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Today, there are hundreds of cryptocurrencies in circulation around the world for trading and purchasing goods and services using electronic devices. The best-selling cryptocurrency on the market is Bitcoin, a crypto type of token launched in 2009. It made the Crypto Currencies Rating List in August 2020, followed by Ethereum, XRP (Ripple), Tether, and Chainlink. Alternative currencies differ from foreign currencies, including the US dollar or British pound, because they have no governmental regulations. Governments regulate the dollar, yen, pound, euro, and other monetary currencies.
It is impossible to avoid risks when investing into stocks, bonds, commodities, Forex, and cryptocurrencies. They all have their share of risks, but make profitable investments with knowledge and skills set. As with other investment options, most digital coins and tokens are volatile and experience fluctuation. Government policies, recent news, and online chatting have an influence on crypto performance in international markets.
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Understanding Cryptocurrencies
Cryptocurrency refers to the virtual exchange of money from a banking institution for tokens. Private organizations and individuals solicit the coins/tokens for consumers to use when purchasing their services and merchandise. The governing power of cryptos includes security and value concepts. For security, digital cryptocurrencies use encryption coding or the cryptographic rule to protect confidential data and information regarding the users.
How Cryptocurrencies Work
Cryptocurrencies work by using blockchain technology to record and manage digital transactions between two parties. The transaction receives an encrypted code and goes directly to a public ledger showing only the amounts to the public. Cryptos use blockchain, a technology software to record and store activities and transactions between users.
Miners use the software to run their decentralized network of servers. Their responsibilities are to operate the functions of networks, including recording and authenticating crypto transactions in token units. It only takes a few minutes for the transaction to complete in the system.
Five Best-Selling Crypto Types
- Bitcoin is the leading crytocurrency among the other cryptos, with a market capitalization of over $210 billion, as of August 2020. A token has a value of approximately $11,500. Although the currency plummeted a few years ago, it remains a favorite among users.
- Ethereum is the second largest cryptocurrency on the list of the top selling cryptos. It is an open source platform for accessing digital money using blockchain technology. The Ethereum platform has a blockchain containing smart contracts. Miners develop marketplaces for games and applications, and to make payments using Ether tokens. The market capitalization of the currency is nearly $49 billion in USD.
- XRP is a digital currency that works on the RippleNet platform owned by Ripple. It uses an open source distribution ledger, known as a XRP ledger database, instead of blockchain technology. Ripple’s XRP is less costly compared to other cryptos and has a fast speed for processing transactions. Today, the market cap of the currency is $14 billion.
- Tether is a blockchain crypto for bridging between the US dollar and cryptocurrencies. The benefits of the crypto are its low fees, transparency, and stability. It provides liquidity and hedges against volatile markets. The global value of tether is over $9 billion.
- Chainlink started in 2019 as an Ethereum type of crypto token powered by a decentralized network. The crypto includes a framework for building networks and making smart contracts accessible to secured and trustworthy information. The functions of the network are storing and managing contracts on a blockchain. Its value surged in August to $6 billion, coming in fifth on the list of top cryptos.
Risks
Cryptocurrencies are subject to cyber hacking and theft by online predators. Their values are volatile and illiquidity, the primary reasons many investors are skeptical about investing their money. Some world countries ban the trading of cryptos because of trust issues and black market scams. There are no governmental regulations to prevent wrongful activities in the black markets and for protecting the users. Another risk issue is the fact that employers can evade paying payroll taxes if they pay their employees using cryptos.
Before you invest into cryptocurrencies, perform thorough research and educate yourself more on how each cryptocurrency works. The fees differ for each crypto and could be costly to maintain. Remember, all investments have risks and can cause loss of profits. Education is the key to you making the right decision on which options are best for you.
