What is Cryptocurrency?
A cryptocurrency is a decentralized digital cash enabled by cryptography technology. It’s designed to work over the internet. The key terms you need to understand to make your crypto education journey easy are “digital, decentralized,” and “cryptography.”
- Crypto is “digital,” as it only exists as software. Although people commonly refer to them as “coins,” it doesn’t have a physical form.
- It’s also “decentralized,” meaning organized authorities like the government or central banks do not issue or control it. Instead, it operates in a peer-to-peer network.
- Lastly, “cryptography” refers to the mathematical function for securing each crypto unit to prevent double spending, creating duplicates, and copying existing units.
Now that you understand the three building blocks, you also need to learn about another common term: “Blockchain.” It refers to a distributed ledger system on a vast network of computers, made up of information blocks. In most cases, cryptocurrencies use blockchain technology. More on this in the next section.
Cryptocurrencies perform all functions of fiat money, such as storing value, facilitating transactions, and offering solutions for deferred payments. Since they are part of the more extensive blockchain network, you will soon find out that, unlike fiat, crypto is more sophisticated in many ways that make life easier. You will need a crypto wallet to store your digital coins. Since the coins are software, their wallets are also digital. In addition, they come with more safety features than physical wallets to keep you safe from online threats.
The idea of digital currencies dates back to the 1980s when American cryptographer David Chaum developed a cryptography-secured virtual coin referred to as a cyber currency. There was not much development afterwards until 2009 when the anonymous Satoshi Nakamoto launched Bitcoin, the first fully developed and functional cryptocurrency. Bitcoin was created to offer an alternative payment method that would function like traditional finance but is decentralized. It was actually meant to completely replace the fiat system.
There are over 21,000 digital currencies today including Ethereum, Litecoin, Dogecoin, Bitcoin Cash, Cardano, Tether, Tron, and Solana. The total market cap for all virtual currencies exceeds $1 trillion. Each of them was developed to offer a unique solution. For example, Ethereum was created to be a digital world computer that would offer smart contract execution and also allow developers to build apps on it. Litecoin was built to improve on the weaknesses of BTC, mainly, slow transaction speed and mining monopolies. Even as new coins emerge, the original tenets of blockchain have been maintained. Privacy, lightning-speed transactions, security, and cost-effectiveness are some of the key drivers behind the adoption of these coins.
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How Does Cryptocurrency Work?
Owning virtual currencies doesn’t give you anything tangible to hold on to, unlike fiat money. Instead, they are digital and live on the internet. What you hold, however, is a key, which allows you to transact the coins associated with it.
The original idea of cryptocurrencies was to eliminate cartels, monopolies, and authorities that tend to overcontrol the money industry. To achieve that, they were created to function independently, through a decentralized technology called the blockchain. This is a distributed network of ledgers or computers that keep records of all transactions and coins held by currency users. In doing so, it helps secure the entire system and keep it autonomous. No government or authority can hence exercise control over digital currencies in any way. Even the team that developed them can’t freeze your funds, or access them.
The process of creating new coins is called mining. It involves using computer power to verify complex mathematical problems and verify transactions. Mining can be compared to digging out gold, but instead of shoving the ground, you solve cryptographic problems. The puzzles were put there by the developers of the network to help secure it through a consensus mechanism. There are mainly two types of consensus, also called block-chain verification
- Proof-of-Work (PoW): This method involves a network of miners who allocate computers to verify transactions. All blocks must be regarded as valid for the transaction to be considered complete. That is proof that work took place. Bitcoin is an example of a virtual coin that uses PoW.
- Proof-of-Stake (PoW): On the other hand, proof-of-stake uses a token staking system where the staked capital acts as collateral. Validators then check new blocks on the network to confirm their validity, as they propagate themselves.
Through decentralization, the entire crypto network is secured. This is possible since each member of the blockchain has the same records of transactions. If one member alters their data or introduces a corrupted record, it will be automatically rejected by the consensus of the other validators.
Cryptocurrencies, like fiat money, require a wallet for storage. Since they are software, they also need a digital platform to store them. Crypto wallets are software compatible with different digital coins and can be used to send, secure or receive tokens. They come with a receiving and sending address called the public key and private key respectively.
What is Blockchain and How does it Work?
