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Cryptocurrency vs Stocks: The Difference And What You Need To Know 

Cryptocurrency can be referred to as Digital money. Those currencies are kept in a decentralized system
Written by Ayileoh Jacob

Discussing the difference between Cryptocurrency and Stocks is a difficult task but let’s get to work. Cryptocurrency can be referred to as Digital money. Those currencies are kept in a decentralized system. This means bots run the affairs of the currency. Cryptocurrency is managed through the encryption of advanced techniques known as cryptography. Crypto is digital money. It uses blockchain technology and it is considered secure because it is capable of establishing distributed consensus. Money transferred through cryptocurrency is stored in a ledger.

Types Of Cryptocurrencies

There are a lot of coins I can discuss in this chapter but my focus is on two which are Bitcoin and Dogecoin.

  • Bitcoin: Bitcoin is the first Cryptocurrency founded in 2009. Though there are a lot of cryptocurrencies in the system, Bitcoin is the preferred one for most traders. Bitcoin is digital money which you can buy, sell and exchange in digital currency without any mediator like what we have at banks.Creator of Bitcoin, Satoshi Nakamoto, had an idea to develop a digital currency that uses an electronic payment system called Cryptographic proof.

 

  • Dogecoin: This is one the many coins that have come into existence. Many coins were created to solve problems but Dogecoin was created as a meme coin. Now Dogecoin has worth and it is a cryptocurrency which can be used to transact business. Dogecoin can be used to transfer money between people as a means of transacting business or just sending cash. Payments can be done without going through an intermediary such as the bank and it is quick and reliable because records of payments are available on the blockchain.

Stocks on the other hand is a kind of investment that gives a person the right to own a share in a company. It gives you fractional ownership of a company. And so for instance when you invest in a company’s stock, you are buying a part of the whole company which makes you a shareholder. Investors are people who do not want their resources to go to waste and so they always want to invest in companies whose stocks are likely to gain value. In such instances when the stock’s value increases, it is sold for profit. There are cases where the value of stocks decrease.

This might be poor performance or economic situation. Sometimes the economic conditions can have a huge toll on stocks and either affect it positively or negatively. Owners of stocks can vote to elect members of the board of Directors. Though they have little say on how things should be run by the company, they can team up if they’re many and decide on the focus of a company.

Investors can choose to hold preferred or common stock classes. Those in the preferred class are in some cases given preferential treatment. An example is preferred shareholders get their dividend first and at a higher rate. This means a preferred stockholder has some advantages over a common stockholder. Also, if a company wants to close down, preferred shareholders get their investment first. One advantage of a common stockholder over a preferred stockholder is that the common shareholder has a voting right while the preferred one does not.

Why You Need To Invest Into Cryptocurrency 

Cryptocurrency has become a major investment option for many people around the globe. Crypto investment is the go to investment option for most people nowadays. Cryptocurrency is of the newest and interesting asset classes available for investors to reap benefits on their income.

However, when investing in cryptocurrency, do not invest more than you wish to lose because it does not have a centralized system of operation where you can seek redress on issues of misunderstanding or take legal action. You can invest crypto coins in companies which have a total focus on cryptocurrencies.

Cryptocurrency Vs Stocks

There are different ways to become a stockholder or Crypto trader though both are valid. There are different strategies to how you buy stock and how to buy cryptocurrency. Let’s get into details.

Ownership

For someone to become a stockholder you need to open an account at a brokerage such as Charles Schwab, TD Waterhouse etc. The brokerage is an intermediary who makes trade and holds stock for the investor. Also, a buyer or investor has to give his or her details such as social security number and street address. A brokerage is streamlined in such a way that it gives security to the investor. But with Crypto, the buyer identity is not that necessary. This is because a buyer holds assets in a virtual market on a storage device. In this case the asset holder becomes anonymous and the security of the asset rests on the shoulders of the owner. Should any unfortunate incident happen, the owner of the asset bears it all.

Exchanges

stocks are traded on exchanges throughout the world. And not any exchanges but accredited ones. This gives buyers security, reliability and transparency. They handle the largest trading volumes everyday. Stocks are regulated to give protection to both buyers and sellers although there may be some varying differences between countries.

Exchanges for cryptocurrency are new although there are a lot on the market such as Coin base, Binance, Bitfinex wallet, Bit Stamp etc. Cryptocurrency is new to game when it comes to exchanges however, stocks have made exchanges part of their game.

Regulations

Stocks are regulated by a centralized system. After the stock market came to a crumble in 1929 which saw many fluctuations in the US, the government created the Securities and Exchange Commission (SEC) to protect the interest of investors. And so as an investor, you have the right to know how a company is fairing because companies are tasked to give out every vital information that can have an impact on stock value to investors. With such information, you can decide on how to invest in a particular company and become a shareholder of that company.

Cryptocurrency are not regulated by any centralized system. It is managed by a technique known as cryptography. It makes crypto investors have no protection and should they lose their investment there is no physical office to go to. This makes investing in Crypto a highly risky one.

About the author

Ayileoh Jacob