell due to fear, which could lead to a further decline.

Synchronous fluctuations: An interesting thing about cryptocurrencies is that many currencies tend to go up and down side by side.

For more factors and causes: 5 factors that affect the price of Bitcoin and the alternative currencies

How to invest in Cryptocurrencies in the right way?

There is a lot of information circulating about explaining Cryptocurrencies on the Internet, but investors in virtual currencies often do not know how this market works and what capabilities they have.

Many people invest with an easy profit mentality, and it is considered that buying the currency may bring them double profit after a few months or weeks.

You should know some things before embarking on an investment of this type, such as understanding the market and learning to anticipate its fluctuations, which will help you expand your understanding and increase the chances of success of the investment process. For an overview of the most important steps for a successful investment in Cryptocurrencies, the link is for the video description.

What are Crypto currencies .. Question and answer

What are Crypto currencies?

They are virtual currencies based on the Internet and use cryptocurrency technology to conduct financial transactions through blockchains that are decentralized, transparent and secure.

What was the first crypto currency?

The first cryptocurrency ever created was Bitcoin.

What are the most popular Crypto currencies?

Bitcoin is by far the most popular of them, followed by other altcoins such as Etherum, XRP, Cardano, and Dogecoin.

How are Crypto currencies obtained?

It can be obtained either directly by purchasing it through cryptocurrency trading platforms, or through the mining process.

What is blockchain technology?

It is an information technology through which all transactions are done in a safe and transparent manner, and it is an essential component of most Crypto currencies.

What is Crypto currency mining?

It is a process carried out by using computers to solve cryptographic equations in order to process blockchain transactions, and miners are rewarded with parts or units of the Crypto currency.

What are the disadvantages of Crypto currencies?

Cryptocurrencies are facing criticism for a number of reasons, including their use for illegal activities, and the fluctuation of the exchange rate. However, the technology behind it has been praised for its ability to process transactions quickly and securely, resist inflation and be transparent.

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