A blockchain is a distributed database that records transactions across a vast network of randomly distributed computers known as nodes. To avoid single-point failure, each node in the network keeps a copy of the dealing ledger. Blockchain is constantly growing as new records, known as “blocks,” are added, and nodes are validated and updated simultaneously. It’s no surprise that the term “blockchain” was coined. It employs a type of distributed ledger technology (DLT) that prevents anyone from hacking the system or duplicating data; thus, it is immutable. Furthermore, because it is decentralized, it is not controlled by any authority, such as the government or regulatory bodies. Here are the main features of a blockchain:
While blockchain has grown famous for recording and securing digital coin transactions, it has also found value in many other industries. Some of its alternative uses are.”
- Fast and affordable money transfer
- Supply chain management
- Internet of Things Network Management
- Digital IDs management
- Securing and moving enterprise data
- Record keeping in the healthcare sector
So, how does blockchain work? Every blockchain is only complete after there is a record, a block, and a chain. The chain contains all blocks interconnected, and each of the blocks has three basic features:
- Data: This is the information including timestamps and every other detail of the transaction.
- Nonce: Nonce is a randomly generated whole number used only once, to yield what is called the block header hash.
- Hash: The hash is a permanent nonce number. They come in different formats. For example, for BTC, all start with several small body-sized zeros.
The following simple steps explain the block-chain transaction process
- Step 1: Authorized persons initiate a transaction with the necessary inputs.
- Step 2: The trade or transaction is simultaneously recorded across distributed ledgers.
- Step 3: Eligible nodes/computers verify the transaction and ensure it’s valid
- Step 4: Transactions are accepted as real through a process called hashing, then added to a block. A block can contain many transactions.
- Step 5: Once the block is completed, it’s added to the previous blocks, creating a long digital chain of blocks.
Note: When the chain of a block is created, the nonce produces a cryptographic hash, which is considered the final signature of the block.
Types of Cryptocurrency
Founded in 2014, NEO is an open-source blockchain and dApp network allowing developers to create different digital assets and manage them through smart contracts. It’s one of the best Chinese cryptos and is sometimes referred to as the Ethereum of China since it shares many features with its counterpart. NEO tokens, also called NEO coins, are the network’s native tokens. They can be staked, used in the governance of the blockchain’s DAO, and used to make payments, such as in gambling. Transactions are swift, with the network processing up to 10,000 payments per second.
Stellar is an open-source infrastructure developed by Jed McCaleb, who founded Mt.Gox and Joyce Kim. It was developed to facilitate payments worldwide by offering a single network that would work with all forms of money. It’s essential in gambling, especially in countries where Bitcoin is restricted, as it can be used to convert fiat into digital coins and vice versa. Stellar is very safe, fast, reliable, and user-friendly as a payment method. Its token, the Lumen, trades under the ticker symbol XLM and is among the fastest-growing in popularity and value.
Like NEO, EOS is a smart contract network with several features borrowed from Ethereum. It supports the creation and hosting of dApps. One thing that makes it stand out is the blockchain’s ability to process up to one million payments per second. What’s more, users incur zero fees for sending and receiving EOS. The coin is still far from being called popular in gambling, but it’s being adopted by different casinos fast. You can use it on sites like FairSpin and Fortune Jack Casino to play dice games and roulette. Its flexibility and speed give it an edge over many other digital tokens in gaming.
IOTA, using the MIOTA token, is a decentralized digital coin platform using an innovative “blockless” architecture. It was designed to offer speed and scalability for the Internet of Things (IoT). Though it’s a distributed ledger, its ” Tangle ” network facilitates machine-to-machine communication. In addition, it offers lightning-speed, fee-less transactions making it an ideal option for gambling. Like EOS, many operators may not accept it yet, but it’s just a matter of time before it becomes popular. It had a price of $0.2 as of writing this, meaning you can acquire it now at a low cost and gamble with it as you speculate for future price growth.
Dash, which stands for “Digital Cash,” was developed by Evan Duffield in 2014 to compete with Bitcoin (BTC). It’s decentralized like its counterpart but offers a faster and more affordable payment solution, making it popular among crypto gamblers. Payments are processed instantly, at a small cost averaging only about $0.15. Regarding safety, Dash is more secure and private than its predecessor. Although it was not originally created for privacy like Monero, it has a feature called Privatesend that eliminates payment traceability. This is simply achieved by ensuring transactions are not recorded publicly, like in the case of BTC.
