Posts in category: cryptocurrency

Cryptocurrency is probably the hottest asset for investment in the modern markets right now. The value of cryptocurrencies soaring up to tens of thousands of dollars for each unit is a great reason for investing in cryptocurrency and trade with it. However, there are many significant concerns you must take care of before investing in crypto. 

The pointers for buying cryptocurrency for the first time can serve as significant support for anyone trying their hand at crypto investments for the first time. However, the different news pieces regarding uncertainty in the value of cryptocurrencies alongside the newly emerging regulations pertaining to cryptocurrencies have been creating doubts about cryptocurrencies. 

Is it reasonable to invest in cryptocurrencies? Well, the top benefits of investing in cryptocurrency can show you some valid reasons for adopting them. However, you must be careful when you are investing in crypto for the first time. The following discussion offers you a detailed guide on the top factors you must verify before buying cryptocurrency. 

Why Should You Buy Cryptocurrency?

Money has been changing forms for many years, and you can notice that cryptocurrencies are an interesting take on digital money. You have the advantage of blockchain technology with cryptocurrencies in the form of decentralization, encryption, immutability, and transparency. 

A first-time cryptocurrency buyer would obviously look for the estimates of value they can get from their investments in cryptocurrencies. For starters, you have the benefit of ownership over a new and unique digital asset that might gain immense value in the future. On top of it, many cryptocurrency coins and tokens are designed with specific utilities in mind. 

Important Points to Know before Buying Cryptocurrency

Investments in cryptocurrency are more of a trendy thing in the present times. Almost everyone wants a piece of the seemingly tasty cake of cryptocurrencies. However, it is difficult for a first-time crypto buyer to navigate the technicalities of crypto investments. Therefore, you would need a solid guide on the best practices you must follow before you invest in cryptocurrency. 

1. Learn about Investing in Crypto

The first thing you need to know about how to buy cryptocurrency is the overview of mechanisms for purchasing, exchanging, and selling cryptocurrencies. Without an idea of how you should approach crypto investments, you cannot blindly invest your money in cryptocurrencies. 

Look for the platforms which help you in depositing and withdrawing fiat currency within a crypto ecosystem. You can explore all the basic steps in the crypto platform, such as the simple purchase and sales options. When you are confident about the processes for buying, selling, and trading cryptocurrencies, you are more likely to make some productive choices.

2. Go For a Balanced Portfolio

The second important pointer in a beginner’s guide to buy cryptocurrency would obviously focus on creating a diversified and balanced portfolio. You cannot just put all your money on a single crypto coin in the hope that its value will rise. Keep in mind that cryptocurrencies are a highly risky asset in comparison to other investments, particularly due to volatility. 

The pricing of crypto coins has been fluctuating with massive variations in comparatively shorter periods of time. In addition, the important tips for buying cryptocurrency also draw attention to the lack of specific regulations for cryptocurrencies. You don’t have the legal backing of an insurance company to recover your losses in cryptocurrencies. 

On the contrary, you can avoid the tribal instinct for getting on board with a popular crypto coin or token. There are many scammers out there as well as staunch evangelists who would go to any height to make you believe in the particular cryptocurrency. As a first-time cryptocurrency buyer, you may develop the urge to invest in a cryptocurrency that seemingly promises a hefty return. However, you don’t have to go through such risks as a first-time investor. On the contrary, you can try spreading your portfolio across various projects in different sectors such as DeFi, gaming, NFTs, and others. 

3. Research is Mandatory

The most prominent addition in any guide on investing in cryptocurrency would obviously point to the limelight on research. Any type of investment requires a good amount of research before you invest the same in an asset. Hours of an endless investigation into the origins of cryptocurrency and its utility can help you understand the value you can get from it. 

At the same time, research also helps you take note of the risks associated with specific cryptocurrencies of your choice. Make sure that you don’t fall for the idea of ‘someone will buy it at a higher price in the future’ while considering investments in a cryptocurrency. 

One of the mandatory additions in tips for buying cryptocurrency, the importance of research is evident in the broad range of information you can access about the cryptocurrency. Look for community forums, online communities as well as crypto developer mailing lists alongside podcasts of crypto professionals. Build your expertise in cryptocurrencies and the related aspects such as economics and cryptography. Clear all your doubts about cryptocurrencies and learn comprehensively about them to judge cryptocurrencies better when it comes to investing. 

4. Don’t Join the Herd

One of the common mistakes of a first-time crypto buyer points to the feeling of missing out on a trend. Many crypto beginners make the mistake of giving in to their ‘fear of missing out’ only to lose everything. Your instincts can play foul without the support of adequate research, thereby leading to an upset with your investments. If you feel something about a specific cryptocurrency, then the best course of action would be to evaluate the option cautiously. Many failing cryptocurrencies report valuations rising by almost 30% in 24-hour periods for duping unaware beginners. 

So, how to buy cryptocurrency when there are so many hidden complications? The answer points to understanding the complications before they present any problems. Research can help you stay away from any random decisions based on public opinion. You must evaluate the merits and demerits of the cryptocurrency before putting in your hard-earned money. 

5. Some Stories are Too Good 

Keep in mind that cryptocurrencies rise in value not only on the basis of their utility but also on their perceived utility. The crypto world has many charlatans who would take the first opportunity to weave far-fetched stories about their projects. For example, you must have found many projects which offer the promises of surpassing Bitcoin. Therefore, if a cryptocurrency promises unrealistic benefits, then you must check into it. 

