Know the Basics! Top 10 Most Frequently Asked Cryptocurrency Questions Answered

Cryptocurrency has become a household term in no time. The popularity is so high that the number of investors in the cryptocurrency market is exponentially increasing. However, if you are a newbie, you would want to know the basics of the whole crypto market. On that note, have a look at the answers to the top 10 most frequently asked cryptocurrency questions.

What are cryptocurrencies?

Cryptocurrencies, in simple terms, are digital assets that are used as a medium of exchange to buy goods and services. Today, cryptocurrencies stand the potential to be pegged to underlying assets such as the US dollar, governance tokens, etc.

What is a blockchain?

Blockchain is a technology that allows transactions to be recorded and cryptocurrencies to work. It is decentralized and digital in nature. Blockchain technology is spread across many computers.

How does blockchain work?

Millions and zillions of computers are connected via blockchain. These computers store encrypted data, hence called as record keepers. Thus, there are millions of record keepers called ‘nodes’.

What is meant by tokens?

All those cryptocurrencies that are built on top of the existing blockchain are called tokens. These tokens can be used to purchase goods and services.

Who is controlling authority for cryptocurrencies?

Those who create cryptocurrencies have the power to set certain parameters such as what would be the rules pertaining to buying or selling cryptocurrencies. The parameters set cannot be changed. A point that is worth a mention is that the control of the day-to-day operations is distributed among users. Though there is very little or rather no legislation pertaining to the ownership of these digital currencies, there are some countries that have expressed their willingness to establish regulation in this area. This comes as the countries want to make sure that cryptocurrencies are not used for illegal activities such as money laundering, terrorism financing, etc. In addition to this, the risk of loss of control over the monetary policy is something that Governments across the globe want to take care of.

Who are called ‘users’?

Any individual or a company that submits transactions into the blockchain for further processing or validation is called a user.

How energy efficient are cryptocurrencies?

Honestly, certain cryptocurrencies including Bitcoin consume a high amount of energy. This is because cryptocurrency mining, called ‘proof of work’ validation requires a lot of energy. One of the best ways to reduce the amount of energy consumed is to rely on ‘proof of stake’ validation. Efforts should be made to make use of renewable sources of energy for mining.

What are crypto wallets?

In simple terms, crypto wallets are places where one can store digital assets. It is considered to be more secure than an exchange.

Is it possible to trade cryptocurrencies 24*7?

Not all cryptocurrencies can be traded 24*7 but a majority of them can be. A good number of digital currencies can be traded around the year.

Are cryptocurrencies volatile?

Well, the extent to which cryptocurrencies are volatile cannot be merely put into words. One day, the price might soar up to set new records, and the very next day, it might fall to a level beyond imagination. The entire cryptocurrency market is volatile and only those willing to take the risk of such high volatility should invest in it.

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