There has been plenty of buzz around cryptocurrencies over the last few years. After the big boom with Bitcoin, news and thoughts about crypto spread at lightning speed. So, now, everyone knows about it. But not everyone understands what it is.
Today, there are many controversial opinions about crypto. Some call them the money of the future, whereas others think it’s a bubble and, thus, an incredibly risky asset. But one fact remains unchanged – cryptocurrencies drive lots of attention, especially among young people.
If you are a student interested in this topic, you’ve come to the right place! In this article, a professional writer from a trusted paper writing service DoMyEssay and a crypto expert will introduce you to this exciting world. So read on to learn everything you need to know about cryptocurrencies!
What Is Cryptocurrency?
Cryptocurrency is a unique and quite complicated technology. But these days, it is also accessible to everyone. To get into this world, all you need is to learn more about this technology. So, let’s start with a definition.
The term cryptocurrency is used to define decentralized digital money. It is called decentralized because, unlike a standard central banking authority, cryptocurrency leveraged a decentralized form of control and governance. It works through a distributed ledger technology called a blockchain.
Simply put, cryptocurrency is digital money. It can be used just like checks or paper money to buy goods or services. And it can also be traded for profit.
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Types of Cryptocurrencies Existing Today
We bet that you have heard about Bitcoin before. It is the first cryptocurrency introduced to the world. It drove lots of public attention back in 2008 and still is the most famous and high-worth currency out there. But of course, it is not the only one anymore.
As stated by CoinMarketCap, today, the number of different cryptocurrencies on the market exceeds 16,000. Other important cryptocurrencies apart from Bitcoin include:
And there are plenty of other options as well.
How are they different? First of all, of course, they all have different values. As was already mentioned, Bitcoin is still the most high-value one. Its highest price crossed the point of $60,000 for one coin. Though currently, it went down to slightly over $18,000. Yet, its market capitalization is nearly $900 billion, which is incredibly high.
The next one, after Bitcoin, follows Ethereum. Its market capitalization is over $100 billion, with the approximate price per coin varying between $800 and $1,000+.
At the same time, there are newer cryptocurrencies like Dogecoin, Cardano, and others that have a price per coin ranging between less than $1 and $10. So, as you can see, the value of different currencies varies a lot. But that’s not the only difference.
Apart from different values, cryptocurrencies also have various technical features. To be more specific, they differentiate in the way their coins are being produced and spent.
Namely, some currencies are produced through a process called “mining,” which implies leveraging powerful computers to solve complex cryptographic puzzles. For solving these puzzles, miners are awarded coins like Bitcoins, Dash, and Monero, which they can later trade for money.
Apart from the crypto that can be mined, there are other coins that can be produced without powerful computers because their algorithms aren’t so complicated. And there are also coins that can’t be produced through mining at all.
As for spending your digital coins, the difference is pretty much in the popularity of a specific currency. For example, Bitcoin, which is the oldest and the most popular, can be spent nearly anywhere because it is widely accepted. At the same time, new and unknown cryptocurrencies don’t give their holders such wide spending possibilities.
So, that’s how different cryptocurrencies differ. Now, let’s move on and learn whether it is a worthy investment or not.
Should Students Invest in Crypto?
One of the biggest concerns facing students interested in cryptocurrencies is whether they are worthy assets to invest in or not. Many young people aren’t quite sure if it is safe enough and if it can bring any profit.
First of all, we have to say that crypto can be considered an asset class for investing like in a stock. Many people are already using it this way. The main reason for that is the possibility of earning high returns.
On the other hand, we have to admit that even the most popular cryptocurrencies are highly volatile and, thus, unstable. Therefore, investing in them can have a significant risk of loss.
Based on the key advantage and the main disadvantage we’ve mentioned above, we have to say that whether this asset is a good investment depends mostly on the profile of each particular investor. For example, it might not be a good option for someone looking to create a stable portfolio that would bring income. At the same time, it can work just fine for investors who see crypto as a way to diversify their portfolios and can handle its high volatility.
The Bottom Line
Now that you know the basics of crypto, you should be able to decide if it can be a good investment option for you or not. If you choose to take on the risk, there are a few additional tips that we’d like to give you:
- Choose the most trusted brokers and exchanges for purchasing cryptocurrencies;
- Consider consulting with a professional financial advisor to define the best investment strategies;
- Study the basic principles of successful investing and apply them in practice to mitigate risks.
If you do everything wisely, cryptocurrencies can become a great asset to invest in. Be careful, and you will win!