25 Best Crypto Questions with Answers

What are the best crypto questions with answers? Cryptocurrency and its potential has attracted a lot of people to invest in it.

However, there are lots of people who are unaware of this new language and a productive source of income that has taken the world by storm. If you are one of them, rest assured that you are not alone out there.

Cryptocurrency has the potential to be the future of finance and therefore a lot of people around the world are talking about it on various platforms, including social media.

Different forms of it have come up since Bitcoin was launched and each of them has grown exponentially.

You may have a lot of questions in your mind to ask in order to know more about this vocabulary. This article comes with the answers to them.

25 Best Crypto Questions with Answers

Best Crypto Questions with Answers

It is quite natural that you will have several queries account cryptocurrency and it is good in a way. With proper knowledge about this digital asset there will be less chances of making wrong investments.

Here is the list of 25 most common questions asked by several aspirants who want to step into the volatile crypto market and make it big.

Though this is not an exhaustive list of questions, it covers most of the basic aspects of cryptocurrency, and beyond. Read on.

1. What are cryptocurrencies?

Cryptocurrencies are digital assets. It is used as a medium of exchange but now its functionality has extended making it the future of money.

These assets cannot be seen or touched and transactions are made through a specific computer network.

It is a decentralized currency which is not controlled by any central authority or government as fiat currencies.

2. What are its other functions apart from being a mode of payment?

The crypto tokens can be used for different purposes apart from pegging it to the base currency.

It is a digital currency that can be used as privacy coins where you can send and receive them anonymously or as governance tokens which gives you the right to vote for or against future developments in blockchain.

These digital assets can also be used as utility tokens and NFTs or Non-Fungible Tokens.

3. How are the transactions recorded?

All transactions are made and monitored using a complex blockchain technology. This is a digital ledger which is based on decentralized technology.

There are different computers set in a network, called nodes, which verifies and records each transaction made by you.

4. Which are the best cryptocurrencies?

When it comes to crypt coins, the most heard and popular one is Bitcoin. However, there are also lots of other variants available now in the market which may sum up to 7000, and is still counting.

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Based on the market value and capitalization some of the top cryptocurrencies, not in any particular order, are Bitcoin, XRP, Ethereum, Litecoin, Tether, and others.

5. Is there any risk of this currency failing?

Just as any other financial investments, you should be careful about your crypto investment as well. Any and every crypto coin may not provide the return as you may desire.

And, yes, it can fail as well. According to records, more than 2000 crypto coins have failed till now for different reasons such as frauds, failing to evolve, and lack of funds to sustain.

Therefore, research well before you invest and always choose a reputed and reliable crypto coin and exchange to trade.

6. Is cryptocurrency illegal or risky?

Most of the countries now have accepted cryptocurrencies but there are several that have not yet. Moreover, as said earlier, this is a decentralized network which means there is no one controlling it.

Therefore, there is a high chance that a few crypto exchanges may operate without any registration.

There are also a few criminal activities recorded, hacks reported and tracing of activities has happened before because blockchain records all transactions publicly.

Therefore, risks are always there and as far as illegality is concerned it all depends on where and how many transactions are made and its other proponents.

7. What is the legality status of crypto coins in the US?

In the US, investing in Bitcoin is legal. The US Treasury Department’s Financial Crimes Enforcement Network FINCEN has allowed digital assets to be used as legal tender provided the seller has no issues in accepting it as a form of payment.

Moreover, it is considered to be a property by the IRS, as a commodity by the Commodity Future Trading Commission and as a digital currency by the Securities and Exchange Commission.

However, a few states do have regulations imposed and therefore research is necessary once again for legal and regulatory updates.

8. How to purchase crypto coins with US dollars?

There are lots of ways in which you can buy crypto coins. One of the best, easiest and cheapest ways is to do so through a reliable online crypto exchange.

You can buy, sell, and trade crypto coins through these exchanges after creating an account with them.

You can even send cash apart from buying crypto coins of your choice.

However, do some research on the transaction fees charged, the user experience offered, as well as the specific requirements of the particular crypto exchange you want to trade with.

9. What are the most popular crypto exchanges?

There are several crypto exchanges out there but all of these are not created equal. Out of a humongous list the most popular ones are Binance, Coinbase, Kraken, Gemini, and online brokers such as Robinhood and eToro 

10. What is a digital wallet? 

Digital or crypto wallets, in simple terms, is the place to store your crypto coins. These are safe and secure and therefore it is better to store your coins in these wallets rather than on the exchange itself.

There are different types of wallets such as hot wallet and cold wallet and you are advised to research well to know which is the best for you to use. Each has its characteristic pros, cons, features, and functionality.

11. Is there any way to buy crypto coins outside the exchanges?

Ys, there are several ways to buy crypto coins outside the common exchanges and one of the best ways is to buy them from Bitcoin ATMs.

All you have to do is deposit cash and the coins will be transferred to your digital wallet. However, make sure that you do have a Bitcoin wallet prior to that.

You can also use the P2P platforms that allows buyers and sellers to meet and trade crypto coins.

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12. Is there any need to purchase a security?

This is quite relative and depends largely on the store value and potentiality of the specific crypto coi you want to deal with.

You may buy a security just as a hedge against the orthodox fiat currency. Or, if you want to make a speculation and some quick money buying a security will be a prudent move.

