What Is Cryptocurrency : 15 Things You Need To Know About Cryptocurrency 2021


Hi, in this article we will be discussing what are Cryptocurrencies, why hold cryptocurrency , safekeeping of cryptocurrency , and many important things you need to know about cryptocurrencies.

A little more than a decade ago, a person or group of persons who have only identified themselves as Satoshi Nakamoto launched a project that they called Bitcoin. 

At that time, it might have looked like a lofty idea to have a form of money that is more digital than it is tangible. 

However, it has soared to more than 1500% of its original price, making it one of the best-performing currencies of all time.

As it is with any other successful model, bitcoin did not enjoy a monopoly in the market for long. Right now, we have the likes of Ethereum, Link, Stellar, Ripple, Cardano, and thousands of other cryptocurrencies in the market.

Of course, the holders and investors would need to do their due diligence to ensure that they are getting into the right thing. 

Even though this network is almost built around anonymity and no true tangible assets, though, it has gained a lot of traction in today’s market.

That is why we are looking at the nature of cryptocurrencies and why users hold them. Most importantly, we are considering the dangers that come with having them and how those can be mitigated too.
 

Why Hold Cryptocurrencies?

They have been here for long enough to allow us to gather various user sentiments and reasons for having some of these coins. 

We can assure you that not all of the reasons might make sense to you, but that does not make them less true than the next point.
 

1. FOMO

The human mind is sometimes tricked into the fear of missing out (FOMO) on something. 

Even marketers use this mindset to drive sales to their brands, making people feel like they could only access products/ services for a while.

FOMO is not a thing in the cryptocurrency market alone. In fact, it has been here before cryptocurrencies made a bow in the market at all. 

However, it has grown since that time.

The fear of missing out around bitcoin and other cryptocurrencies reached a very huge high in December of 2017 when the leading crypto soared to an all-time high price in the $20,000s. 

Even though it has not managed to cross that same barrier ever since the attention that it got in the market around that time was good for its publicity and promotion.

Likewise, there are usually flash crashes and pumps in the cryptocurrency. Anytime that is happening, the fear of missing out steps in to play for more players in the cryptocurrency niche.

Right now, a resource known as the Fear and Greed Index has been launched to understand the level of fear in the market or greed towards accumulating more coins at any point in time.
 

2. Transactions

Some cryptocurrencies have gained moderate acceptance to the extent where they could be used to effect transactions. 

This is more common among the top coins in the market especially bitcoin and Ethereum.

A coffee shop in Prague made the news for not accepting anything other than bitcoins. 

Even those who didn’t have any would be required to change their cash to bitcoin before they entered the coffee shop so that they would make purchases. 

There are a lot more of these establishments from all around the world.
 
The best thing in this space is that some big businesses are also starting to accept bitcoins, while others are in the stage of seeing how they can incorporate that into their processes also. 

All of that spell good news for the currency.

But then, why not use basic cash for transactions?

That might be a fine idea until people need to buy something from a vendor in another country. 

Traditional modes of money transfer might not work, which leads to the cryptocurrency framework that does not need any form of external regulation. Thus, such money transfers are as seamless as can be.
 

3. Safe Haven

Investors do not always park their money into commodities, stocks, and other currencies to grow the money. 

They are sometimes doing that to prevent the money from losing their value in the first place. That is what some investors have started doing with cryptocurrencies too.

In the earlier parts of this year 2020 when the coronavirus pandemic measures were first announced, a lot of panic led to crashes in the markets. 

That time also saw a never-before-seen flock into cryptocurrencies, especially bitcoin.

Further down the year, major hedge funds started announcing that they will be parking some of their portfolios in cryptocurrencies. 

If that does not spell it out enough, it shows that these investors see the cryptocurrencies as a good way to hedge against inflation, protect their assets, and break-even where necessary. 

Even if for the short run.

Those investors who made such a call around March of this year would be winning big right now. After all, the crypto market has seen a lot of big rallies since then.
 

4. Savings

There is a mathematical model behind the performance of most coins, if not all. 

Due to the limited supply and mode of supply too, it is estimated that there won’t be new coins in circulation after a while.

That means that there is now a limited amount of coins that every investor is chasing with their money.
Bringing some basic economics into that, the demand for the said crypto will outweigh its supply. 

Thus, the price starts to climb so that only those who are willing and able will be able to afford it.
Looking at this model, it is not surprising why some users prefer to use cryptocurrencies as a form of savings. 

Combined with the safe-haven status that it can grant above, the choice for this kind of currency is even more glaring.
A notable case of someone who saves in Bitcoin is Eric Savics an entrepreneur with his own podcast channel. 

Unfortunately, though, he lost all 12 Bitcoins worth more than $100,000 when he made an error in judgment which we will discuss in detail later in this piece.
 

5. Access

Imagine wanting to make a payment and having to go through banking loops and hoops first.
This is more common when you want to make a payment to an entity that is abroad. 

In other cases, it might be that you would like to go abroad for a while and make some money with you. 

Having to set up another bank account in the target country, then effecting a transfer between two banks in different countries can be strenuous.

Cryptocurrency takes all that out of the mix. You get instant access to your funds and can be your own bank. All you have to do is log in to your wallet and you start making transactions. 

There is no need to have a big brother looking over your shoulder, deciding to approve your transactions or not. 

At the same time, cryptocurrencies work 24/7, unlike some regions where wire transfers can only be made on workdays and no other time.
 

Threats Associated with Cryptocurrencies

There is enough evidence on the market to suggest that cryptocurrencies are not exactly totally safe. 

There have been some hacks and breaches so loud that market sentiments had been going against these coins for some time now.

Truth be told, though, even fiat money is not as safe as we make it out to be. 

