Everything You Need to Know About Cryptocurrency

With cryptocurrency already legalized by more than half of the world, sooner or later, the UK government will develop regulations for the same.  For many investors, cryptocurrency has emerged as an innovative digital currency. However, the reason that makes cryptocurrency attractive to investors is the blockchain technology. It is an advanced database mechanism enabling information sharing transparently within a business network while data is stored in closely linked blocks like in a chain. Again, just like stock and commodities exchanges, you can trade in cryptocurrencies via online platforms (cryptocurrency exchanges).

Types of cryptocurrencies

Amidst thousands of cryptocurrencies, Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) are the most well-known. While most of these are based on a decentralized system and have many similarities, they differ based on transaction speed, the average transaction fee, etc. So, it is always best to first conduct some research work before investing in any cryptocurrency.

How is cryptocurrency used?

As a form of currency, cryptocurrency is not yet globally adopted but has tremendous. At present, you may not purchase a loaf of bread with it but can use it as an alternative form of investment. Just like people invest in the stock market, many people initially invest in cryptocurrency. They got good returns because of astronomical growth in their value, but it is now clear that cryptocurrencies are extremely volatile.  Unlike transactions by cash or debit card where the bank is an intermediary, there is no involvement of the bank or any third party during an exchange of these cryptocurrencies. Instead, every transaction is recorded and kept secure by using the blockchain technology.

Is investing in cryptocurrency risky

Yes, investing in cryptocurrency is pretty much risky compared to investing in other forms of investing. Moreover, the demand for cryptocurrency keeps on rising and decreasing drastically. So, it is possible that you eventually lose your hard-earned money.

It is also a fact that, like other regulated investment providers, crypto investment providers do not inform investors about the potential risks, which is misleading. As a result, many people have this misconception that investing in cryptocurrency is safer which is not true. However, it is tough to ignore that millions of people are actively investing in cryptocurrencies and not regulating the same may leave these people vulnerable.

As the Financial Conduct Authority (FCA) does not regulate the cryptocurrency market, there is an increasing possibility of online criminals putting your business at risk. As per a 2019 study conducted by the University of Edinburgh, there have been approximately $76 billion of illegal activities annually involving Bitcoin transactions.

Benefits of accepting cryptocurrencies

There are numerous benefits of accepting or adopting cryptocurrencies. Some of these are as follows:

Speed and ease

As the blockchain is decentralized, there are no intermediaries like a bank or a payment processor which results in quicker payments anytime and from anywhere.

Reduced operating cost

Compared to the processing fees involved in traditional payment methods, here you may experience a lower processing fee which will result in reduced operating costs for businesses.

More reach to customers

There is no restriction of geographical boundaries on cryptocurrencies which means businesses who have adopted cryptocurrencies can attract and reach a demographic not tapped yet.

Secure payments

As it is almost impossible to reverse or edit a cryptocurrency transaction, and there is no need for personal data, there is little possibility of cyber-attacks or cyber fraud causing loss.

However, it is strongly advised that despite all these benefits, seek advice from a financial advisor or tax consultant if you are thinking of making any investment in cryptocurrencies soon. It is better to take advice rather than regretting later.