FAQ - Cryptocurrency
Here’s a summary of some of the most frequently asked questions (FAQs) about cryptocurrency, blockchain, and smart contracts.
### General Questions:
Cryptocurrency is a digital or virtual currency that uses cryptography for security. It operates on decentralized networks, often using blockchain technology.
Cryptocurrencies function through blockchain technology, where transactions are recorded on a public ledger. Transactions are validated by network nodes or miners using mechanisms like Proof of Work (PoW) or Proof of Stake (PoS).
Blockchain is a decentralized, distributed ledger that records transactions across many computers, ensuring transparency and security without a central authority.
### Investment and Trading:
You can buy cryptocurrencies through exchanges, either with fiat currency or by trading one cryptocurrency for another. Popular exchanges include centralized exchanges, decentralized exchanges, automated market makers, and smart contract or P2P swap markets
Cryptocurrency can be highly volatile, offering high potential returns but also significant risks. It’s not regulated like traditional investments, so it’s advised to only invest what you can afford to lose.
Trading involves buying and selling cryptocurrencies on exchanges, using market analysis to time trades. It requires understanding market trends, using trading pairs, and managing risk.
### Security and Storage:
A crypto wallet stores private keys needed to access and manage your cryptocurrency. Wallets can be hot (online) or cold (offline), with cold wallets considered safer for long-term storage.
While blockchain technology is secure, the endpoints like exchanges and wallets can be vulnerable to hacks. Security practices include using hardware wallets, two-factor authentication, and keeping private keys offline.
### Legal and Regulatory:
Legality varies by country. In many places, it’s legal but regulated differently. Some countries have embraced it as legal tender, while others have imposed restrictions or bans.
In many jurisdictions, cryptocurrencies are treated as property for tax purposes, meaning gains from transactions can be subject to capital gains tax.
### Specific Cryptocurrencies:
Bitcoin is primarily a digital currency, while Ethereum is a platform for decentralized applications, with its own currency, Ether (ETH), used for transaction fees and computational services. SWaRM is also a platform for decentralized applications, with its own currency, (SWRM) and has (ENERGY) a transaction fee token as fuel. SWaRM also has a rewards mechanism (NOJO) token called No Joke Rewards.
Yes, there are thousands, including Ethereum, SWaRM, Litecoin, and many others, each with unique features or use cases.
### Technology and Use Cases:
Staking involves holding funds in a cryptocurrency wallet to support the operations of a blockchain network, like transaction validation, in exchange for rewards.
While designed for privacy, cryptocurrency transactions are traceable on public blockchains, and its use for illegal activities is decreasing as regulations tighten.
### Adoption and Market Dynamics:
Crashes can result from market sentiment, regulatory news, technological issues, or macroeconomic trends. Cryptocurrency markets are known for their volatility.
It introduces new concepts like decentralization, which could influence financial service transparency, efficiency, and inclusion.
