What Is Cryptocurrency and Why Should You Care?
You’ve probably heard the word cryptocurrency thrown around in the news recently, but do you really know what it means? Or how it could change the way you do business? Here’s everything you need to know about cryptocurrency—and why you should care about it.
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What Is Cryptocurrency (Bitcoin)
When most people talk about cryptocurrency, their focus is on one type: Bitcoin. Bitcoin is a form of digital currency that exists only online,
created and held electronically. There are no physical coins or paper bills—just balances kept on a public ledger using blockchain technology,
a kind of distributed database that maintains a continuously growing list of data records (or blocks). It’s also called crypto-currency
because it uses cryptography to keep transactions secure. In other words, people buy and sell things with Bitcoin (and other cryptocurrencies)
by trading them for dollars or other government-issued money through an exchange like Coinbase. com.
The record of these transactions is stored in a massive public ledger, which anyone can access. But unlike traditional currencies
and assets under your control, you don’t physically own any cryptocurrency until you own the private key associated with it—
basically just a long string of numbers and letters that gives you ownership over whatever amount of currency exists there
(it’s not actually stored anywhere else). That means if someone hacks your account or steals your password,
they could transfer all your funds out before you realize what’s happened.
And as more people start buying into cryptocurrencies en masse in 2017,
exchanges have become increasingly vulnerable to attacks from hackers who want to steal
those valuable private keys from unsuspecting users’ accounts.
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How Does Crypto Work?
To explain cryptocurrency, let’s begin with an analogy. We’re going to compare crypto to something you’re probably familiar with:
a paper currency like a dollar bill. If you open up your wallet right now, pull out a dollar, and take a look at it,
you will see that it says U.S. Treasury on top of a depiction of George Washington.
The buck has value because it’s backed by America’s ability to pay its debts;
if Uncle Sam can’t pay his bills, those dollars become worthless as well.
Dollars are also worth something because most people accept them as payment for goods or services;
if we paid for everything in cans of tuna fish or rare baseball cards, then nobody would want them either. So,
when we say that cryptocurrencies have value, what exactly do we mean?
Crypto Valuation: There is no central bank or government backing cryptocurrencies.
Instead, their value is derived from their supply and demand
in online exchanges where they’re traded for traditional currencies such as dollars and euros.
So how do these virtual currencies maintain any sort of real-world value without government support?
Buying And Selling Bitcoin
If you’re looking to get into cryptocurrency investing, Bitcoin is obviously a good place to start. The most popular of all cryptocurrencies,
Bitcoin has a huge network of users and plenty of infrastructure behind it.
There are also many other currencies based on bitcoin which have a lot less value but are easier for newbies to mine.
Try investing in some if you’re new to cryptocurrencies;
even though their value isn’t likely going to grow a ton anytime soon,
there’s still money to be made here. Other currencies that could be worth your time include Litecoin (LTC), Ethereum (ETH),
Dash (DASH), Ripple (XRP) and more.
Some exchanges like Coinbase make it easy to convert dollars
into these other digital currencies so you can buy and sell them just like stocks or ETFs.
They will be subject to market fluctuations just like any currency pair,
so check with an expert before making any big trades.
Just remember: not all cryptocurrencies are created equal, .
so choose carefully when deciding where to invest your hard-earned cash.
Mining For Crypto
The second way to earn cryptocurrency is through mining.
With traditional mining, you dig through dirt and rocks in order to get at a raw material
—gold, nickel, copper, or whatever else happens to be valuable.
You refine it, put it through different processes until you have something that’s useful
. It takes work, lots of work.
While cryptocurrency mining requires some tech savvy (you’ll need a computer that can run multiple GPUs),
it doesn’t take as much time or effort as conventional mining. And there are plenty of opportunities for people looking to make money by mining cryptocurrencies.
For example, there are companies like CryptoMiningFarm
that allow users to rent out spare computing power and make money from their investment.
If you don’t have your own rig, but still want to mine cryptocurrency,
sites like CoinHive let users hijack other people’s computers for mining purposes.
And finally, if all else fails, new currencies always come with an Initial Coin Offering (ICO)
where investors can purchase tokens directly from creators before they even hit exchanges.
Investing In Crypto
Most people are intimidated by cryptocurrencies like Bitcoin.
This is due in large part to their complicated nature,
but it can also be attributed to misinformation about these assets.
In fact, there is a lot of information out there that you can use to your advantage
if you want to begin investing in cryptocurrency right away. Keep reading for three tips to get you started!
The first thing you should know is what exactly cryptocurrency is. It’s not as easy to define as fiat currency,
so let’s start with some basics. Essentially, it’s digital money—it only exists online and isn’t controlled or regulated by any government or bank.
There are hundreds of different types of cryptocurrencies available on exchanges today, including Bitcoin (BTC), Ethereum (ETH),
Litecoin (LTC), Ripple (XRP) and more—but they all function similarly. They’re all built on blockchain technology,
which allows them to operate independently from banks or governments.
This means that no one can freeze your funds or tell you what to do with them;
they’re completely under your control at all times.
While it’s easy to get excited about cryptocurrency and blockchain,
there are a few important factors to consider before getting on board.
There are still massive adoption hurdles that need to be cleared, as well as concerns over regulation, security and volatility.
Also, while blockchain is an impressive innovation in
its own right, many see it as nothing more than a way for traders to make money trading cryptocurrencies.
And don’t forget: There are other ways of investing in
new technologies besides buying into cryptocurrency. So even if you’re bearish on crypto right now,
it doesn’t mean you have to be entirely bearish on innovative technologies like it. Just not getting your hopes up too high either.
Here are some reasons why I wouldn’t buy bitcoin or any other cryptocurrency today,
but why I’m still optimistic about blockchain technology.
If you’re going to buy cryptocurrency anyway, at least read what experts have to say first.
It’s one thing to hear from your cousin who claims he bought $10,000 worth of Bitcoin and has already made $5 million off it (yeah, sure),
but another thing altogether when these people tell you how they did it
—and what could happen next. Reading real insights from top minds will help you gain perspective so you can make better decisions based
on real information instead of blind hype and FOMO (fear of missing out). Sure,
we all want to become millionaires overnight with no work involved
—but do we really want to bet our financial future on something as unpredictable as cryptos?