Most importantly, a security will be very useful especially if you want to trade your crypto coins and not just consider it as your investment per se.

13. Does the crypto market close?

No, it is open 24 hours a day, seven days a week, and 365 days a year. This means you can trade on a Sunday, Monday night, and even on the weekends.

However, trade cautiously because the crypto coins are subject to drastic price movements making them highly volatile. Consider going through the trading signals and price charts before you place an order.

14. What are the tax liabilities?

It depends on the country you live in. If you stay in the US, you will need to pay taxes on your crypto income because according to the IRS, digital assets and cryptocurrencies are considered to be a property and are therefore subject to federal income tax.

Therefore, whenever you make a capital gain or loss, make sure that you record all of your transactions because most of the exchanges do not provide any tax reporting form.

15. What happens in case an account is hacked?

Ideally, you can do nothing since there is no FDIC insurance or any other types of coverage against it. However, that does not mean there is no protection for it.

You can buy crypto insurance for individual coins from the exchange. There are several of these that finance and offer their users their own insurance plans.

It is a good thing to do especially if you own a large position. However, this does not eliminate the risks completely since these insurance plans are not guaranteed and are usually capped.

16. What about cryptocurrency adoption among the institutions?

The good news is that adoption of cryptocurrency is increasing with each passing day not only among the individual buyers and sellers but also among different merchants, sales outlets, and more importantly among the financial institutions.

According to a recent report conventional banks, endowments, new technology companies, and pensions now deal with cryptocurrencies to make payments.

17. What is the future of cryptocurrency?

The crypto space is evolving at a rapid pace and the prices and value of it will rise in the future and continue to do so in the years to come.

It may even replace traditional money one day due to the developments happening in its surroundings that involve investment, trading, and even regulatory measures.

This means that every area of cryptocurrency whether it is trading, custody or execution will become more and more efficient.

It will become a much safer space to invest and will see some of the most influential players and institutions taking part in it as the crypto market matures.

18. Are governments making any efforts to make it legal?

As said earlier, several governments are opening up to this digital finance market. They are now implementing newer and more flexible regulatory measures and rules regarding cryptocurrency.

They are also focusing on other vital aspects of it such as disclosures and identity collection to reduce illegal activities and increase tax collection.

Surely, the crypto marketplace, the stakeholders and the governments are the ones who will determine the fate of cryptocurrency in the coming decade.

19. What about energy efficiency of the cryptocurrencies?

Depending on the type, a few specific crypto coins can consume a high amount of energy. There are several different developments made in this field to deal with this issue.

However, as of now, cryptocurrency mining is the most common technique followed which is considered to be highly inefficient in terms of energy consumption.

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Efforts are being made to transform this POW or Proof of Work validation into a more energy efficient technique such as the POS or Proof of Stake technology.

20. How does blockchain work?

Blockchain technology is actually the infrastructure to keep the record of all crypto transactions made. It connects numerous computers to store or host encrypted copies of the transactions.

These are called nodes. This technology makes it impossible by one user or a group of users to tamper with the records in collusion with any third party since there are millions of nodes in a network keeping a watch on every proceeding.

21. What is an Initial Coin Offering?

An ICO or Initial Coin Offering is very much the same as IPO or Initial Public Offering of stocks. However, here crypto tokens are offered instead of stocks.

These tokens are proof that the contract between a buyer and seller is fulfilled. The value of the coin depends on the fluctuations in prices of the coins or tokens to different degrees. However, this entirely depends on the state of the association.

22. Are these cryptocurrencies as good as securities?

It all depends. Securities are specifically negotiable financial instruments. These securities are issued by the government or a company.

It provides ownership rights and other different rights such to buy, to sell, to trade, or debt rights. However, Bitcoin, which does not have a centralized governance, is not considered as a security.

On the other hand, there are a few specific digital assets that you may consider as securities. However, this depends on the particular framework which makes them subject to a variety of SEC regulations.

23. Can one cryptocurrency be converted into others?

Yes you can but all crypto exchanges may not allow it. Those that allow converting crypto currencies into other tokens by buying other coins from the crypto space.

These exchanges allow the users to convert crypto coins directly. Depending on their features and regulations, you can convert BTC, ETH, ETC, LTC, ZRX) and BCH.

24. Why do the price of cryptocurrencies fluctuate?

There are notable ups and downs in the prices of crypto coins for several reasons and one of the most significant ones is that it is a relatively young market.

There are several developments going on in this field continuously which makes it so volatile. It is the reaction of the crypto assets to these developments that makes the price of it fluctuate so dramatically.

However, the supply and demand also plays an important role in varying the prices of these coins.

25. If cryptocurrency is banned, what effect will it have?

Firstly, it will deprive the country from adopting a transformative technology which is supposed to be the future of money.

Moreover, a lot of individuals and institutions hold this digital asset which will be annihilated immediately resulting from a ban. It will eliminate wealth and deprive people from creating wealth.

The most significant effect, albeit bad, will be that it will possibly build a parallel economy where there will be illicit trade and illegitimate uses such as money laundering.

Conclusion

Everyone today is looking for an alternative or additional source of income and investing in cryptocurrencies is one of the most productive ways.

Going through the above list of questions will clarify a lot of doubts in the minds of beginners.