A first-time cryptocurrency buyer must take note of specific factors such as underlying mechanisms with crypto platforms. For example, some crypto exchanges can fool you with the opportunity to draw around 99% of your investment as loans while juicing the profits in event of a rise in the value of the coin. On the other hand, you can lose the complete investment if the value of the coin reduces in value.

6. Trustless Approach

The crypto market has become a fertile ground for scammers, despite the promises of cryptographic security. For example, some scammers used Elon Musk’s SNL appearance as a tool for cheating people of $100,000 worth of crypto assets. How did the scammers achieve this? They just put out a ‘false’ giveaway and showed another important threat to look out for when you buy cryptocurrency or tokens. 

The scammers used a fake Twitter account of Saturday Night Live and asked victims to send small amounts of crypto for address verification. In return, the scammers promised around 10 times the amount return. Quite an attractive and hard-to-ignore value proposition, isn’t it? Therefore, you should try to follow a trustless approach while navigating the crypto domain. Always rely on research and verification as your first course of action when you think of investing in cryptocurrency, as it can help you avoid scams. 

7. Avoid the Unit Bias

Unit Bias is basically the assumption that a cryptocurrency trading at $50,000 per unit is better than a coin trading at $1. However, you must shed such assumptions when you think of buying cryptocurrency. With around thousands of cryptocurrencies all over the world, you are likely to explore a broad range of functionalities. 

The tips for buying cryptocurrency would obviously draw attention towards removing ‘Unit Bias’ as different cryptocurrencies come with varying functionalities. For example, some might have better decentralization, while some can offer improved developer support. Therefore, a deep dive into the technological mechanisms underlying a specific cryptocurrency can speak a lot about its potential.

8. Get the Right Wallet

You must also pay attention to the choice of a suitable crypto wallet for your cryptocurrencies. Cryptocurrencies are basically assets where the holder is considered the rightful owner. So, the concerns regarding how to buy cryptocurrency must also focus on choosing a wallet that can hold the cryptocurrencies safely. However, crypto wallets work by storing private keys to the cryptocurrencies on a blockchain. 

Which type of wallet should you choose as a beginner? The common answer would point at the crypto exchange, which would serve as a cryptocurrency wallet. On the other hand, DeFi solutions have encountered some of the biggest hacks in the course of the last year. Therefore, you should pay adequate attention to choosing a crypto wallet that can safeguard your assets with ease. 

9. Fractional Ownership is a Thing Now

Another prominent pointer for any first-time cryptocurrency investor would point at the possibilities for fractional ownership of cryptocurrencies. For example, you don’t have to worry about purchasing one complete Bitcoin to establish your crypto ownership. Now, fractional ownership of cryptocurrencies lets you purchase crypto. One of the best examples is that of the small amounts of Dogecoin. As a result, you don’t have to go all-in for specific cryptocurrency investments.

10. Taxation and Regulatory Concerns

The final highlight in tips for buying cryptocurrency would focus on concerns regarding taxation and regulations. Taxation and regulatory concerns are important, especially in the US, for specific reasons. Similarly, the legal perspectives on cryptocurrencies in different jurisdictions can also play a crucial role in determining the expected returns from crypto investments. 

Therefore, you need a clear overview of tax conditions alongside the regulations for crypto in your country or state before investing. Make sure that you don’t violate any law while ensuring proper optimization of your returns on the crypto investment.

Cryptocurrencies, the newest class of digital assets, is obviously one of the top technological disruptions in recent times. The domain of cryptocurrencies has been useful in driving plausible improvements, especially in 2021, with many notable improvements. Cryptocurrencies have been through three essential ingredients of adoption, innovation, and integration for achieving stupendous growth. However, it is also important to think of the future of cryptocurrency and what it holds for everyone. What are the top trends you can expect in the domain of cryptocurrencies next year? 

Experts point out the possibility of 2022 being a slow year after the massive growth in 2021. The interest of people in crypto has doubled by huge margins in the last year. Interestingly, crypto is no longer a topic restricted to investors as it has also entered popular culture with many celebrities associating themselves with crypto assets. The following discussion helps you uncover an outline of the predictions for cryptocurrency future and their implications for investors. An understanding of the possible future for cryptocurrencies could help in preparing for changes in the crypto ecosystem over the next 5 or 10 years.  

Top Predictions for the Future of Cryptocurrency

The evolution of cryptocurrencies is obviously one of the most significant events in modern times. People have been wary of cryptocurrencies since the arrival of Bitcoin. However, the times have changed, and people are showcasing interest in crypto-based solutions. The existing state of cryptocurrencies definitely offers the right foundations for favorable cryptocurrency future predictions. On the other hand, the volatility of cryptocurrencies makes it difficult to draw clear insights into their future. 

Some predictions regarding long-term events in the crypto space are farfetched and express a positive opinion on future of crypto. At the same time, it is also important to look for the critical aspects which might define the cryptocurrency future scope clearly. For example, how will the crypto regulations shape up in the future? Similarly, you can note a few other crucial trends for cryptocurrencies in 2022. Here is an outline of some of the top predictions for the future of cryptocurrencies in 2022 and beyond.

Cryptocurrency Regulation

The questions about uncertainty in the crypto landscape often round-up on doubts regarding crypto regulations. It is impossible to deny the significance of regulations in the future of crypto in the next 5 years, even if lawmakers have not initiated any active measures for the same. As of now, all you can find is a lot of talk about cryptocurrency regulations. On the other hand, you cannot deny the gradual developments in crypto regulations. For example, US officials have been directing a share of their interest towards stablecoin regulations. Lawmakers worldwide are trying to figure out suitable precedents for crypto regulations to ensure safety for investors. 

