Cryptocurrency is the new technological innovation to take the world by storm. A lot of people may be confused as to what cryptocurrency is and how it works so we’ve created a short beginner’s guide to cryptocurrency.
The term cryptocurrency is used to describe any decentralized digital currency that is backed by a secure blockchain network. A blockchain network is essentially a network of multiple computers that work simultaneously without a single central administrator. These networks are secure, open to the public, and anonymous. Cryptocurrency allows users to transact online without the need for an intercessor like a bank or an online payment company. While people were initially sceptical of cryptocurrency, even terming it a scam and a Ponzi scheme, the legitimacy and value of cryptocurrency have been actualized. Cryptocurrency continues to be endorsed by major players in tech and finance, who have also invested heavily in it.
There are over 1,500 cryptocurrencies which currently exist, and this number is growing rapidly by the day. This is because cryptocurrencies are open source, meaning they can be created easily and by anyone who wishes to. The most popular cryptocurrencies right now are Bitcoin, Litecoin, Ethereum, Ripple, Bitcoin Cash, and Cardano. Bitcoin, which was the first cryptocurrency in the market, remains the most popular cryptocurrency and the largest by market capitalization. Cryptocurrency, like any other currency, can be bought, sold, and traded on cryptocurrency exchanges like Binance and Kraken, which are very similar to traditional stock markets.
Cryptocurrency is stored in secure wallets which can be downloaded and accessed through computers, phones, printed access keys, and external storage devices, or hosted online on cloud systems. Downloadable wallets are more secure but can only be accessed through a single device. Cryptocurrency is not only for investment and trading. It is a legitimate form of currency which can be used to pay for goods and services. There are a few major companies that have already started accepting all major forms of cryptocurrency as a viable source of payment including Microsoft, Overstock, Expedia, Paypal, and Shopify.
If you are considering investing in cryptocurrency it would be wise to be cautious. Cryptocurrencies are susceptible to major rises and drops in value, making them very unstable. You may buy a cryptocurrency during its peak only to have it crash later, resulting in the loss of your investment. Many view the crypto market as a large bubble due to its volatility. There is also the risk of hacks. As a digital currency, cryptocurrency is always at risk of being hacked. This has happened in the past when cryptocurrency exchanges lost hundreds of millions of dollars at the hands of hackers. Lastly, there is also the risk of fraud. Many scammers have taken advantage of the growing popularity of cryptocurrency to devise ways to steal money from unsuspecting investors. Before purchasing cryptocurrency ensure you are not part of a phishing scheme.
Regardless of the risks involved, cryptocurrency remains an exciting and alluring prospect for investors and definitely something worth taking the time to understand.