Monero (XMR) is a privacy-centered peer-to-peer cryptocurrency. It’s designed to offer a high degree of confidentiality and anonymity by ensuring payments are untraceable back to the sender. Gamblers love this coin because transactions can’t be linked to them or any real-world identity due to its fungible nature. Unlike BTC, where you can distinguish a coin from the darknet, and one bought from Binance, two XMR tokens are 100% similar. Unfortunately, the currency’s anonymous nature made it unpopular among authorities. The IRS even offered a bounty of $625,000 for anyone who would crack and pull it down. On the other hand, gamers who value privacy love Monero.
NEM stands for “New Economy Movement” and is traded under the symbol XEM. It is a peer-to-peer cryptocurrency and programmable platform that aspires to be more user-friendly than its competitors, including Ethereum. It includes a one-of-a-kind consensus mechanism known as the Proof-of-Importance (POI) system, described as eco-friendly, energy-efficient, sustainable, and easily scalable. Furthermore, it enables the simple transfer of digital assets, such as tokens and contracts, between private and public blockchains and, eventually, other businesses. For instance, if both parties agree, XEM can make it possible to transfer money from PayPal to Skrill, which is usually impossible. Despite being new to the gambling industry, it is being enthusiastically embraced because of its efficiency and interoperability capabilities. As of the time of writing, the coin had a market value of $327,448,919 and a 24-hour trading volume of $20,813,312.
VeChains (VET) is a blockchain platform developed in 2015 to streamline supply-chain management through improved digital collaboration. Developers can also use it to create and launch decentralized applications (dApps). Some corporations already using it include BMW to control odometer fraud and Walmart to track food supplies. The token, VET, the main means of settlement on the network, increased in value exponentially between 2022 and 2021 to record an over 1500% gain. Players who want to try out fast, affordable coins with colossal growth potential could consider VeChain.
Ethereum Classic is another top digital currency used by punters. Don’t get confused. It’s the original Ethereum blockchain known for smart contracts, speed, and anonymity. After a hack that saw a loss of about $50 million, the Ethereum community disagreed on compensating the affected users. Vitalik Buterin and some developers decided to branch out and build a fork known as Ethereum today. At the same time, the original coin was renamed Ethereum Classic by a different team that preferred to continue mining it. Unlike the newer currency that recently transitioned to Proof-of-Stake, the original mainnet still uses Proof-of-Work consensus. As of writing this, it had a market cap of $2,994,751,845 and a 24-hour trading volume of $276,207,622.
Qtum is an open-source blockchain network that aims to build a superior, more efficient, and cost-effective hybrid platform by leveraging the strengths of BTC and ETH. QTUM, its native token, is used to pay for smart contract execution. It can also be staked or used as a means of governance. Qtum standard coins, like Ethereum’s ERC20 crypto, are known as QRC-20 tokens and can be used in dApps. They can also be used to gamble for free. You only get to pay the network fees. As of this writing, the altcoin was trading at $2.80, a 97% drop from its all-time high of $100.22 in January 2018. This can, however, be attributed to the crypto winter, which saw approximately $2 trillion wiped out of the entire virtual currency sector. QTUM remains one of the most valuable virtual currencies for gambling. There’s also a chance it’ll shoot up while you’re holding it, greatly multiplying your winnings.
Omisego (OMG) is an Etherum-based layer-two solution for a decentralized economy. Users can securely send and receive funds across borders, thanks to the Ethereum network safety features. Being an ERC-20 token, you can be sure of fast payment speeds at considerably low costs. The network uses proof-of-stake algo and is built on the plasma architecture to allow unlimited scalability. In terms of speed, it boasts 4000 transactions per second, which is 200 times faster than ETH. The token has yet to become popular in the casino world, as only a handful of operators are offering it. However, following the rising popularity of crypto casinos, it’s only a matter of time.
Zcash (ZEC) is a fast, efficient, cost-effective, confidential blockchain network and cryptocurrency. Unlike Monero, which is private by default, this currency allows users to decide whether to shield their payment details or make them public. Zcash was developed on the original BTC source code with some variations but remains decentralized and distributed across a vast network of computers. It runs on the Proof-of-Work system hence mineable. However, its block time is about ten times that of BTC, making it faster to transact. Like its famous counterpart, the coin has a maximum supply of 21 million coins. As a result, ZEC is a popular gaming token supported by almost all top digital currency casinos like BC.Game, Winz.io, BitStarz and BetFury.