Regulations are the biggest drawbacks in the crypto industry, and the more they are delayed, the more crypto users are at risk. Without stricter regulations, investors are likely to have a better assurance of safety of their cryptocurrencies. On the other hand, long-term cryptocurrency predictions in terms of regulations can be quite ambiguous. How? The perceptions of cryptocurrencies in different jurisdictions create critical issues for establishing uniform crypto regulations worldwide. For example, some countries impose a tax on crypto transactions, while some have banned crypto transactions completely. Therefore, it is quite clear that crypto regulations would solve one of the prominent roadblocks to growth of cryptocurrencies. 

• Implications of Crypto Regulations

The statements regarding cryptocurrency as next big thing in technology have a lot to do with their utility and how people perceive them. Crypto regulations would have a prominent impact on investors and the future of cryptocurrencies. Crypto tax reporting initiatives in the $1.2 trillion bipartisan infrastructure package by President Biden can improve tracing for crypto activity among citizens. New crypto tax rules in the US can enable crypto investors to report their crypto transactions. New initiatives such as introduction of 1099-B tax forms featuring cost basis information could help in reducing the problems of crypto tax filing. 

Regulations can also influence the cryptocurrency future scope through an effect on cryptocurrency prices in comparatively volatile markets. Market volatility can witness any trend in event of regulatory changes. However, crypto regulations would only improve trust in crypto, thereby driving confidence in crypto assets. 

Acceptance of Crypto ETF

Crypto ETF has emerged as one of the solid highlights among cryptocurrency future predictions for 2022 and beyond. The major development in this trend points to the first-ever Bitcoin ETF, which was introduced on the New York Stock Exchange in October 2021. One of the significant highlights in the approval of crypto ETF refers to the availability of a new and conventional approach for crypto investments. Investors can use the BITO Bitcoin ETF to buy in on cryptocurrency directly from the traditional investment brokerages. In simple words, crypto ETF opens up a new road for integrating crypto into mainstream finance. 

On the other hand, cryptocurrency future predictions regarding ETF also suggest that BITO ETF is not the only solution. Experts have pointed out that the ETF is only associated with Bitcoin and does not hold direct ownership of crypto. On the contrary, the ETF includes the Bitcoin futures contracts, which comply with general trends in actual cryptocurrencies. However, approval for crypto ETFs like BITO is a favorable improvement in the essential driving factors for future of cryptocurrencies. 

• Implications of Crypto ETF

It is important to look for suitable solutions when new development comes with specific challenges. Therefore, the concerns regarding validity of crypto ETFs can have a crucial role in shaping them for better adoption. However, BITO showcased considerable trading volume in the first few weeks. At the same time, improving the accessibility of crypto assets in traditional investment products can help in empowering crypto adoption. The implications of crypto ETF for cryptocurrency future would also point to how users can add crypto to their portfolios directly from a brokerage. Remember that this brokerage would be the regular one you use for a traditional investment account or a retirement account. 

While crypto ETFs can present positive implications for mainstream crypto adoption, it is also important to look for risks associated with them. After all, they are crypto derivatives and feature the same risks as every crypto investment. Crypto ETFs are obviously one of the prominent highlights for the future of crypto in the next 5 years, with a few challenges of their own. Investors can consider taking risks with investments in crypto ETFs, just like with any other crypto asset. If they are successful in powering the integration of cryptocurrencies in mainstream finance, then crypto ETFs will be a revolutionary force in crypto future.

Institutional Adoption Rises

The most significant highlight among the long-term cryptocurrency predictions would often refer to institutional adoption. Mainstream companies across different industries have been investing their efforts and interest in crypto and blockchain. For example, AMC is one of the big names to have announced the adoption of crypto payments by the end of 2022. Many other notable examples include PayPal and Square. 

The digital payment companies are setting the perfect precedent for proving that cryptocurrency is next big thing indeed. How? Both of them have enabled crypto payments on their platforms. At the same time, one should also notice how Tesla, a big name in innovation, took the initiative of accepting Bitcoin payments before turning away from its promise. Even if Tesla didn’t keep its promise, the company still has a billions worth of crypto assets. 

The immense attention toward crypto is one of the foremost factors driving the institutional adoption of cryptocurrencies. As of now, the future of cryptocurrency depends on how bigger and global corporations will play out crypto adoption. Involvement of bigger institutions is a useful tool for improving trust and confidence. 

For example, a big retailer like Amazon would lead to a chain reaction, ultimately adding up more credibility to cryptocurrencies. Interestingly, Amazon has recently stirred up some discussions with its job posting for a cryptocurrency product lead. Furthermore, Walmart is presently seeking crypto experts to guide its strategic approach to blockchain transformation. How will institutional adoption of cryptocurrencies affect investors?

• Implications of Institutional Crypto Adoption for Investors

The only thing stopping cryptocurrencies from reaching mainstream financial use cases such as everyday payments is the lack of visibility. Where do buyers use cryptocurrency regularly to purchase clothes? On the other hand, the cryptocurrency future scope might change with adoption of crypto payments by major retailers. 

Although the dynamics of how volatile cryptocurrencies can serve institutional use cases are still under research, the everyday value benefits for crypto users can improve in future. You could also notice better stability in crypto prices with the massive scale of adoption. It is important to think of how the ‘real’ use cases of crypto in the actual world can increase its value and demand. 

