What are digital currencies or cryptocurrencies? It is also called digital money, electronic money, or electronic currencies, and it is a type of currency that is available in digital form only and does not have a physical presence like banknotes or coins. However, it has the same characteristics as other financial currencies, so instant transactions …
What are digital currencies or cryptocurrencies?
It is also called digital money, electronic money, or electronic currencies, and it is a type of currency that is available in digital form only and does not have a physical presence like banknotes or coins. However, it has the same characteristics as other financial currencies, so instant transactions and ownership transfer are carried out without it. border; Rather, it can be used to purchase various goods and services, as it is a financial balance recorded electronically and traded over the Internet
Digital currency can also be defined as one of the forms of currencies or means of exchanging benefits that offers characteristics similar to tangible physical currencies, but it is digital and not tangible, and allows instant transactions, buying and selling like tangible currencies.
Blockchain concept
Block Chain is a digital technology based on a huge cloud database through which people can complete transactions or transfer money using a network of decentralized computers spread around the world. It is considered a public database in which digital information for exchange transactions is stored.
The first use of the term blockchain in its current form dates back to American software developer Hal Finney in 2008.
The goal of Blockchain = This technology allows the possibility of exchange between dealers with each other without the need for an intermediary to follow the exchange movement. The exchange process is safe because it contains lists that reveal tampering or illegal transactions within data records on an ongoing basis, in addition to storing data in a decentralized manner instead It is kept in one place by a central administrator
Types of Blockchain
•Blockchain is public, like digital currencies, as it allows anyone to join the network
•Blockchain is private and is often used by companies where there are some people who have permission to add their own devices to the network.
benefits of digital currencies
Ease of transactions, speed, and low fees: One of the benefits of digital currencies is that they allow transactions to be carried out easily, at high speed, and at costs that are considered lower than most traditional transactions, as anyone can send and receive a variety of digital currencies using a simple smartphone.
Decentralization: It means hiding the user’s identity. One of the most important features of digital currencies is that they enjoy a high degree of security, due to them being considered cryptocurrencies that can be used with confidence.
24/7 Markets: Stock markets are open on weekdays during regular business hours from 9:30 AM to 4:30 PM only, while cryptocurrency markets are open 24 hours a day, seven days a week, without exception. The only things that can hamper a person’s ability to trade cryptocurrencies are power outages or internet outages
Freedom of transactions: One of the great benefits of digital currencies is the possibility of using them to exchange value between two parties without the need to resort to any third party, which makes transactions more free and resistant to censorship, unlike traditional banks, which have the freedom to exclude some people, such as some journalists, political opponents, or others. Benefiting from its services, digital currencies allow everyone, regardless of their identity, the freedom to use them.
Cross-border payments: One of the most important benefits of digital currencies is that they do not take into account national borders. Any individual in any country can send digital currencies to another person, regardless of their geographical location, with complete ease. This process, when completed through traditional financial services, may take a long time and impose high fees, and it may sometimes be impossible due to the tensions occurring between certain countries.
Portfolio diversification: Cryptocurrency markets operate independently from other markets. This means that what determines the movement of their prices is different from the factors that affect the prices of stocks, bonds, and commodities. But this does not mean that you cannot diversify your portfolio by trading in stocks and other investments along with digital currencies.
Inflation hedging: One of the most important benefits of digital currencies is that they protect you and your money from the risk of inflation. What usually leads to monetary inflation is central banks and governments printing more money than necessary, so the value of things increases when they are scarce. Currencies like Bitcoin are in limited supply, ensuring their scarcity and value rise regardless of fluctuations in monetary policy
Accelerated industry growth: The digital currency industry is among the fastest growing industries today. It follows the approach of the leading Internet companies in the 1990s and early twenty-first century in terms of rapid spread, as the total market value of the cryptocurrency market in 2013 reached about $1.6 billion. It rose to more than $1.4 trillion in late 2021.
The risks of digital currencies
Cryptocurrency fluctuations: Massive price fluctuations have become an integral part of the digital currency landscape, and this makes it very difficult to predict the long-term performance of various digital currencies. Although this characteristic may apply to any investment, the reasons that lead to the fluctuation of digital currency prices are many and unclear, and may seem somewhat ridiculous, like Elon Musk’s tweets, so you must take into account the severity of the losses and risks that may result from… Cryptocurrency price volatility.
Storing cryptocurrencies: When you buy cryptocurrencies, you are responsible for storing your assets more than you would when investing in other areas.
Security of digital currencies: Digital currencies are not vulnerable to human errors, as we mentioned previously. Rather, one of the most important risks of digital currencies is that they are vulnerable to hacking and other security violations.
Illegal activities: Cryptocurrencies are the focus of illegal activities such as money laundering, tax evasion, and perhaps even terrorist financing.
Digital currencies are not accepted everywhere, as so far there is no consensus on them and no general acceptance of them, whether by individuals, companies or governments.
Types of digital currencies
The first digital currency created was Bitcoin and it is still the most widely traded, most valuable and popular
Many other digital currencies were created after it with different goals and projects
How to choose the right digital currency
Market value: The market value of digital currencies is defined as the current price of one unit of digital currency multiplied by the total number of tradable digital units.
For example, the price of the digital currency to be purchased is $2, and the number of units offered for trading is one million, so the market value of this currency equals $2 million. If the price of the currency rises to $3, the market value becomes $3 million. It is worth noting that the number of units offered for trading It can be increased by mining digital currencies and cannot be decreased. With regard to choosing digital currencies, we must know that currencies with a small market size are more risky than currencies with large markets, so always look for currencies with an acceptable market limit according to the risk ratio.
Trading volume: Trading volume is a very important indicator that helps investors make clear investment decisions in light of volatile markets, as it provides an indication of price movements and helps digital currency traders determine whether or not to buy a particular currency. Therefore, choosing digital currencies with a good increase in their trading volumes is important. With the right ability to earn profits and trade quickly, a significant decrease in trading volume is an indicator of the possibility of a significant decline in value and traders should abandon these currencies as they are easy to manipulate.
The importance of the currency and its project: Almost every digital currency has a specific goal for which it was created. Digital currencies work within projects based on blockchain technology to provide developments in life. This is why it is necessary to look at digital currency projects and what technology they will provide and whether this technology will provide actual solutions and innovative technologies, and for this reason If you are a new investor, all you have to do is look at the projects worksheet to help you in the decision-making process if you believe in the project.
The community based on the currency: It may be important for you to know those in charge of the currency and its work team, and whether they are truly trustworthy people in this field, but it is not necessary that you know them or that they be famous, as the majority of those in charge of digital currencies were not famous, but as a result of their work. It is what made them famous, so all you have to do is look at the work team and find out what certificates they have and whether they have good experience in this field. Rather, you must also get to know the stakeholders who invest in this currency. For example, if you see some billionaires encouraging and investing in this currency, then you will undoubtedly be more satisfied than not knowing anyone.
Coin Market Cap: It is a company and platform that tracks the market values of digital currencies, the amount of transactions you use, and the current price converted into fiat currencies. The company was founded in 2013. The company’s mission is to make crypto discoverable and effective globally by providing unbiased, high-quality information. And accurate
Market cap is the market value
Price Price
Volume
Circulating Supply The number of cryptocurrencies currently in circulation in the market
Sources for obtaining digital currencies