Bitcoin Gold (BTG) is a hard fork of BTC developed in 2017. Its code shares some aspects with Bitcoin but runs on a separate blockchain. The developers of BTG wanted to re-decentralize Bitcoin and make it easier for anyone to mine it through affordable methods like Graphics Processing Units (GPU). Unlike its predecessor, BTG also focuses on privacy and anonymity. Transaction details such as user wallet addresses are never published on the public ledger. The virtual currency is supported by most major crypto casinos, just like BTC and ETH.
Classification Of Cryptocurrencies
The term altcoin originates from the phrase alternative to bitcoin, and it refers to all cryptocurrencies other than Bitcoin. Some popular altcoins include crypto assets like Cardano (ADA), Litecoin (LTC), Dogecoin (DOGE), Ripple (XRP), Ethereum (ETH), Binance Coin (BNB), and Tether (USDT).
The majority of altcoins follow the same framework that Bitcoin was built on. As a result, they share several similarities with Bitcoin. However, altcoins differ from Bitcoin in many ways, and in many cases, they offer investors financial products that are different from Bitcoin.
Regarding their differences from Bitcoin, some altcoins use a different process to produce and validate transactions on their blockchain. In other cases, some cryptocurrencies may use innovative features like smart contracts on their network, while others may help investors control high volatility by providing stability. Altcoins can further be divided into coins and tokens.
Coins are crypto-assets built on their own blockchain, meaning that they act as the native currency of their blockchain. For example, Ether (ETH) is the native currency on the Ethereum blockchain. Similarly, Cardano (ADA) acts as the native currency on the Cardano network.
Tokens are crypto assets that are built on an existing blockchain. However, unlike coins, tokens do not act as the native currency on a blockchain. Rather, they are programmable digital currencies that allow for the production and execution of smart contracts.
Tokens share many similarities with fiat currencies. For example, they can be used to purchase goods and services. They can also stand as a measurement of value for real-world items.
What are Crypto Exchanges?
A crypto exchange is a platform that offers to exchange cryptocurrencies for other assets (and vice versa) as a service.
When you want to exchange physical cash, say the US dollar for the Australian dollar, you go to a money exchanger. Similarly, you use a stock exchange when you want to buy or sell stocks. In the same vein, a crypto exchange is a platform where traders buy and sell digital currencies. It may come with additional services such as price discovery and storage. Some, such as Stormgain, also provide margin trading and free cryptocurrency educational coaching. Exchanges have revolutionized how people acquire virtual currencies. Previously, you could only own crypto through mining, or crypto community social platforms. These days, you can find hundreds of cryptocurrency exchanges online. Some of the leading ones are Binance, Coinbase, Kraken, and KuCoin. These sites can be categorized into centralized and decentralized exchanges. Learn more in the next section.
Centralized Exchange (CEX)
A centralized exchange is one that is controlled, managed, and/or overseen by third parties. Just like traditional banking systems, these platforms belong to profit-making companies, and have a proper conventional management structure in place. The management is commonly referred to as the “exchange operator.” The advantage of these sites is that they are highly compatible with both fiat and virtual currency banking systems. You can hence use your card, bank account, or e-wallet such as Skrill to make a purchase. This makes them highly user-friendly, easy to use, and quick to transact with.
CEXs have an order book system, which lists buy and sell orders to be filled at the desired price. The owners of these exchanges decide which coins to list on their platforms. Order books are linked to a matching engine. It assigns each order to a fulfilling side based on the best available price, known as the spot price, or a specific preset price, known as a limit order.
On the flip side, all this convenience is not free. Users pay different rates for transaction fees depending on the exchange. For example, Coinbase charges a 1% fee on all virtual currencies, while transacting on Binance will see you part with a 0.10% fee for trading on the platform as well as a 0.50% fee for instant buy/sell.
Decentralized Exchange (DEX)
Now let’s talk about decentralized crypto exchanges (DEXs). They are the exact opposite of their CEX counterparts. DEXs aim to maintain the original principle of blockchain technology; decentralization. Hence, they are not managed by any organized groups or authorities. They also don’t have an order book. Instead, all trading takes place on a peer-to-peer basis (P2P). Transactions are affected by the use of smart contracts, which are basically self-executing codes on a blockchain network. With that, you are guaranteed more security, less slippage, and anonymity. Slippage is the only cost you may incur apart from network fees, making DEXs more affordable. Some of the most popular ones are Uniswap, Pancakeswap, and Shibaswap. One downside of these sites is that they are more complex to use than CEXs. New users might need to learn some technical skills and more cryptocurrency knowledge to have a good user experience on DEXs.