Final Words

The future of cryptocurrencies in 2022 and beyond is considerably uncertain. Crypto adoption increased by unreal margins during the pandemic and the crypto market registered humongous levels of trading volume in 2021. The cryptocurrency future predictions for 2022 emphasize regulations and approval for crypto ETFs alongside institutional adoption. 

All of these factors would affect not only the general crypto industry but also the experience of users and enterprises. In the long run, crypto has the potential to replace various conventional financial instruments. However, it can also work in tandem with existing financial services and products such as traditional brokerage accounts. 

At the same time, the perception of real value with cryptocurrencies alongside the emerging utilities of crypto presents conclusive implications for larger crypto adoption rates. Learn more about cryptocurrencies and the crypto ecosystem to figure out more details about its future prospects.

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Inflation is one of the most troubling words for an economy, especially for the world’s no.1 USA. The inflation rate in the US has been estimated at almost 8.5% in 2022. The growth in inflation is a prominent highlight, especially considering the fact that inflation rate was around 7.0% in 2021. Growing inflation has also imposed pressure on stagnancy of wages while facilitating rise in prices. Therefore, the inflationary vs deflationary cryptocurrencies debate has been gaining momentum in recent times. But why? 

Many people have perceived cryptocurrencies as a viable option for hedging against higher inflation. However, you must also know that cryptocurrencies also qualify as inflationary and deflationary assets. Will they help you combat inflation? The following post might help you find the answer with a detailed overview of inflationary and deflationary cryptocurrencies and the differences between them. 

What is Inflation vs Deflation?

One of the first aspects of a discussion about inflationary vs deflationary crypto would focus on the difference between inflation and deflation. Both the terms might seem to have jumped out of an accountant’s handbook for any cryptocurrency beginner. Inflation points to a growth in prices of products and services when excess currency is in circulation, thereby causing the currency to lose value. 

On the other hand, deflation points to growth in the value of a currency along with the relevant drop in pricing of products and services. It is important to note that deflation is the consequence of limited currency in circulation. Inflation is good to an extent as it empowers the economy by driving people to spend more. On the other hand, inflation can turn into a serious issue when the prices grow faster in comparison to salaries.

Did you notice the common element in the difference between inflation and deflation? The answer is the supply of the currency. Fiat currencies are generally inflationary as it is possible to increase their supply according to your will. Since the overall economic activity remains constant in any situation, the value of a single unit of the currency drops. Deflation implies the reduction of demand and increase in supply, which can lead to higher purchasing power of the fiat currency. How does the concept of inflation and deflation fit in the domain of cryptocurrencies?

Inflationary Cryptocurrencies

As the world turns towards cryptocurrencies as a hedge against inflation, it is important to learn more about inflationary and deflationary cryptocurrency alternatives. The concepts of inflation and deflation are also applicable for cryptocurrencies as they are governed by the laws of supply and demand. 

An inflationary cryptocurrency is one with an increasing number of tokens in circulation. Some of the common approaches for introducing new tokens through mining, staking, and other methods can help in increasing the circulating supply of tokens. The increasing supply of the token would cause a drop in its value. As a result, users have to spend more tokens for purchasing a specific product, asset, or item. 

Dogecoin is the best example of inflationary cryptocurrencies in an inflationary vs deflationary cryptocurrencies debate. One of the creators of Dogecoin removed the hard supply cap of 100 billion DOGE in the year 2014. The move was particularly directed towards ensuring an unlimited supply of the asset. Subsequently, the supply of the token could easily outpace demand, thereby decreasing the value of all Dogecoin tokens. 

On the other hand, you can also identify other inflationary assets, such as Bitcoin, which feature inflation only to a specific limit. How can a cryptocurrency be a limited inflationary asset? The total circulating supply of Bitcoin is 21 million, thereby implying that there could be 21 million Bitcoins ever in circulation. Once the supply limit runs out, Bitcoin mining would disappear, thereby turning Bitcoin into a deflationary cryptocurrency. 

Interestingly, Bitcoin has employed an innovative mechanism for slowing down inflation by halving it. Period every four years, Bitcoin network reduces the number of Bitcoins that can be mined and entered into circulation. Some of you might be wondering about the fact that 19 million Bitcoins are already in circulation, thereby leaving little time for mining the rest. 

On the contrary, the gradually dropping rewards for mining would suggest that the 21 million mark might be years away. Bitcoin treads the thin line between inflationary and deflationary cryptocurrency with a considerable reduction in mining rewards. For example, the mining reward in 2016 amounted to almost 12.50 Bitcoins. In 2020, the rewards dropped to almost 6.25 Bitcoin and would round up to 3.125 BTC in 2024. Halving is an effective mechanism for reducing the number of cryptocurrency tokens in circulation. 

Deflationary Cryptocurrencies

Deflationary cryptocurrencies are the ones where the supply of coins would decrease over the course of time. Therefore, the value of every coin would increase even in scenarios with consistent demand. On the other hand, different projects use unique deflationary initiatives for specific objectives. A detailed understanding of deflationary cryptocurrencies is an important requirement to learn the difference between inflationary and deflationary cryptocurrency alternatives in the market. 

One of the examples of showcasing deflationary cryptocurrencies refers to the crypto exchange Binance. The crypto exchange destroys a few of its native Binance Coins or BNBs to reduce the supply every quarter. Similarly, the crypto exchange Polygon also burns its native MATIC tokens to reduce supply of the token. 