There are a lot of money-based frauds that are growing by the day too. 

That said, everything can be chalked down to every good thing also having a bad side to it. 

It is, thus, left to the user to understand how they will make sure they are not erring on the wrong side of the security of whatever cryptocurrencies they have.

That said, we take a look at some of the threats to look out for if you have some cryptocurrency at hand.
 

1. Trusting HYIPs

Known as High Yield Investment Programs, HYIPs promises an insane amount of return on investment in little time. 

This is what lures people in since they believe they can get in, grow their crypto, and get out fast too. 

In fact, most HYIPs have perfected the art of supplying social proof so that it looks like all is well and good.

Some of them might have even been paying out to investors but running on a Ponzi scheme model. 

They do this to gain the trust of more investors while the ones that they have at hand supply more money for the investment, so to speak. 

After some time, they pack their things and leave with everyone’s money.

The worst thing about HYIPs is that they are often unregulated. 

That does not raise a red flag to most investors since bitcoin and other cryptocurrencies do not exactly enjoy regulation in many countries either. 

Leveraging this loophole has helped to fleece thousands of their hard-earned money.
 

2. Choosing Bad Wallets

Saying something is a bad wallet is a function of two things.

It could be that the wallet is inherently poor in the way its security models were set up. 

This allows hackers to have a field day breaching the wallets on such a network and carting away tons of free money. 

On the other hand, it could be that the wallet provider itself has a malicious intent with their creation.

It has happened before where a group disguised as a wallet provider. 

Unknown to users, all the cryptocurrencies that they believe they have in their accounts were being sent to a central address that belonged to the developers of that wallet. 

When they had gathered enough cryptocurrencies, they called it quits and made away with all the cryptos in their care.

The same is true for bad players who mimic legitimate wallets to fleece users out of their money. This is what happened to Eric Savics mentioned above. 

Downloading a browser extension of what he thought was his wallet, he imported his cryptocurrency only to find out it had been stolen. Since the hacker now had access to his private keys, this theft was done swiftly.
 

3. Anonymity

The anonymity of the cryptocurrency network is what makes it desirable to a lot of people. 

However, that is the same thing that makes it dangerous if not handled well.

Should money be transferred from fiat accounts, the identity of the thief can be obtained from the bank account that they moved the money. 

This will not be possible on the cryptocurrency network.
Every transaction is marked by a long string of characters that does not bear semblance to where the transaction came from or who sent it in any way. 

No matter how such transactions are analyzed, it cannot come up with details like the name, address, computer, etc. of the sender/ receiver. Unless the data is used in line with others, that is.
 

4. Key Management

With fiat money accounts, you do not have to worry about your account getting lost. 

As of the time of this writing, though, it is estimated that some 4 million bitcoins (worth $45.9 billion right now) are lost forever. 

That is just for bitcoin, not counting the rest of the thousands of cryptocurrencies on the market.

A good example is that of James Howell in the UK who mined nothing less than 7,500 bitcoins in a hard drive and threw it away. 

Not on purpose, of course. Till today, he has not been able to gain back those bitcoins and they are probably lost forever. 

After all, even if someone else were to come across the drive, they would have a hard time hacking it.

5. Hackers And Scammers

Hackers are always on the prowl for cryptocurrencies. We can go out on a limb and say that they are one of the biggest threats to this form of currency. 

Before cryptocurrencies became mainstream, hackers and scammers have been involved in various breaches and programs that led to the loss of significant money. 

Now that they can do the same thing without the chance of ever getting found out, it is little wonder why it seems like they have intensified their efforts.
 

How to Stay Protected?

After looking at the use cases of bitcoin and other cryptocurrencies, it is sure that there is a lot of promise in that market. 

However, the threats that the coins hold is enough to make anyone think long and hard about what they want to do.

Fortunately, you can beef up your security as a crypto holder now that you are your own bank.
Here are some of the things to do right now.
 

1. Choose Secure Passwords

Your cryptocurrency wallet/ exchange is not the place for those 8-character passwords. 

If you truly care about your privacy and security, start from the 24-character password set. 

You can also use online password generators to get secure and reliable password picks for your accounts
 

2. Secure Your Private Keys

Your private keys, which are also known as recovery passphrases, can unlock your crypto wallets without the need for username and passwords. 

This is why you need to keep them safe and secure lest you lose access to your accounts. 

In the rare case that you do, you would be able to get the accounts back with your recovery keys.

Likewise, securing these keys is important since you do not want anyone else to have access to your accounts. Thus, never store them online but write them down offline instead.
 

3. Choose a Cold Wallet

One of the best ways to secure bitcoins and other cryptocurrencies is by having a cold wallet for it. This can be in the form of a hard drive or USB stick, but never online. 

That keeps your account safe in instances of online hacks and break-ins. 

Unless the hacker had access to the physical wallet and the unique combination to get it open, they would not be able to touch your money at all.
 

4. Secure Your Network

You have seen from above that a poorly secured network connection will invite the hackers in. what they do when they get in is anyone’s guess.

Tighten your network security by encrypting every internet session with a VPN. 

Continue the good practice model by avoiding public Wi-Fi networks wherever you can. 

Free Wi-Fi connections should also be abhorred since you do not know who is on the other end of such transactions.
 

5. Choose Known Wallets

Go onto any platform mobile or desktop and search for wallet apps and services. 

You can rest assured that you will be hit with so many options to pick from. However, not all of these are worth picking from.

Make sure your desired wallets are from known sources. 

It helps if they have been in the business for long, and have a face behind them too. 

This keeps you safe from falling into the hands of scammers just wanting to make a quick buck with some new wallet idea.
 
Would you like to know more about cryptocurrencies in general? Please ask your questions in the comments section and someone should reach out to you with a comprehensive answer.


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