Hybrid Exchange (HEX)
Hybrid exchanges leverage the benefits of CEXs and DEXs to offer users an all-inclusive experience. Such platforms have an order book for centralized price matching but offer decentralized crypto storage solutions to their users. They are safe to use since the government or any other authority can’t exercise censorship once client money goes into storage. Even the exchange can’t control how you transact. They use an order book for fast and efficient order matching and management. KuCoin is an example of a HEX.
Are Cryptocurrencies Legal?
The question of legality always comes up when discussing cryptos. Unlike fiat currencies, which are known to derive their authority from government-recognized monetary authorities, digital coins are 100% decentralized. Apart from a new type called stablecoins, cryptos are not backed by any entities like the US dollar bill. Currently, it’s challenging to build a case for the legal status of digital coins in different jurisdictions. It doesn’t matter that they have been around for over a decade now. Most governments still don’t regulate them. However, the trend has gradually started changing, with authorities in different parts of the world either completely banning or adopting formal legalization.
As of February 13, 2023, the only countries that had legalized crypto transactions for daily use were El Salvador and the Central African Republic. Bitcoin is formally accepted in those two nations as a medium of exchange. Apart from that, there are other jurisdictions that have allowed citizens to own virtual coins, but not to transact with them. For example, Japan legally recognizes BTC as property and not a currency. That means you will pay capital gains tax for holding it, just like stocks or land. China, on the other hand, has totally outlawed virtual coin exchanges and digital coin mining within its territory. The UK, India, and Russia, recently announced steps towards regulating the sector. The common trend among all these nations coming up with a legal framework is the categorization of cryptocurrencies as financial instruments, and not a means of value transfer. The US has yet to create any regulations for this sector. President Biden, however, recently talked about the need for a regulatory framework in the industry. For now, exchanges and service providers are licensed, but there is no law that directly touches digital money.
Are Cryptocurrencies Safe Investment?
Cryptocurrencies are synonymous with safety, so this is not a question. All payments are distributed, unanimous, decentralized, and immutable. There is no risk of government censorship unless you use a CEX. As an investment, digital coins can be attractive with quick, insane profits. On the other hand, it is still possible to lose money when the prices plummet suddenly. There are also risks associated with volatility, which could see your capital depreciate dramatically.
You don’t need to be scared, as thousands of investors globally are swimming in wealth courtesy of cryptos. These ordinary people were once doing average jobs but are now loaded because they invested in Bitcoin or other virtual coins.
- Javed Khan first bought bitcoin in 2018, when it was worth $3,000 at the time. He continued buying more coins whenever the price fell. In 2020, only two years later, he cashed out part of his profits to buy a Bentley.
- Norwegian student Kristoffer is perhaps one of the grandest success stories you will encounter. He came across Satoshi Nakamoto’s BTC white paper during his master’s degree research and decided to buy some coins. He invested only $26 then, which gave him a whopping 5000 BTC. He forgot about the investment until 2013 when he heard about it for the first time in the news. His quick math made him realize that he was already becoming a millionaire. So he sold 1,000 bitcoins and bought an apartment. He’s now worth millions of dollars.
Simply put, digital currencies fall under “high risk, high reward” opportunities. That said, one needs to evaluate different factors, such as risk tolerance, before pumping funds into these opportunities. Remember, cryptocurrencies have insane volatility compared to other assets like stocks. You also need to understand that one might earn a fortune investing in digital currencies and still lose the gains to fraudsters. So make sure you are familiar with securely storing your coins. Cold wallets are always the safest crypto storage option. Lastly, don’t invest without reading some fundamental factors about your favorite crypto asset. If you have the skills, conducting some technical analysis may help too. You want to make sure you’re getting in at the right time. Like in stock trading, buying low and selling high is the secret to profitability.
Crypto users are prone to making mistakes that could see them lose their funds. Because the blockchain is immutable, it is impossible to reverse transactions. So you will most likely lose your funds if you send them to the wrong address. In addition to that, the loss of your private keys or crypto wallet password could result in the permanent loss of your money.
Governments play a big role in any market. While it’s clear that digital coins are decentralized, they operate in territories controlled by different governments. A change in the law governing virtual currency transactions, or a sudden crackdown similar to what occurred in China in September 2017 could cause prices to plummet.