In addition, you must also learn about the examples of cryptocurrencies that serve as central banks. Such cryptocurrencies use inflationary as well as deflationary methods for maintaining the value of the token. The best example of such a deflationary cryptocurrency refers to the TerraUSD or UST stablecoin. The TerraUSD network, or Terra Network, mints and destroys its tokens to maintain the price of the stablecoin constant at $1. 

Your understanding of inflationary vs deflationary crypto would also focus on the understanding of Ethereum as a deflationary cryptocurrency. The native token of Ethereum, i.e., Ether, was a completely inflationary asset at one point in time. On the other hand, Ethereum introduced an update in August 2021 to make Ether deflationary during rising in network activity. The update introduced a clause for burning ETH to reduce supply. According to the reports of a tracking website, over 1.7 million Ether coins amounting to more than $4.5 billion have been destroyed. 

The example of Ripple also shows a different approach for making its native token, XRP, a deflationary cryptocurrency. Ripple released 100 billion XRP tokens at once and locked away around 55 million tokens in 2017. The locked tokens would be released on a periodic basis to maintain liquidity. In addition, users have to pay a small transaction fee with every transaction featuring XRP. The Ripple network also burns the transaction fee for maintaining the deflationary nature of its XRP token. 

Factors behind Economics of Inflationary and Deflationary Crypto

The economic implications associated with inflation and deflation of fiat currencies can be quite confusing. However, the inflationary vs deflationary cryptocurrencies comparison presents a more straightforward interpretation of both concepts. Inflationary cryptocurrencies feature a system that enables a continuous growth in the number of tokens in supply. 

On the other hand, deflationary cryptocurrencies feature a system with tokens in supply reducing gradually over time. The deflationary mechanisms can include periodic burnout of tokens or lowered minting rewards. How do you differentiate an inflationary cryptocurrency from a deflationary cryptocurrency? Here are the three important factors for the economics underlying inflationary and deflationary cryptocurrencies. 

• Maximum Supply

Some cryptocurrencies have set a hard cap on the number of tokens they can ever put in circulation. The best example of a cryptocurrency with a maximum supply limit is Bitcoin, with its 21 million BTC mark. 

• Circulating Supply 

The most important factor of difference between inflationary and deflationary cryptocurrency refers to the token’s circulating supply. Circulating supply refers to the total number of cryptocurrencies associated with a specific blockchain moving around on the chain. 

• Total Supply 

The total supply refers to the total supply of tokens defined for a specific cryptocurrency token. It may also point to the number of tokens mined till now on the blockchain network, thereby creating similarities with the description of circulating supply. 

Basis for Inflationary and Deflationary Cryptocurrencies Comparison

The most critical highlight in a comparison between inflationary and deflationary cryptocurrency draws attention to demand and supply pertaining to a specific cryptocurrency. A better understanding of tokenomics pertaining to inflationary and deflationary cryptocurrencies can set the ideal foundation for comparing them. The important factors in the tokenomics of a specific cryptocurrency include overall production, distribution, and quality of a cryptocurrency token. 

The tokenomics of a cryptocurrency are generally outlined in the whitepaper of the concerning blockchain. You can use the whitepaper of a blockchain to identify whether the native token offers an unlimited and gradually increasing supply or a restricted and gradually dropping supply. The cryptocurrencies with a fixed supply, such as Bitcoin, Binance Coin, Ripple, and Cardano, can showcase a reduction in supply alongside driving higher demand. As a result, these cryptocurrencies can gain value improvements over the course of time.  

Can the whitepaper help you identify the difference between inflationary and deflationary cryptocurrency? First of all, you need to discard the common beliefs regarding inflationary cryptocurrencies. Some of the inflationary cryptocurrencies with unlimited supply, such as Ethereum and Dogecoin, are not as bad as people imagine. 

They might be serving lower demand and higher supply now. However, one should understand how the crypto ecosystems don’t fall prey to economic downturns like the fiat currencies. Irrespective of an unlimited supply, an inflationary asset would never affect the long-term picture of demand and supply. 

Take the example of Ethereum, which does not have any hard cap. Irrespective of the hard cap, Ethereum blockchain allows only a specific amount of ETH to be mined every year. Assume that the existing ETH supply has a market capitalization of almost 100 million, then users can mine only 18 million ETH every year. In this case, the inflation rate would be 18%. With continuous growth in market cap of ETH over the course of time, the inflation rate would reduce gradually. 

Inflationary vs Deflationary Cryptocurrency Comparison

The general action of investors might turn towards deflationary cryptocurrencies over the inflationary crypto assets. However, you can notice how inflationary cryptocurrencies can also bring plausible benefits alongside working on new mechanisms for reducing inflation. For now, the inflationary vs deflationary crypto debate ultimately rounds up on one plausible observation. 

The observation suggests that inflationary and deflationary cryptocurrencies have their unique advantages and drawbacks. For example, inflationary cryptocurrencies can cause scenarios where demand overpowers supply. At the same time, they are also essential for continuing the mining process without any interruptions. On the other hand, deflationary cryptocurrencies can help you capitalize on the benefits of a price surge, an important value benefit for investors. 

Here is an overview of the comparison between inflationary and deflationary cryptocurrencies on the basis of different factors.

• Supply 

The obvious aspect in the overview of inflationary vs deflationary cryptocurrencies points at supply. As a matter of fact, the difference between inflationary and deflationary cryptocurrencies is all about the change in supply of the native token. In the case of an inflationary cryptocurrency, you have an increased supply of the token in circulation. On the other hand, a deflationary cryptocurrency is one that offers a reduced supply of cryptocurrencies. 

