Cryptocurrency is a digital or virtual currency that uses cryptography for security. It allows a forex crypto broker to have anonymity when receiving funds and transferring the money, but the same measure of cryptography makes it difficult for governments to track transactions. When people think about cryptocurrency, they usually think about Bitcoin, which became popular in 2009.
The concept of cryptocurrency was around long before then, though; online services such as Beenz and Digicash attempted to create electronic payments systems during the late 90s and early 2000s. Many failed due to their centralized nature, which allowed governments greater control over how much money could be transacted and by who (e.g., tax evasion). A decentralized system like cryptocurrency removes these issues, allowing for exponentially cheaper transactions to take place. Next we share some insight for novice crypto traders.
How does crypto work?
Cryptocurrency uses a decentralized control system; no one entity (company, person, etc.) has complete oversight over the currency. Instead, it works like Peer-to-Peer file-sharing; everyone running cryptocurrency software stores all of the information about all of the transactions ever made with it; this way, everyone’s records are kept in check by everyone else doing similar tasks around the world.
As long as at least 51% of honest people use cryptocurrency, everything should remain transparent and accurate. It can also have negative implications if people decide not to use it honestly; governments may be able to track your money easier, or users can take advantage of an opponent by double-spending their cryptocurrency (sending it to two different people at once).
Is Crypto the same as Fiat?
Cryptocurrency is very much like traditional fiat currency in that its value comes from the fact that governments support it. If you could pay your taxes using Monopoly money, why would anyone use real money? The same goes for cryptocurrency; if you can send people or companies money without waiting for transactions to clear, who would want to use something that takes days or weeks?
The main difference between them was security; cryptocurrencies are protected by cryptography (hence the name), whereas fiat currency is protected by armed guards and vaults full of cash. Additionally, since everyone has a record of every transaction made with cryptocurrency, there is no way to counterfeit it. Each coin has its signature, which is checked against the public ledger. It also means that you cannot double-spend your money; by using a Cryptocurrency wallet (software or hardware), you can sign every transaction and prove that you have the required funds to send beyond a shadow of a doubt.
Can I trade Crypto in Dubai?
From the beginning of May 2018, technology and cryptocurrency trading in Dubai and UAE have been boosted after forming a new committee.
The new initiative promotes innovation and explores new technologies such as blockchain by establishing links with international investors and startups. The Financial Services Regulatory Authority (FSRA) – which falls under the government’s umbrella – aims to help financial markets stay updated with technological changes.
They will do this through licensing deals to make it easier for businesses to operate within both areas by sharing knowledge, expertise, experience and resources. It will also focus on increasing awareness about cryptocurrencies so people understand them better and how they work.
According to Ali Sajwani, Executive DirectorFinancial Services Professional at Arqaam Capital, “This will be the first step towards standardizing the market and enhancing Dubai’s position as a financial hub that supports innovative technology.” He went on to say that this move would bring about an improvement for both consumers and regulators.
As part of his contribution, he said: “Arqaam is anticipating the impact of these new initiatives, particularly in how it will change the way investors perceive digital assets. As one of the largest exchanges in MENA (the Middle East North Africa region), we are looking forward to seeing regulatory sandboxes evolve into strong rules-based frameworks to provide investors with enhanced security without compromising their experience.”
Always remember that it does not matter which financial instrument you trade, there are safe and good practices for traders that is relevant to all. Always find a trusted broker that offers a demo account where you can practice before you trade real money.