The virtual coin industry is highly interdependent. Individuals, merchants, and different service providers depend on each other to fulfill different aspects. There is a risk that the party you’re depending on could cause you to lose money. For example, in 2014, Mt. Gox was hacked, leading to the loss of over 840,000 investors’ BTC.
In 2022, FTX, the fourth-largest exchange then, collapsed, causing investors to lose more than $8 billion. This might not be the last case. The lack of proper regulation allows anyone to operate as a service provider, even without relevant experience. This exposes users to the risk of losing huge sums of money due to bad management decisions.
Virtual currencies are software. All platforms used in the industry, including wallets and exchanges, are digital too. A mistake in a program’s code could issue the wrong command, triggering huge losses. You may also experience bugs, which might expose you to hacking risks.
The blockchain sector is perhaps the most manipulated. Many investors have lost funds to pump-and-dump schemes, where token prices are hyped up with artificial demand to cause an increase and attract investors. As soon as the projects receive substantial amounts, the organizations or influential investors behind the manipulation cash out huge sums of money, causing prices to drop to near zero.
Advantages & Disadvantages of Using Cryptocurrencies
Just like coins have two sides, digital currencies have several advantages and drawbacks. You need to understand them before making any investment. Here are the most important ones everyone should know.
Players remain anonymous when using crypto to bet. This is because they don’t disclose their identities. If you are using a decentralized wallet, even the company that created it wouldn’t know who you are, as these sites don’t ask for your private information.
No Transaction Fees
The decentralized nature of blockchain greatly reduces transaction fees that would have been incurred if intermediaries were involved. The only costs you will incur when using decentralized wallets are a slight slippage and normal network fees, which go to reward validators and miners. CEXs are mostly profit-making and may have transaction fees, but they are still very insignificant compared to sending fiat money.
Gains Cannot Be Seized
The government does not have the luxury of controlling decentralized coins in the same way that it does fiat money. Unless you are using centralized exchanges that keep custody of your private keys, there is no way the government can freeze your money when it is in digital currencies.
Money transfers can be faster than traditional fiat payment methods since there are no intermediaries involved. For example, in decentralized finance, flash loans are processed 100% without middlemen and can only take a few seconds to be disbursed.
Blockchain is decentralized, meaning centralized bodies or persons, such as the central bank, and any other monetary regulatory institutions do not control transactions. The system is also distributed in such a way that it eliminates monopolies and creates a self-efficient market based on a peer-to-peer model.
Secure and Private
The decentralized, unanimous, and immutable properties of blockchain-based payments make them highly secure. Any corrupt files or invalid data would be instantly declared void. In addition to that, your bank will never know when you use virtual currencies to gamble. Your bank statements won’t show these transactions.
Easy Transfer of Funds
Digital coins simplify transactions due to their trustless nature. There are no long procedures like opening a bank account. No one will need you to explain the reasons for transactions or provide documents to show where the funds are coming from.
Self-governed and Managed”
The crypto ecosystem is self-managed through a decentralized and distributed system of nodes. Decentralized autonomous organizations (DAOs) are governed by community members using a voting system. That means they make laws that are fair and best for the success of the platform.
Digital tokens are the most volatile in the entire financial industry. They can experience rapid surges and crashes without a warning. In 2021, BTC skyrocketed to $65,000 before dropping sharply to about $23,000. Something worse was experienced with the Luna coin, which lost over $2 billion in one day, before finally crashing to almost zero. Investors lost an estimated $60 billion.
While blockchain technology is evolving immensely, the maximum number of transactions most networks can process per second is still way less than its fiat competitors. The speed of some traditional money systems like Visa is also higher than BTC and many other virtual coins.
Hackers are always on the lookout for their next prey. Despite the high security of blockchain transactions, fraudsters still find ways of stealing money. Centralized exchanges and custodial wallets can easily be hacked. Sometimes, even cold wallet users can lose money to well-orchestrated phishing scams.
Rules and Regulations
Regulation in the industry is still not widespread. Investors are left in the dark, fearful that the government might enact positive or negative legislation at any time. This hinders the sector from achieving its full potential.
Although digital coins have done a lot of good, criminals have also found a way of using them to transact and promote their illegal activities, such as money laundering. They can also be used to purchase outlawed products like drugs. It is widely alleged that terrorists may also be using BTC and other coins to fund their activities.
How to Buy Cryptocurrencies?