• Purchasing Power

The purchasing power of inflationary and deflationary cryptocurrency also serves as one of the basic pointers in their comparison. One of the evident observations about an inflationary cryptocurrency would refer to the lower purchasing power. When the number of tokens of a specific cryptocurrency has increased in circulation, it loses its value. On the other hand, the deflationary cryptocurrency would gain value due to the limited supply. The reduced supply alongside the consistent demand can support growth in pricing of the deflationary cryptocurrency. 

• Conversion

The flexibility for conversion of inflationary to deflationary assets is also another important aspect in the comparison between the two types of cryptocurrencies. Inflationary cryptocurrencies are inherently inflationary, which means that they come with an unlimited supply. On the other hand, the inflationary vs deflationary crypto debate must focus on how inflationary cryptocurrencies can turn into deflationary cryptocurrencies temporarily.

Inflationary cryptocurrencies can impose deflationary mechanisms for fighting inflation in certain cases. For example, Ethereum, which has an inflationary cryptocurrency ETH, burns a specific share of the tokens at times of high activity. However, deflationary cryptocurrencies are deflationary by nature and could not be created according to will. The specific examples of deflationary cryptocurrencies show how they use distinct mechanisms or restrictions to restrict the supply of tokens in circulation.

• Value

One of the significant highlights in a comparison between inflationary and deflationary cryptocurrencies would also refer to their value. How are inflationary and deflationary cryptocurrencies different in terms of their value for crypto in general? The difference between inflationary and deflationary cryptocurrency would show you that deflationary cryptocurrencies would increase in value over the course of time owing to scarcity. 

On the other hand, it is important to note that demand also plays a critical role in driving the value of deflationary cryptocurrencies. Without any demand, the value of an asset would decrease considerably, contrary to the general expectations. When you consider the value of inflationary cryptocurrencies, you might not fetch much with them right now. However, the value of intrinsic cryptocurrencies rests in diverse use cases, such as the popular example of Ether for DeFi applications.   

The staggering growth of cryptocurrencies has been one of the most significant events in recent history. However, beginners in the domain of cryptocurrencies and blockchain are more likely to have doubts regarding the creation of cryptocurrencies. The answers might point towards token minting in crypto, which can be quite confusing without a clear explanation. 

Some beginners may assume that cryptocurrency tokens must be minted like minting coins in the real world. You need to stay away from such assumptions and learn about the exact mechanism of crypto minting. The following discussion helps you find a clear overview of crypto token minting and how it works. You can also learn about the advantages and setbacks associated with minting crypto tokens alongside the best practices for minting. 

How is Crypto Created?

The biggest question in the mind of any beginner would revolve around the process of creating crypto tokens. What goes behind creating some of the most valuable digital assets in the present times? The answer would point at two distinct options, i.e., crypto mining and cryptocurrency token minting, with different methods in each option. If you want to learn about crypto minting, then you should clarify your doubts about crypto mining. Remember that both of them are different methods, and you must identify the differences between crypto minting and crypto mining.

What is Crypto Mining?

Cryptocurrency mining is completely different from the process to mint token crypto tokens. It basically involves documentation and verification of transactions over a public digital ledger or transactions. Miners use their powerful computing equipment for solving complex mathematical puzzles and obtain rewards. As a matter of fact, crypto miners have to compete with each other. Miners must show that they have solved a problem before others. 

The first miner to solve a problem would receive rewards in the form of cryptocurrency from the existing reserve. The basic design of mining follows the Proof of Work consensus algorithm. It facilitates the mining of a new block, which in turn continues the blockchain network. Crypto minting addresses two distinct purposes creating new tokens or coins and maintaining a log of all existing token transactions. 

The interesting detail you must note here is the evidence of token minting in crypto mining procedure. You may wonder about the possibility of such an event. As a matter of fact, minting is an evident part of the crypto mining process as the Proof of Work consensus brings new coins into circulation. The example of hashing a new block for the first time in the Bitcoin network shows how the crypto mining process leads to minting new tokens or coins. 

Understanding Crypto Minting

The clarity regarding crypto mining draws the focus of the discussion towards “What is token minting?” and its significance. Crypto minting basically refers to the process of creating new coins through verification of data, creation of new blocks, and documentation of the verified information on a blockchain network through Proof of Stake consensus. The importance of token minting is clearly evident in the flexibility for minting crypto tokens as well as non-fungible tokens or NFTs.

It is important to note that newly minted crypto tokens are circulated in the market for trading purposes. The Proof of Stake consensus mechanism is a distinct highlight for the crypto minting method as it defines the formation of blocks through staking. On the contrary, the Proof of Work consensus mechanism favors the crypto mining procedure. 

The users involved in the process of mint token crypto are referred to as validators. One of the important details about the crypto minting process refers to the fact that it is decentralized. As a result, anyone interested in creating crypto tokens could use crypto minting without the necessity of depending on central regulatory authorities. 

Importance of Crypto Token Minting

The overview of token minting meaning would also draw emphasis on the importance of crypto minting. As a matter of fact, crypto minting has become one of the most significant highlights in the crypto landscape. Interestingly, the constant growth of the crypto ecosystem with introduction of wide new varieties of crypto coins and tokens has also fuelled the significance of crypto minting. For example, new tokens on different blockchain networks in the form of non-fungible tokens or NFTs have changed the face of crypto. 

