The Ins and Outs of Cryptocurrency

The Ins and Outs of Cryptocurrency

Are you curious about adding digital currency as a form of payment for your business but still have doubts or questions about its uses? Do you want to buy Bitcoin or Ethereum but don’t know where to start? The cryptocurrency world is rapidly expanding, increasingly relevant to everyday life, and perhaps quite complicated to get started with as a novice. 

Not to worry. If you’re interested in the world of crypto but feel lost, this is a great place to start. Managing, investing, and trading digital assets is our business. We offer you this article to help introduce you to the most fundamental ideas behind this emerging and rapidly maturing financial field! 

The Basics

Before going any further, we should answer some of the most basic and important information regarding crypto. 

What is Crypto?

Crypto is essentially a digital form of currency that can be bought, sold, traded, or exchanged online for goods and services, just like traditional money. All forms of crypto are created by leveraging what is called a blockchain, which is a combination of distributed ledger and encryption technology, and is uniquely useful for recording, verifying, and encrypting transactions on a public ledger. 

In actuality, crypto isn’t too different from a traditional currency. After all, the money in your account is just a value or number officially verified and backed up by your bank. At its heart, crypto is the same thing – a digital record of value controlled by a system that monitors and verifies transactions. The difference is that crypto is decentralised, meaning it is not issued nor controlled in value by a central bank making it publicly verifiable and the transactions immutable. 

Key Traits of Crypto

There are thousands of different kinds of cryptocurrency, but all of them have a few traits in common.

Firstly, crypto is decentralised. Instead of being presided over and backed up by a central institution such as a bank or government, crypto relies on a digital ledger created by blockchain, which is publicly available to all users to verify transactions and prevent fraud. This decentralisation is useful in avoiding market intervention and providing more security than traditional online payment formats. 

Secondly, while there are many kinds of crypto, most are geared towards different uses or markets, all represent value through one of two basic units – coins and tokens.

  • Coins are essentially an alternative to traditional money – each coin is a single unit of fungible currency, with a certain amount of value associated with it, coins are issued to award those securing the network and updating the ledger. 
  • Tokens are digital representations of different kinds of assets. Some are used for utility and access specific platform functionality, others represent real-world assets, while others can be used directly as a form of payment within specific industries. 

What Are the Advantages of Crypto?

Now that we’ve covered some of the basic ideas let’s consider some of the pros and cons of cryptocurrencies. There’s no denying that crypto has made a huge impact on the world of finance, and it’s safe to say that it’s not going anywhere anytime soon, so what are the advantages that draw people to using it?

  • Many see crypto as the future of money. Digital transactions are becoming more and more central to our daily lives, and crypto enthusiasts and investors see it as the next logical step for digital commerce. 
  • Many are drawn to the openness of crypto. The decentralised nature of crypto means that anyone can invest or create their own cryptocurrencies. Decentralisation also allows for pseudonymity, which is a primary draw for many crypto users. 
  • The nature of blockchain code means that crypto is generally more secure and faster than traditional forms of digital money exchanges, making crypto ideal for fast and easy international transactions. 

What Are the Limitations of Crypto?

Despite its rising popularity, crypto is not without drawbacks. 

First of all, while many users consider it a plus, the pseudonymity that is usually built into the cryptocurrency system can make it an option for buying illegal goods or services or for committing financial crimes like tax evasion or money laundering. Some forms of crypto are more or less private than others, however. For example, as it has matured, Bitcoin has become more reputable and above-board by necessity. The increasing ability of authorities to trace the Bitcoin blockchain to identify and arrest criminals has made it a poor choice for illegal activities.

Additionally, crypto (particularly Bitcoin) has been criticised for the volatile way its value can rise and drop. It’s standard for the value of a single Bitcoin to rise and fall by thousands of dollars over the course of a few months. Stability is necessary for any healthy and sustainable currency, and some critics claim this volatility makes Bitcoin more of an investing bubble than a stable new form of legal tender. Others view this as a primary draw to the currency, as it has sound money principles and much in the same way it is for the stock market, where fortunes can be made on speculative investments at key times.

What Are the Different Kinds of Crypto?

As mentioned earlier, there are thousands of different cryptocurrencies. Some are intended as broad, general use currencies, and some are very specifically designed to fill a niche within a single industry. We’ll take a quick look at Bitcoin, Ethereum, and Cardano, currently three of the biggest names in crypto. 

Bitcoin: The original cryptocurrency and by far the most successful on the market today. Most of the alternative crypto options out there are built directly from Bitcoin’s original code. They exist to specifically solve problems associated with Bitcoin or to somehow improve on the original Bitcoin model. 

Ethereum: The second-largest cryptocurrency and main competitor for Bitcoin. Unlike its rival, Ethereum has no maximum limit on the number of tokens that can be produced and has the ability to issue tokens making it an ideal blockchain for the emerging DeFi protocols to build upon (which makes it ideal for processing contracts and programs). 

Cardano: Cardano is an emerging  crypto and is the only cryptocurrency to be built on peer-reviewed, scientific principles and data observation. While it is currently usable as currency, its creators are still gathering data and using it to build parts of the platform in the same way Ethereum is utilised. 

Now You Know the Basics, What’s Next? 

Aus Merchant is a digital currency provider for investors and businesses. Our brokers help you navigate the often complicated and sometimes confusing landscape of digital currency. Whether you want to buy, sell, trade, hold, earn, spend or receive digital assets, Aus Merchant is here to help you realise your goal.

Aus Merchant is a group of industry professionals and investors looking for a more efficient trading method and storing digital assets. Bringing the future financial system to a growing network of Australian investors and businesses. Contact us today to realise your future in digital currency.

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Mitchell Travers

Mitchell Travers