You must’ve heard people around you talk and engage in heated discussions about cryptocurrency. Like any form of currency, such as the dollar, crypto coins and tokens can act as a mode of payment. As of March 2022, the total value of more than 18,000 types of cryptocurrencies is estimated at a whopping 1.7 trillion dollars. But there are several things you must know before investing your hard-earned money. Here is a brief overview of how cryptocurrency works.

Understanding blockchain technology
Blockchain technology is a shared secured ledger that records all digital transactions and keeps track of assets for your business. First, the technology is powered only by authorized members for particular blockchain access. This mainly eliminates the risk of cybercrime and unauthorized access. Second, blockchain transactions are permanently recorded once they are entered into the ledger, and even the administrator of the software cannot modify such entries. Blockchain is more secure, trusted, and efficient for digital bookkeeping.

How does cryptocurrency work with blockchain?
Cryptocurrency is a digital asset powered by blockchain technologies to enable peer-to-peer transactions. Crypto is decentralized, meaning no government in the world actively regulates the flow of this asset. All crypto information is recorded in blockchain technology ledgers to keep accurate track of digital transactions. Now, it is an encrypted medium of direct exchange, but banks and financial institutions do not accept it as a valid currency. Bitcoin became the first-ever recognized form of cryptocurrency created by Satoshi Nakamoto in 2009.

The primary purpose of blockchain technology in cryptocurrency is to prevent the duplication of these encrypted assets so that nobody can remake this currency. This secures the transaction and ensures there is no form of counterfeit currency affecting the market value of this digital asset. Since crypto is not governed by any major central banking authority or currency exchange, the circulation of this digital asset is purely done by those who buy, sell, or trade in cryptocurrency. In layman’s terms, if you have some bitcoin, you can use this digital asset to pay for a commodity or service. The party selling the item or providing the service should be accepting bitcoins as payment. Since it follows a peer-to-peer mechanism, the currency medium has to be the same.

Where can you get cryptocurrency?
Crypto can be either mined or purchased on legit apps to be traded on platforms that allow this exchange.

Mining for cryptocurrency
Mining is a complex digital process that can only be done using powerful computing systems to solve complex mathematical problems. The solution allows the miners to create a new “block” in the blockchain to introduce new crypto coins or tokens. Not everyone has the skills or computing technology to mine cryptocurrency. Also, the cost of mining eats up a significant chunk of the profits earned from these digital assets once they are sold or traded on the peer-to-peer platform.

Buying cryptocurrency
Just as you would invest money in the stock market to buy, sell, or trade shares, Crypto can also be bought on similar platforms that allow blockchain digital asset trading. Even though centralized trading exchanges do not regulate crypto, it can still be bought or sold from such platforms. The provider charges a fee for every transaction. Amateur investors should consider centralized platforms, as cryptocurrency is a volatile asset that fluctuates in value. There is no way of predicting how the market may behave on a given trading day.

Most popular cryptocurrencies traded to date
The following digital assets are widely circulated in the decentralized market.

• Bitcoin
  Bitcoin was the first of its kind and set the benchmark for crypto trading. It is now one of the most valued coins or tokens in digital blockchain technology.
• Ethereum
  This alternative to bitcoin supports more complex financial transactions at the core of the decentralized trading market. Ethereum coins have a higher circulation than bitcoin, even though bitcoin holds the maximum market share value.
• Cardano and Solana
  One of Ethereum’s co-founders created Cardano, while Solana popularly became a much quicker and cost-efficient digital asset that can be traded in the market.
• Stablecoins
  Stablecoins were introduced to manage some of the volatility in the crypto market. Its value does not fluctuate erratically, making it a slightly safer investment for first-timers.
• Dogecoin
  Interestingly, Dogecoin was created as a joke. But the crypto received a tremendous response, and it is now one of the most popular versions of the digital asset traded actively.

Note that cryptocurrency investments are subject to high market risk. The market is severely volatile. It is better to consult with financial experts to understand whether this investment will deem to be a prudent choice in the future for your portfolio.