Cryptocurrency and it’s workings

Anyone who watches the news would have heard the words crypto,
bitcoin, etc., being thrown about. People talk about them as easy ways
to get rich, and hear social media influencers like Elon Musk raising
and lowering their price by a single tweet.
This arouses the questions, what is crypto? How do I buy into it? Is it
worth the investment? What do I need to know before I take the
plunge?
This article will try to guide you through the finer details of what
cryptocurrency is, and whether you should risk putting your hard-
earned money into it.

What is it anyway?
Cryptocurrency is pretty similar to normal money, the only difference
being that it’s purely virtual. There isn’t any physical representation
of its value in the real world.
So how does this work? Basically, cryptocurrency can be looked at
like casino tokens. You pay real money to buy them, and they have
value only when used online.
However, unlike casino chips that have a fixed value, the value of
cryptocurrency changes according to the market. When demand and
scarcity increase, the cost goes sky high.
This is what happened to bitcoin, who’s price has jumped from
$0.0008 in July 2010, to $38,830 as of this article. That’s an
astonishing 50-million-time increase.
This may seem very exciting, but that doesn’t make it less risky.
Bitcoin had a whole bunch of rises and falls before it got to its current
state.
How does cryptocurrency work?
All cryptocurrencies work using blockchain technology. To make it
simple, blockchain uses a decentralized network to keep records of
data. In the cryptocurrency world, that means all records of currency
is out of the reach of the government, which makes the usage of
cryptocurrencies hard to trace. This is useful for illegal activities.
The other advantage of blockchain is to combat the trust issue. If
someone makes a new currency, say “Zipcoin”, how can you trust
him to not give himself all of the money?
The blockchain database works such that no one person is in charge
of it, instead the users are the ones who can edit it. This makes it
secure, and incapable of being faked or double spent.
Cryptocurrencies, when used for making payments, is useful because
they don’t have the huge processing fees banks slap on wire transfers.
For most people reading this article, using cryptocurrency for making
money instead of spending it is the goal. So how does that work?
How do I make money off of cryptocurrency?
There’s 2 main ways of making money off of crypto.
The first way to buying and holding. This is just simple day-trading.
You sit on it, and sell it for a profit if the price goes up. The “if” part
here is important. Prices won’t always go up.
Day-trading is the easiest method to earn money with
cryptocurrencies, but it’s hardly the safest. Many people have lost
entire life savings by improper trading.
On the contrary, many have made huge fortunes by trading. All of this
depends on the research you put in. Analyzing stock prices and seeing
if it’s rising or falling is crucial before putting your money in it.
However, this can still be risky. Random things can trigger massive
rises or falls. For example, when internet famous Elon Musk tweeting
a single word, “Doge”, the value of the cryptocurrency Dogecoin rose
rapidly by almost 30%.
Similarly, when he announced Tesla won’t accept cryptocurrency to
buy cars anymore, the price dropped. People today are affected a lot
by current affairs, so care has to be taken to not get affected by that.
The second way to earn money through cryptocurrency is by mining.
Mining is the process by which new bitcoins are entered into
circulation. It is also an important component of the maintenance and
development of the blockchain ledger. It is performed using very
sophisticated computers that solve extremely complex computational
math problems.
This is not only costly and hard to setup, but the rewards gained are
only rewarding sporadically. However, with this method, you aren’t
putting money on the cryptocurrency itself, so it’s safe from the
fluctuations of price.
Mining is a complex process, and takes a lot of research to do. It also
needs a lot of power to maintain.
Is cryptocurrency right for me?
The market of crypto is confusing and volatile. Making money in
crypto needs not just proper planning and timing, but also a
willingness to take risks.
Practicing and browsing trading tips is essential to make money off of
cryptocurrency. Keep practicing and one day you can make a lot of
money easily.