Cryptocurrencies offer several advantages and disadvantages
Cryptocurrencies offer several advantages compared to traditional banking, money transfers, and official currencies.
Privacy. Many cryptocurrencies are designed with the privacy of the issuer and receiver of funds in mind. Only cash provides similar anonymity. Decentralization. Cryptocurrency owners use a wallet to access their currency and receive or send funds from a specific wallet address, using a secret key for access. Some also use crypto exchanges [companies to trade (sell and buy) cryptocurrencies] to store coins, although this practice carries additional risk. The currency register exists on the blockchain with a copy stored at each node, which maintains a local ledger and syncs with other computers online. Your money is not in a single bank, not even in several. The decentralized nature of cryptocurrency ledgers makes them less vulnerable to confiscation or individual risks, such as fire or hardware failure. The data is not only stored off-site but is copied around the world to all existing nodes. Shortage. Bitcoin has a fixed supply. There is more than 17 million Bitcoin. However, only 21 million Bitcoin will exist in life. It is integrated into the code of the currencies. Fixed supply gives Bitcoin and other cryptocurrencies characteristics similar to gold, silver, or other precious metals historically used as money. Unlike the US dollar, the British pound, or any other official currency, after the total supply is in circulation, it will never grow, devaluing the currency's purchasing power. Smart contracts. Some cryptocurrencies have a unique feature that cannot be duplicated with official currencies. Ethereum is among the best examples with its strong support for "smart contracts," essentially programs that live on the blockchain and that can be used to handle transactions as well as for many other uses, some of which we may not have imagined yet. For starters, these contracts can be used to replace mediators or escrow services. The smart contract can manage the details of a transaction, releasing the payment only when predefined conditions are met. Cost of transfers. The cost associated with cryptocurrency transfers can be a pro or a con, depending on the type of currency, the type of transfer, and the transfer speed. Bitcoin, for example, can become prohibitive if you need to make a quick transaction. Costs are less of a problem for less urgent transactions. Other types of cryptocurrencies, such as Ripple, are transferred quickly and cheaply, causing financial institutions to adopt Ripple-based transactions and related technology increasingly.
Disadvantages of cryptocurrencies
Cryptocurrencies come with a list of considerations that can help make investments more secure.
Related Content: Bitcoin: Is It a Good Investment?
It’s fair to say that there is no such thing as a safe cryptocurrency at this early stage. But with careful planning, you can build a portfolio that limits risk while offering the opportunity to exit the trade should it be necessary.
Adaptation in the market. Cryptocurrency awareness is growing, but most of the attention has been on Bitcoin. Relatively few retailers accept cryptocurrencies for payment, but quite a few already exist. Overstock.com announced in 2017 that it would accept cryptocurrencies as a means of payment. Payments will be limited to Bitcoin, Ethereum, Litecoin, Dash, and Monero, giving the other 1,500+ cryptocurrencies their back. Pizzaforcoins.com accepts more than 50 cryptocurrencies, allowing cryptocurrency owners to buy pizza at local establishments. The adaptation of the cryptocurrency market for payment has been slow, and options remain limited, but this can change quickly. Obsolescence. Up to 1,000 cryptocurrencies have already failed, and more will indeed be added. The most common type of failure is in the Initial Coin Offering (ICO). Many coins find a market crowded with coins with similar characteristics to existing ones, causing skepticism among investors. The ICO was just a cash robbery in some other cases, with the founders running away with investor funds. Currently, ICOs are not regulated. Cryptocurrency projects abandoned. Most of the investment money for cryptocurrencies is focused on a relative pool.
They lamented small coins. Without investor interest, projects can be abandoned, leaving investors with worthless digital currencies.
Regulation risk. When it comes to cryptocurrencies, regulatory risk is twofold. In the US, cryptocurrencies are not regulated at the federal level, leaving states the option of introducing rules and regulations about cryptocurrencies or blockchains that serve as the backbone for cryptocurrencies. On the other hand, some investors and finance experts have raised concerns about the future regulation of cryptocurrencies, which could cause a drop in demand or eliminate it.
Liquidity risk. Investors and lesser-known cryptocurrencies may find fewer buyers, which creates difficulties when trying to exit a position.
Volatility risk. Few investment classes can rival cryptocurrencies when it comes to price volatility. Prices can go up or down dramatically in a single day, making or breaking fortunes.
Third-party risk. Mt. Gox, a Japan-based Bitcoin crypto exchange and the world’s leading exchange in 2014, was hacked, resulting in a loss of nearly $ 500 million worth of Bitcoin. In total, an estimated 850,000 Bitcoins belonging to investors disappeared, ultimately driving the exchange into bankruptcy.
Security. Cryptocurrencies are often kept in a digital wallet, secured by an extended code or a long series of words. Unlike your bank or investment account, there is no recovery process available if you lose your password. Without your password, your cryptocurrency wallet and its contents are no longer accessible.
The cryptocurrency landscape is hugely diverse. With few barriers to overcome, almost anyone who wants to and understands blockchain technology can create their cryptocurrency. There are more than 1,600 cryptocurrencies offered on the leading, medium and specialized exchange platforms.
It is fair to say that the actual significance number can be reduced to a two-digit list of these cryptocurrencies and digital tokens. This smaller group can further be narrowed down to cryptocurrencies that are traded enough to have significant liquidity or regularly used to pay for uses of blockchain platforms as utility tokens. In this category, we could very likely include between 20 to 30 digital currencies.
Since the beginning of the cryptocurrency phenomenon, the two most popular cryptos have been Bitcoin and Ethereum (Ether). In recent years, Ripple XRP has strengthened its position within the top 3. Ripple even briefly surpassed Ethereum’s market capitalization in September 2018 to become the second most popular cryptocurrency.
Beyond Bitcoin, Ethereum, and Ripple XRP, other cryptocurrencies enjoy popularity. However, their value and public interest tend to rise and fall. The exclusive Crypto 10 Index, which is made up of the most popular cryptocurrencies of the moment, can also be traded.
What are the most popular cryptocurrencies for traders?
One way to determine the most traded cryptocurrencies is to look at which ones are offered as CFDs on major trading platforms such as Plus500. Below you can see the cryptocurrencies that are most interesting to Plus500 users.
Screens of two iPhones with buying and selling cryptocurrencies in the WebTrader.
A quick internet search suggests that the most popular cryptocurrencies on the market today are:
Bitcoin Ethereum Ripple XRP Litecoin NEO IOTA
They are all different, so let’s take a quick look at their main features.
Bitcoin is considered the original crypto; its launch in 2009 is what started the entire cryptocurrency movement. Bitcoin – and the blockchain technology on which it operates – was developed by a person or workgroup under Satoshi Nakamoto’s pseudonym. Bitcoin was presented as an alternative to the traditional monetary system, known in the crypto world as Fiat currencies. Satoshi Nakamoto’s true identity has never been revealed.
In the Bitcoin white paper, Nakamoto asserted that a fiat monetary system controlled by central banks and a small number of financial institutions led to a centralization of wealth and power, thus bringing economic and social mobility to bear. It made it difficult. The savings of ordinary people were hit by inflation, caused mainly by monetary expansion and money printing by