How Crypto Opened Up a New Online Gambling World
The betting industry was initially dominated by fiat service providers. While the industry was popular, players started losing faith in the system due to the rise of unfair operators. When blockchain was first introduced in 2009, it was met with slow adoption, with critics looking for any reason to dismiss it. In 2012, on SatoshiDice, a BTC slot machine was rolled online, triggering the idea of virtual currency casinos. However, no further development happened until 2014, when forward-thinking company Moon Technologies B.V. officially launched Bitcasino.io as what would be the world’s first fully-fledged online BTC gambling site. In the same year, the industry exploded with new entrants such as mBit, 7Bit, BitStarz, and Fortune Jack. While it appears as though operators made a sudden paradigm shift to blockchain-based gambling, it was actually players who stimulated the demand from players. Bitcoin gambling is considered safe and anonymous.
The advent of “provably fair” games, where players could verify the outcome of their results using blockchain technology, further fueled gamers’ migration from traditional online operators to crypto-based. Everyone was excited about being able to play with 100% assurance of fairness. Soon, more casinos started streaming in with huge bonus offers to lure clients. Today, we have hundreds or perhaps thousands of such platforms. It doesn’t end there. The virtual currency casino industry just seems to be getting started as decentralized finance and Web3 become more popular. We are likely to see more innovative blockchain-based gambling methods in the coming days, utilizing sophisticated technologies such as augmented reality to offer players deep immersion.
Best Cryptocurrency for Gambling
Some digital currencies are more popular than other crypto assets because of the unique features they offer. This section of our guide will briefly consider some of the most popular cryptocurrencies in the iGaming industry.
Litecoin (LTC) Casinos
Litecoin is a virtual currency that Charlie Lee created in 2011. This digital currency is was created to rival Bitcoin and shares several similarities to the crypto asset. Like Bitcoin, Litecoin is decentralized and can not be issued or controlled by central authorities like central banks or government regulators.
Litecoin also has a fixed supply of 84 million tokens.
Litecoin used to be very popular but has dropped in popularity with the creation of many other crypto assets. Currently, Litecoin is ranked as the 16 most popular cryptocurrency in the world. Litecoin is a very effective payment option, and many of our Litecoin casino gambling platforms accept it as a means of payment on their sites.
Following the Howey Test from the 1946 Court ruling, something is considered an asset when (1) people invest money (investors), (2) the money is invested in a common enterprise, (3) investors expect to make a return, and (4) investors earn money from the efforts of other people. Although people invest in virtual coins, cryptocurrencies fail to meet these conditions because there is no common enterprise and investors don’t make money off the efforts of others. At the same time, there is a fine line between which cryptos are securities and which are not. Therefore, it’s best to stay up to date on your country’s laws so you can be the first to learn about any changes that may classify some tokens as securities.
Cryptocurrencies are taxed differently globally. Most countries classify them as property, hence attracting capital gains tax. The IRS also does the same. That is, if you hold them for more than a year, you will be taxed 0% to 20%, whereas a shorter investment period will attract 10% to 37%, depending on your tax bracket. Remember that you only pay tax on gains when selling your tokens. In that case, if you bought BTC for $20,000 and sold it after two years for $33,000, you will only pay capital gains tax on the $13,000 gain. Profits earned from gambling may be taxed or not, depending on your country. Make sure to talk to a tax advisor in your country to find out what the law says about taxation, as this varies globally.
While digital coins have been around for about two decades now, they are still new from a legal perspective. Many countries still lack proper regulatory frameworks for crypto and do not even mention them in their laws. The absence of restrictions is usually interpreted as legally acceptable since you won’t be breaking any laws using them. However, some countries like China, Egypt, Iraq, and Tunisia have clear regulations outlawing their use. It’s best to check with a legal professional in your country to learn about the legal status of virtual currencies.
You can get started with crypto by simply creating a wallet, signing up with an exchange, and buying your first digital coins. However, if you are entirely new, visit our “Cryptocurrency” section for more guidance. You will find all the guidance you need.
Like fiat money, the value of digital coins is derived from forces of supply and demand. Each currency has a unique use case that drives its market. The value of every coin goes up when more people demand it than those selling it. On the other hand, the value drops when sellers exceed buyers.
Anyone with access to the internet and a computer or mobile device can buy cryptocurrency. Most exchanges require KYC (know your customer) verification to confirm that you are of legal age before you can transact on their platform. Of course, there are many others where you can buy bitcoin without any form of verification. However, make sure you are not breaking any laws by doing so.
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