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What is a Cryptocurrency Wallet?

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Cryptocurrency Wallet is a digital tool you can use to interact with the block chain network. Crypto wallets store cryptocurrencies. They work as a gateway that provides the tools a user needs to communicate with the block chain. It has a private key associated with it.  As a user always keep the private key safe. These wallets can generate all the information we need to use cryptocurrencies. These allows you to take control of your cryptocurrencies.

The various types of wallets can be divided into three main groups. All these wallets can also be referred as Hot or Cold wallets.

3 main groups.

  1. Software Wallet. You can avail this wallet in 3 forms: online, mobile and desktop. The currency are found and stored as a software on a device.
  2. Hardware Wallet. This enables you to store your cryptocurrencies in a physical device which looks like a USB drive. It stores your private keys and do not expose them to the outside world. It provides defense against cyber hacks, fishing scams and key loggers.
  3. Paper Wallet. It is a hardcopy or a printed piece of paper. It will have keys and QR codes that will be used in any cryptocurrency transaction. The information cannot be found in the Internet thus many find this option safer.

What is Decentralized Finance

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This is commonly known as DeFi. It is known that cryptocurrencies are digital assets that are not controlled by any banks or government. These digital tokens can be transferred or sent to anyone from anyone in all corners of the globe without the need of a bank or any financial institute. Cryptocurrencies are decentralized money. Compared to the paper currency that we currently used, these are centralized currencies which rely on a central authority. Decentralized finance aims to replace our current financial system.

DeFi is a term used to define financial services with no central authority. The use of decentralized money like certain cryptocurrencies that can be programmed for automated activity can lead to the building of exchanges, lending services, insurance companies and other organizations that don’t have any owner and are not controlled by anyone.

What are the risks of DeFi:

  • Still in its infancy stage.
  • Use cautiously with a small amount of money.
  • Some services are only partially centralized.
  • Intensive research is needed before attempting to avail of any services you want to invest in.

Important Things to Consider Before Investing in Cryptocurrencies

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Before you start investing in these digital assets there are some important things to note and remember.

  • Cryptocurrencies are very unstable. They can go very high and go down very fast. With the blink of an eye, its current value can abruptly drop. There are many risks involve and its to risky because you can loose all your hard earned money. It’s safer not to gamble your financial security. Think twice before investing.
  • The use of cryptocurrency has to pass through a needle’s hole before being accepted by the public. It should be built in shared trust and reliability. Do a survey and only a small percentage knows about this digital currencies.
  • These currencies can be used illegally. This is the ideal medium used by many criminals, terrorists and hackers.
  • Trading and investing in cryptocurrency is a gamble. You can exchange its used without any regulation. It’s credibility has yet to be established.

Will Banks Embrace The Use of Cryptocurrencies?

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During this digital age, we are hearing more about cryptocurrencies. The public has been skeptical about this and are asking its effect on banks. The question being raised now is will banks accept or adopt its use? Will they also venture in creating its own  cryptocurrencies? If yes, how will this affect its clients.

Before moving forward, we should define cryptocurrencies first. Cryptocurrencies are digital currency that has no physical form. They are being used mostly in the web and are kept electronically via the blockchain. For its security, it uses an encryption technology to authenticate the movement of funds. With it’s increase and introduction to the web some Treasuries are considering to make a further research and study about this digital currencies. This would help them determine its role in the financial world and in a bigger picture, the economy.