The adoption of cryptocurrency trading and investment on a large scale in recent times has been one of the notable factors underlying the radical growth in demand for crypto minting. People have accepted technological change quite easily, and the growing hype around new technology solutions has been crucial in driving the demand for new coins and specific tokens. Crypto enthusiasts and experts have welcomed the concept of cryptocurrency minting with the objective of introducing new tokens in the crypto market. 

The most notable highlight which draws attention to cryptocurrency token minting refers to the growth of NFTs. Non-fungible tokens, or NFTs, caught the whole world by surprise in 2021, with a digital art NFT fetching around $69 million in an auction. Subsequently, many other NFT projects have evolved over the years with varying utilities.         

How is Crypto Minting Different from Crypto Mining?

The next significant highlight in a guide on crypto token minting would refer to its differences from crypto mining. Interestingly, you can find out the answer by reflecting on the differences between Proof of Work and Proof of Stake consensus algorithms. Let us reflect on the fundamental differences between crypto mining and crypto minting in detail. 

First of all, you need to note that Proof of Work helps in cryptocurrency mining. The consensus mechanism helps in creating cryptocurrency through the solution of cryptographic equations by leveraging high-powered computer processors. The mechanism for problem-solving focuses on verification and validation of data blocks alongside storage of transaction records on the public distributed ledger, i.e., blockchain. 

In the case of cryptocurrency mining, security of transactions depends on complicated encryption techniques. The miners receive rewards for securing the network and validation transactions in the form of cryptocurrency coins. It is important to note that the newly “mined” coins would go into circulation.

The foundations of token minting in crypto depend on the Proof of Stake consensus algorithm. Proof of Stake consensus works for validating cryptocurrency transactions through staking. The process of staking basically involves crypto owners locking in their existing assets for validating transactions. 

It is important to note that the staked assets would be locked up, and you have to unstake them from trading or use them for other purposes. The most interesting highlight about cryptocurrency token minting with Proof of Stake refers to the random selection of validators. Generally, users with more staked coins can have better chances of being selected as validators for verifying transactions. 

How Does Crypto Token Minting Work?

The details in a guide on “What is token minting?” in the domain of crypto would also draw attention to the working of crypto minting process. You can find a clear impression of how crypto minting works by reflecting on important highlights in the Proof of Stake consensus mechanism. The first aspect in the working of the crypto minting process is staking. 

It is the process through which users can pledge a specific amount of cryptocurrency deposits for participating in the Proof of Stake consensus. Users who have successfully registered their stakes on the network would obtain eligibility for being selected as validators. The network would select validators randomly from all the users who have staked their crypto deposits in the mechanism. The primary work of a validator is to document and verify the transactions on the blockchain network. 

One of the important aspects of the Proof of Stake process in crypto token minting refers to the restrictions on staked deposits. You cannot use the staked deposits for trading or payments, and it is mandatory to unstake the deposits for using them. The crypto minting process also involves penalties for the forgers or users with a stake in the network. 

Any individual violating the regulations or documenting incorrect information would encounter the risks of losing stake security. At the same time, the crypto minting process is attractive as users with higher stakes are more likely to be selected as validators. Upon successful verification and documentation of transactions, users would receive rewards in the form of cryptocurrency. The rewards for validators in crypto minting come from the transaction fees paid by system users. 

What is the Difference between Minting Coins and Tokens?

Cryptocurrency assets are generally classified into two categories, i.e., coins and tokens. Coins are generally associated with native blockchain platforms and can be purchased with cash. They can facilitate trading and payment transactions among different issuers on the concerned blockchain network. On the contrary, cryptocurrency token minting happens on the existing blockchain platforms. Users can mint tokens quite easily in comparison to coins by developing a local blockchain platform from scratch. 

The conditions for minting coins require users to join the concerned blockchain platform or build a local blockchain platform from ground zero. In addition, minting coins requires comprehensive knowledge of blockchain code for adding a relevant variable. On the other hand, you can mint token crypto without any extensive coding knowledge. In addition, users can also use already existing blockchain networks to draw in more customers. 

Benefits and Drawbacks of Crypto Token Minting 

The discussions on token minting meaning should also include the details of the advantages and pitfalls associated with crypto minting. You can explore some major benefits of decentralization and the speed of the process for creating new crypto tokens. The use of Proof of Stake consensus in crypto minting ensures efficient energy utilization. Furthermore, users don’t have to depend on high-end computing resources for crypto minting, thereby reducing the barriers to entry. One of the most significant advantages of crypto minting refers to the opportunity to apply the concepts to NFTs. 

Apart from the numerous benefits, crypto token minting also features a distinctive set of pitfalls. For example, you need a significant amount of crypto assets to participate in the Proof of Stake consensus for minting. The selection of validators on the basis of stakes also creates the possibility for centralized ownership in crypto minting. 

Best Practices for Token Minting in Crypto

The advantages and setbacks of token minting in crypto showcase the necessity of following the ideal methods for minting. You have to comply with the best practices, such as careful evaluation of blockchain platforms for minting and selection of tokenomics parameters. It is also important to outline the utility of the concerned crypto token you are minting alongside specifying its role in the future economy. Furthermore, you must also define the design of your nodes according to the type of control you desire over the minting process.

Final Words

The process of minting crypto tokens is different from the conventional crypto mining procedures. Both methods are crucial for creating new cryptocurrencies. As the adoption of cryptocurrencies continues to climb higher, the demand for new tokens and coins has been growing profoundly. The detailed understanding of cryptocurrency token minting shows how it depends on the Proof of Stake consensus mechanism. 

