Cryptocurrency has become a buzzword in the investment sector due to its monumental success in the last few years. “Is cryptocurrency a good investment?” This critical question arises in the minds of many people looking to earn profit from bitcoins investments. A person should be familiar with how cryptocurrencies operate before answering this question. A second important question is whether cryptocurrency is suitable for beginners. To answer this question, an individual must understand and gain in-depth knowledge of its market before starting to invest in it. Let us understand more about cryptocurrency and its attraction as an investment option.
What is Cryptocurrency :
Cryptocurrency essentially is a form of digital money that works without any middleman or bank. It has a decentralized ledger with no single point of access. The authorized users receive the distributed access among themselves. Assets such as money, houses, or even intellectual property get recorded in this ledger.
Blockchain technology is the foundation of cryptocurrency. An important characteristic of blockchain is that it records transactions chronologically. Using a blockchain, one cannot alter records or transactions. Therefore, transactions are safe from tampering. A block is the smallest unit of a blockchain, which holds all the transaction details.
A unit of cryptocurrency is essentially a coin or token in understanding, depending on how you use it. Some of these serve as units of exchange for goods and services. At the same time, some serve as monetary units, and others help run computer networks involved in complex financial transactions.
Role of Mining
Through bitcoin mining, bitcoin transactions are digitally verified on the bitcoin network. Thereafter, they get added to the blockchain. Verifying blocks of transactions on a decentralised blockchain ledger involves solving complex cryptographic hash puzzles. This involves the use of sophisticated equipment and powerful computational power. Mining for bitcoin rewards miners with bitcoins, which get released into circulation as a reward.
Why is Blockchain Technology So Hyped?
Before bitcoin happened, there were always issues related to trust, and efficiency in digital currencies.
Imagine someone created a new currency called the “A”, and you happen to invest in that. What guarantee do we have that they won’t take our money?
Blockchains, the type of database used by Bitcoin solve this problem. As with most normal databases, such as SQL databases, there is usually an admin who can change entries and compromise the system. Blockchain is different because nobody controls it. Furthermore, one cannot hack or double-spent bitcoin, so those who own it can be confident that it is valuable.
How To Start As A New user:
It is easy to get started with Bitcoin as a new user without understanding all the technical details. As soon as you have installed a Bitcoin wallet on your computer or mobile phone, the program will create your first Bitcoin address. If you want your friends to be able to pay you or vice versa, you can share your addresses with them. This is pretty similar to how email works. But the exception is that Bitcoin addresses work only once.
Top 6 Cryptocurrencies
Based on market capitalization, the following cryptocurrencies are the largest:
India’s Take On Cryptocurrency :
The RBI banned crypto trading in India in 2018, ordering banks not to facilitate it. However, the Supreme Court overturned RBI’s order in 2020. Historically, the RBI has refused to support crypto because of fears about financial stability.
As per the Government of India’s current stand, cryptocurrency will never become legal tender. The government further elaborates that just as gold and diamond are not legal tenders, private cryptocurrencies will also never be legal tender. The government has proposed to impose a 30% tax on bitcoin trading as well in their latest budget.
Is Cryptocurrency Trading For Beginners Good?
In May 2010 the price of 1 bitcoin was less than $0.01 and it was trading at the price of more than $61000 per bitcoin in September 2021. The speed at which it has scaled is humongous and anyone with the basic investment knowledge will tell you that it is a goldmine. But one should remember that bitcoin trading is highly volatile. Since bitcoin has provided such huge gains to investors in the last decade, it has caught the attention of the regulators and government as well. However, it still remains one of the best modes of investment to earn high returns.
India is home to the highest number of bitcoin owners. The number exceeds 10 crore which is even higher than the USA. Therefore, one can certainly say that the enthusiasm for bitcoin is great. Bitcoin investment is certainly giving benefits to investors who are investing with discretion. Due to the diversity of cryptocurrencies available and their volatile nature, it is important to make sensible choices while trading in bitcoin. Just like with the share market, bitcoin is a risky investment. In fact, it is far riskier than the share market. Therefore, cryptocurrency trading for beginners is a dangerous affair. But it doesn’t mean one cannot master it. with research and practice (One can do paper trading for practice), investors can make wise choices.
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