A cryptocurrency is digital or virtual in its existence. Issuing of new crypto units and keeping a track record of the transactions takes place through a non-centralized system. Therefore, centralized systems like banks or other financial institutions have no role in the case of cryptocurrency.

The digital currencies are in an online database as digital entries that explain the specific transactions. With the help of cryptocurrencies, you can send money to anyone, irrespective of the national borders. We know that we use banks and other financial institutions to verify traditional financial transactions. But for cryptocurrencies, transactions are verified through a decentralized system. Encryption ensures cryptocurrency security and safety.

Crypto scams are prevalent despite the safety and security they get from encryption. The scammers are quite opportunistic for any opportunity to steal  from crypto users.

Cryptocurrency functioning:

Cryptocurrencies work outside the banking system and are not managed by the government or the central authorities.

●     Mining:

Cryptocurrencies are generated by a procedure known as “mining .” It is a complex and challenging process. Miners have to fundamentally solve mathematical puzzles over specially equipped computer systems to be rewarded with cryptos in exchange.

●     Buying, selling, and storing:

The users can purchase cryptocurrencies from central exchanges, brokers, and individual currency owners or sell them. The most convenient way of purchasing or selling digital currencies is through exchanges or platforms. Once you have bought the digital currencies, they can be safely kept in digital wallets. The digital wallets can be in any of the two states, such as “hot” or “cold .” A hot state means a digital wallet is connected to the internet, making the transactions easier but exposed to thefts and fraud. Cold means it is safe and stored in hardware keys but harder for transaction purposes. 

●     Transaction or investing:

Virtual currencies such as Bitcoins can be easily transferred from one digital wallet to another using only a smartphone. Once you are the owner of those, then you have the choice to:

1.   Utilize them to purchase goods or services

2.   Trading in the cryptos

3.   Exchanging them for cash 

Buying cryptocurrency:

You all may be looking forward to buying virtual currencies. Here are the steps involved in the process of purchasing crypto.

·       Choosing a platform:

The initial step is to decide on the platform you want to use. You can select either a traditional broker or a cryptocurrency exchange.

They are online brokers giving alternatives to buy and sell digital currencies and other financial assets such as stocks, bonds, and ETFs. These platforms may offer low trading costs but a few crypto features.

You have a wide range of cryptocurrencies to choose from on  cryptocurrency exchanges. Each cryptocurrency exchange gives many cryptocurrencies, wallet storage, interest-bearing account options, etc.

While comparing different platforms, consider which digital currencies are currently on offer, what fees are charged, storage and withdrawal options, etc.

●    Funding your account:

Once you have selected your platform, the next immediate step is to put funds into your crypto account to start crypto trading. Most cryptocurrency exchange platforms permit the users to purchase the crypto using fiat currencies using their debit or credit cards, even though this varies by platform. It is because the purchase of virtual cash is considered risky, and some crypto exchange platforms do not support them. In the same way, certain credit card companies don’t permit crypto transactions either. Again, that is because cryptocurrencies are highly unpredictable, so it is not advised to risk going into debt.

●    Placing an order:

You can place an order through your broker, exchange website, or a mobile platform. For example, suppose you are planning to purchase cryptocurrencies. In that case, you can choose the “buy” option, select the type of order, enter the number of cryptocurrencies to buy, and confirm the order. The same procedure goes for “sell” orders.

Benefits:

By using cryptocurrencies, you will get several of the below-mentioned benefits.

1.  The transactions with virtual currencies are made easy at a lesser cost, and that too in a private manner. By using a smartphone app, hardware wallet, or an exchange wallet, anybody can send and receive different types of cryptocurrencies.

2.   The transfer of the funds is done with minimum processing fees.

3. Crypto payments are increasing. It is being enabled amongst various organizations and in several sectors.

4.   The crypto markets always work 24 hours and seven days a week.

5. The internet allows people to transfer cryptocurrencies in a very convenient manner. Cryptocurrencies can be utilized by anyone who has the internet. 

6.   While performing a transaction in cryptocurrency, you can’t reverse it. There is a dependable technique known as encryption. The encryption technique is used throughout cryptocurrency transactions to protect hackers and information.

7.   In the traditional banking system, the amount goes to the nominee when the account holder dies. The high chances of closing the account are when you violate the terms of service. With cryptocurrency, you will be the only owner of private and public encryption keys.

Disadvantages:

The disadvantages of using cryptocurrencies for performing transactions are as follows:

●     Bitcoin investment scams:

In the bitcoin investment scams, the tricksters contact you pretending to be “investment managers.” The fake investment managers claim that they have made millions with virtual currency investments and assure the victims that they will make more money by investing in crypto.

●     Rug pull scams:

In rug pull scams, the cheaters develop a new project to get the funds. After they get the money, the cheaters disappear.

●     Romance Scams:

In a romance scam, the scammer starts to connect with the victim and gain the victim’s trust. After gaining the victim’s trust, the trickster asks for money in the form of crypto from the victim. The cheater does it by cooking up some story.

For example, B starts browsing her social media account and connects with a random person named A. Then A and B chat more often, and their relationship builds up. After that, A starts asking for money in the form of crypto from A, saying it is for a medical emergency. B believes that story and sends the virtual currency to A. After a few days, B notices that she lost all her crypto from the digital wallet and realizes that A was a scammer and had stolen her crypto money.

Conclusion:

People must use cryptocurrencies carefully and be aware of crypto scams. Additionally, they must protect their crypto wallets and take precautions to be safe from crypto scams.

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