Are cryptocurrencies legal?

Few countries explicitly prohibit buying, selling or saving cryptocurrencies. Bitcoin and other virtual currencies are completely legal in the vast majority of countries around the world. Before participating in investment or consumption, you must confirm whether your jurisdiction allows the use of cryptocurrencies.

Please note that different countries have different regulations for cryptocurrency activities. You must not violate any tax or compliance regulations.

Cryptocurrencies are dead?

Over the past decade, cryptocurrencies have been sentenced to death by the media hundreds of times. Yet today, it still operates and develops as it did in 2009. Of course, its volatility cannot be ignored, with prices fluctuating and fluctuating frequently. In the eyes of profit-minded people, a bear market can be frustrating.

However, “cryptocurrency is dead” is an absolute fallacy. Its client base is still expanding, and its technology and infrastructure are improving day by day.

With the continuous improvement of core technological innovation capabilities, Bitcoin and Ethereum will undoubtedly have a huge impact on the reshaping of the existing monetary system, making it more in line with real development. Features such as immutability, anti-censorship ability, de-trusting or near-instant transactions through the public monetary system can completely subvert the operating mechanism of Internet economic activities.

Are cryptocurrencies safe?

Cryptocurrencies carry certain risks. If you forget your bank account password, you can reset it through customer service. However, if you forget or lose your private key to access cryptocurrencies, nothing will help. Reputable trading platforms can reduce such risks – users entrust funds to the platform and avoid the risk of losing their private keys.

Public-key cryptography remains strong. Protected by advanced security measures, the chances of theft of funds drop statistically significant, and online accounts instead frequently fall victim to hacking attacks. Best practices for defending against attacks include understanding common scams ( social engineering and phishing , etc.), keeping private keys offline and backing them up to a safe location.

Are cryptocurrencies anonymous?

Your name is not associated with a cryptocurrency address – which is much like a random string of numbers and letters on a blockchain. However, even if it is possible to become anonymous, you must be careful. Although acting under a pseudonym , the “on-chain identity” is still with you, just different from the real identity.

Through certain methods, users can associate Internet Protocol Addresses with activities. This virtually creates the conditions for means such as dust attacks and other analytical techniques to crack anonymity. Don’t forget, the essence of blockchain is a huge public database. If you are concerned about personal privacy, you should try to avoid linking personal transactions to real names. Cryptocurrencies like Bitcoin are not private by default, but methods such as currency mixing and CoinJoin can reduce the reliability of analytic heuristic algorithms.

A few cryptocurrencies, known as privacy coins , use methods such as confidential transactions to obfuscate the source of funds, target addresses, and amounts in transactions. They are more private by default, but are not completely resistant to de-anonymization.

Are cryptocurrencies valuable?

In the financial system, value is a shared belief. Like anything with value, value is not inherent in cryptocurrencies themselves, but is artificially endowed. In other words, the value of something comes from the consensus of everyone, not the thing itself. This is true whether the object of value is a precious metal, a piece of paper, or information in a database.

Still, some believe that cryptocurrencies and Bitcoin can be considered scarce digital goods. With the predictable speed of issuance and monetary policy, some believe that Bitcoin may act as a store of value like gold in the future. Bitcoin is only a decade old, and it remains to be seen whether it will stand the test of time in this regard.

Are all digital currencies cryptocurrencies?

The answer is no. Today, many countries and central banks are developing proprietary versions of digital currencies. However, these products are just “digital currencies”. In fact, they are often collectively referred to as central bank digital currencies (CBDCs) . These currencies are essentially digital versions of fiat currencies and do not have most of the advantages of cryptocurrencies. They are fiat currencies issued and declared by the central government and typically do not use a distributed ledger such as a blockchain to keep records of transactions.

You may also have heard of another digital currency – Facebook Libra . The strength of the project is that its plans are built on an open source blockchain system. However, it will not be a permissionless currency like Bitcoin or Ethereum. With a simple internet connection alone, participants cannot use this digital currency. What’s more, the project and the activities within it will be run and managed by an association of selected members.

So, while equally utilizing blockchain or cryptographic principles, CBDCs and other forms of digital currency are vastly different from cryptocurrencies like Bitcoin.

What is the market cap of cryptocurrencies?

Price is not the only metric to measure cryptocurrencies. Another equally important metric is how many units a cryptocurrency has, the supply .

Specifically, to assess the value of a cryptocurrency network, it is necessary to understand the number of existing units. This is called the circulating supply . Different cryptocurrencies have different issuance plans, so it is necessary to understand the issuance of each network.

Market capital (or market capitalization) is equal to the unit price multiplied by the circulating supply.

市场资本 = 流通供应量*价格

As you might expect, the market cap of a cryptocurrency network is a better reflection of the value in the network than the unit price. A network with a lower price but a larger circulating supply may generate a higher total valuation (market cap) than a network with a higher price but a smaller circulating supply. In some cases, the opposite may also be true.

However, it is worth noting that market cap does not represent the total amount of money entering a particular market. For example, beginners tend to fall into the misconception that Bitcoin market cap represents the total amount invested in Bitcoin. This view is wrong because market cap depends on price and supply.

Why do I need to pay transaction fees?

If one bitcoin is sent to another address , the actual number of bitcoins received will be slightly less than one. A small portion of this fee is paid to miners as a reward for adding individual transactions to the blockchain.

Many cryptocurrencies use a similar mechanism to incentivize users to protect cyber security. In a proof-of-work system, transaction fees are often tied to newly minted tokens ( block subsidies ) to form block rewards .

The specific fee can be flexibly adjusted according to the urgency of the transaction. Rational miners will always seek high yields and often prioritize transactions with higher fees. You can view the current pending transactions, see the average fee and set individual fees accordingly.

Can I get my funds back if my keys are lost?

If the key is accidentally lost, the chances of getting it back are slim. The biggest advantage of cryptocurrencies is the elimination of custodians and middlemen who manage financial transactions. But there is also a drawback, that is, all responsibility will be entirely on your own. Therefore, you must be extra careful not to lose your private key, which is the key to keeping a firm grip on your funds.

What is the future of cryptocurrencies?

How will cryptocurrencies develop in the future? This is a question of benevolence and wisdom. Some believe that Bitcoin will rise in the digital age, eventually replacing gold and disrupting the existing financial system. Others believe that cryptocurrencies will always be a secondary system that cannot go beyond niche markets. Others firmly believe that Ethereum will evolve into a distributed computer and become the mainstay of the new internet.

Skeptics predict that the industry will eventually collapse, while enthusiasts take comfort in the fact that cryptocurrencies are still a niche monetary system. The results are indeed unpredictable, and it is too early to determine what will happen a year from now. But it is undeniable that cryptocurrencies have huge growth potential.