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Currency is the medium of exchange for services and goods. Currencies are issued in the form of coins or paper by the government of the country which is usually accepted as a method of payment at its face value.
Technological advancements have led to the evolution of currencies as well. When the majority of the world was governed by monarchy currencies were issued in the form of precious metal coins (gold coins, silver coins, platinum coins). However, today currencies have evolved from gold coins to digital currencies.
Yes, you’ve heard it right digital currencies.
The term ‘cryptocurrency’ has been derived from techniques of encryption (cryptography) that are used to secure the network. A cryptocurrency is a digital form of currency that is protected by cryptography, which makes it highly secure, and prevents malpractices like counterfeiting or double-spending. An important point to be kept in consideration is that cryptocurrencies are not issued by government banks, government or a financial institution which makes them immune to manipulation or interference by the government. Blockchains are organizational methods that are used to ensure data integrity of all the transactions that take place via cryptocurrencies.
The first blockchain approach based cryptocurrency was Bitcoin which was launched by a group known by the name of ‘Satoshi Nakamoto’ in 2009 whose identity is yet to be verified. Bitcoin remains the most popular and circulated cryptocurrency of all time. After the launch and success of bitcoin, several cryptocurrencies called ‘alt currencies’ have entered the market some of them are litecoin, namecoin, etherium.
By the end of Nov 2019 statistics revealed that the combined value of all the cryptocurrencies in existence is approximately $245 billion out of which bitcoin holds more than 65% of the total value. Almost 18 million bitcoins are currently in circulation with an approximate value of $165 billion.
Blockchain technology helps to keep an online track of all the transactions that have occurred using cryptocurrencies. Many cybersecurity experts see the blockchain approach as having the potential for uses like funding crowds, conducting online voting, etc. Financial institutions like JPM see cryptocurrencies with the potential to lower the cost of transactions by streamlining the process of payment processing.
Cryptocurrencies are digital and are not stored on a centralized database, a virtual cryptocurrency balance can be lost in case of destruction of the hard drive. Moreover, since no central authority has access to your funds it becomes more difficult to track transactions.
Cryptocurrencies increase the ease of transferring funds between two parties, without involving a third party like a bank or Credit Card Company. Transfers between two parties are secured using public keys, private keys, and other different incentive systems.
In the case of cryptocurrency, a user’s wallet has a public key while the information of the private key is only known to the owner for signing transactions. Funds transferred using cryptocurrencies require minimal processing fees which allow users to avoid paying steep charges.
The nature of cryptocurrency makes it highly suitable for hosting illegal activities like tax evasion and money laundering.
Bitcoin is a poor choice for funding and conducting illegal activities online because bitcoin analysis helps authorities to identify and arrest criminals.
Investing in bitcoins can reap huge benefits but the investment in Dubai is also prone to high levels of risks. From Dec 2016 to Dec 2017 Bitcoin raised its value from $750 to $10,000. This means that if an individual invests $10,000 then the return received after one year would be $133, 333.
Soon after the rise in the value of bitcoins a lot of people invested the entire savings of their lives in the hope of receiving huge returns. However, the value of bitcoins dipped significantly and resulted in huge financial losses for several people.
While investing in cryptocurrencies it is important to calculate risks and invest accordingly. Cryptocurrencies like bitcoins are highly volatile which makes them different from other forms of financial investments in Dubai. The cryptocurrency market is bitcoin dominated however there are several other currencies. Bitcoin in the past has suffered from severe performance issues which have led to a decrease in its popularity.
White paper reports guide that informs investors in Dubai and readers about issues and the philosophy of the issuing body on it. Before investing in cryptocurrencies one should have a clear idea of what the white papers have got to say.
A lot of economists and cybersecurity experts believe that cryptocurrencies are speculative bubbles and have a very short life spawn. Although cryptocurrencies have been subjected to a lot of criticism many investors in dubai see a lot of potential benefits of cryptocurrencies.
Investing carefully in cryptocurrencies can provide profitable returns but it also involves high levels of risk.