Explain the various types of cryptocurrencies
Cryptocurrency is a digital currency, often adopted as a method of payment, made by using encryption algorithms. Virtual currencies work as both currencies and as an automated accounting system.
For using digital currencies, a digital wallet is necessary. These wallets can be an operating system that includes a service based on the cloud or installed in your computer or mobile device. Cryptocurrency is made to work as a channel of exchange in which a person’s transactions are recorded in a computerized database.
The first cryptocurrency that came into being in 2009 was Bitcoin. People contribute their money to a cryptocurrency because they see it as a potential investment, and they want to make a profit from it. Even when cryptos are becoming familiar worldwide, crypto scams are occurring recurrently. Every year, the number of crypto scams is only increasing, without any signs of its reduction or elimination. People must save their crypto assets from crypto scams. But before you learn how to prevent a crypto scam, here are a few basics that you need to pull up your sleeves for secure crypto trading.
Types of cryptos:
Here are few prominent types of cryptocurrencies listed below:
Bitcoin is the first-ever digital currency to be introduced. Blockchain technology makes payments and digital transactions more accessible and convenient. In the history of bitcoin, the blockchain acts as a record of all the transactions. The ledger permits a party to show that they are the owners of the Bitcoin bought by them. This activity can help prevent fraud with Bitcoin
The token, Ether, provides the transactions on the Ethereum network. Ethereum is a platform that employs blockchain technology that enables the creation of smart contracts and other non-centralized applications.
It is a stablecoin. The main aim behind Tether is to add benefits of both, digital currencies along with the stability of a currency given by the sovereign government.
- Binance coin:
Binance coin is a crypto offered by Binance. However, when it started off it was on Ethereum’s Blockchain network.. It currently exists on the Binance chain, its own Blockchain network.
- USD Coin:
USD coin is a stablecoin fixed to a dollar, meaning that the value of the USD coin does not vary much from the dollar rate.
It was previously known as Ripple and was created in 2012. It shows how one can utilize it to pay in various digital real-world currencies. XRP is used to perform transactions across multiple countries and provides independent payments.
- Binance USD:
Binance USD came into the picture in 2009 and is controlled by the New York Department of Financial Services.
It was launched in May 2020. It connects blockchain technologies with different digital currencies.
It was founded in 2017 and was formerly known as Matic. But Matic was changed to Polygon in 2021. Polygon focuses on being easily accessible to those making digital apps and it scales up the Ethereum platform.
The co-founder of Ethereum created it. Cardano uses smart contracts, and it enables identity management.
People who use digital currencies enjoy several advantages. Here are the benefits of adopting virtual currency.
- The activity of sending and receiving money through crypto is easy and convenient. It is at a lesser cost. Anybody can perform crypto transactions using a smartphone app, hardware wallet, or exchange wallet.
- Payments using digital or virtual currencies are very secure and protected. Security in virtual currencies is because of the Hash rate. It means the security is directly proportional to the hash rate. If the hash rate is high, then more determining power may be required to determine the transactions, which in turn ups the level of crypto security. The most secure cryptocurrency is Bitcoin, which has a higher hash rate. Using a crypto exchange is as secure as any other stock exchange if you have ascertained their legitimacy and background.
- Since Bitcoin came into the crypto market in the year 2009, the cryptocurrency market has been growing like crazy ever since then. The worth of cryptocurrency has increased a lot by the year 2022. It explains the rise in the cryptocurrency market over the past decade. Hence, it is crucial to always remember that markets, which once prominently emerge, will constantly grow if the market continues to see a future in it.
- People always choose virtual currencies as an alternative for easy transactions. Crypto transactions can be undertaken with ease, whether domestically or internationally.
- Remember that all the transactions related to the cryptocurrency are recorded and exist in the blockchain. Here, blockchain is the technology and the main reason why crypto transactions flow uninterruptedly.
- Blockchain does not include the mediators such as banks and online marketplaces. It indicates that blockchain provides the facility of managing crypto transactions and stores them securely.
- Cryptocurrencies are used in various industries, including the fashion and pharmaceutical industries.
- The cost associated with crypto transactions is significantly less. Generally, the transaction costs are high with other financial services, but with crypto, it is economical.
- Cryptocurrencies can be utilized by anyone and from anywhere. It will not take you much time to set up a digital wallet. But to open an account in a financial institution/bank will relatively take some more time. Cryptos are convenient for people who are not interested in going through the normal banking process.
Disadvantages of Cryptocurrencies:
Cryptocurrencies and their usage arrives with several disadvantages. Even though blockchain protects the crypto data on its network, crypto scam is inevitable, leading to users losing their money. They are mentioned as follows:
- SIM-Swap scam:
In this scam, the cheater gets a copy of the crypto user’s SIM card and accesses all of their data, including the user’s crypto wallet. As a result, the victim’s crypto and other data get hacked, and everything gets erased before the victim receives any clue about it.
- Investment scam:
In an investment scam, the fraudster will call the user and convince them to put money in crypto. The fraudster promises the victims of huge returns on investment. However, if the victims invest their money, their money is lost, and cheaters eventually run away with their money.
- Phishing scam:
It is a very old scam. In this scam, the cheaters want to get your account details, including the private keys to your crypto. As any crypto user would know, the one who holds the key has the access and possession of the crypto. Phishing scammers send you a message along with the link that leads you to a fake website where they can get hold of your account details.
People should be careful while using crypto and should know the protective measures against crypto scams.