Crypto minting has introduced prominent benefits such as better energy efficiency and speed of creation of new cryptocurrencies. However, the setbacks with crypto minting would also affect the future prospects of the technique. Furthermore, the highlights of best practices for crypto minting show the necessity for evaluating the blockchain platform and tokenomics parameters. Learn more about tokenization and the best strategies to capitalize on the benefits of crypto minting.

What is a crypto wallet?

A crypto wallet is a digital or software-based way to access your cryptocurrencies.

Unlike a regular wallet, a crypto wallet doesn’t actually hold your assets. Instead, it stores credentials called private keys that give you access to your assets on the blockchain.

Depending on the type of crypto wallet you have, you can:

• Send, receive, and pay with crypto
• Store crypto
• Create a digital “vault” online that only you can access
• Interact with web3 applications that let you lend and borrow against your crypto
• Buy, sell, and store NFTs
• Earn on your crypto in a crypto rewards account

To recap: crypto wallets store your public and private keys as well as a linked receiving address so you can send and receive crypto securely

How a crypto wallet works

Crypto wallets consist of three parts: a public key, a private key, and a public receiving address.

Whenever someone sends crypto from their wallet, they must use their private key to “sign,” or confirm, the transaction. This digital signature is like a fingerprint, unique to each individual and their private key, proving that the transaction is coming from the legitimate owner of the wallet and hasn’t been tampered with.

What are private and public keys?

Crypto wallets all begin with a private key, a long, randomized string of letters and numbers. These private keys can also take the form of a QR code or mnemonic phrase.

This private key is used to generate a public key through an encryption process. While it’s easy to verify that a specific private and public key fit together as a pair, you can’t “work backwards” and figure out a private key from its public key.

This “one-way” — or “trap-door” — encryption, makes it possible to share a public key without worry that someone will figure out your private key and steal your crypto.

Next, the public key undergoes a mathematical function that “compresses” it into a receiving address (either a QR code or a shorter string of numbers and letters) where you can actually send crypto.

You can generate many public keys — each with their own separate receiving address — from one private key.

Most of the time, you don’t interact directly with these digital keys. Instead, they get stored in wallet files or managed by crypto wallet apps.

What makes crypto wallets secure?

Cryptocurrency relies on cryptography, the art of protecting data through codes and digital puzzles called ciphers.

When you use your private key to sign a transaction, the network can verify that the private and public keys represent a pair — while still maintaining the privacy of the information.

Since anyone can remove funds from an address with that address’s matching private key, it’s critical to protect your private key information.

Again, crypto wallets usually manage your private and public keys for you, but it’s important to know that they exist and what they do.

Why crypto wallets matter

A crypto wallet provides a secure way to store your cryptocurrency, send, and receive it. You can also track your crypto balance and transactions and swap one cryptocurrency for another.

Arguably, though, the greatest benefit is the ability to custody your own funds, or “be your own bank.”

When you hold assets at a traditional financial institution, like a bank or broker, you entrust them with your private information and rely on them to keep your funds safe. They may also charge fees for their services.

With any cryptocurrency wallet that lets you remain in control of your private keys, you are in complete control of your assets. No one can access your funds without your permission, and you don’t have to pay anyone to custody your funds.

This gives you full control of your cryptocurrency and helps keep it safe from hacks, scams, and theft. In countries facing high levels of inflation or capital controls, crypto wallets give people a way to store value that can’t be confiscated by their governments.

To recap: Crypto wallets that let users hold their private keys make self-custody possible for everyone.

That said, not all crypto wallets are created equal. Read on to discover the different kinds of crypto wallets you can select.

Kinds of crypto wallets

There are two main types of crypto wallets: custodial and non-custodial.

Custodial wallets vs. non-custodial wallets

Custodial wallets

Custodial wallets are like bank accounts.

They are managed by a third party, which could be an exchange, a company, or even just another crypto user. These wallets are convenient because you don’t have to worry about losing your private keys or managing them yourself.

However, custodial wallets come with risks. Because a third party manages your crypto, they also control your crypto keys. This means that if the company goes out of business or is hacked, your crypto could be at risk.

Non-custodial wallets

Non-custodial wallets are the opposite of custodial wallets.

With a non-custodial wallet, you are the only one who has access to your private keys. This might sound like a recipe for disaster (after all, if you lose your keys, you lose your crypto), but non-custodial wallets actually offer two big advantages.

First, because you are the only one who has access to your private keys, non-custodial wallets are much more secure than custodial wallets. If a non-custodial wallet is hacked, your crypto is safe because the hacker does not have your private keys.

Second, non-custodial wallets give you full control of your crypto. This means that you can use your crypto however you want, without having to worry about third-party restrictions.

Choosing a crypto wallet

When choosing between a custodial or non-custodial wallet, there is no perfect choice. Each has tradeoffs. The key is finding a wallet that best fits your needs.

If you are new to crypto or just want to dip your toe in the water, a custodial wallet might be a good choice. These wallets are easy to use and require no special expertise.

If you want total control over your crypto or plan on using web3 applications, a non-custodial wallet is the way to go. These wallets might be slightly more complicated to use, but they offer greater security and flexibility.

The Blockchain.com Wallet gives you custodial and non-custodial wallet options in the same app, making it easy to buy, sell, store, and secure your crypto with less effort than managing multiple wallets or apps.

We call our custodial wallet a ‘Trading Account’ and our non-custodial wallet a ‘Private Key Wallet’.