The way people work, communicate, shop, and even pay for goods has all changed as a result of technological advancements. Companies and consumers no longer prefer cash, and contactless payments such as Apple Pay are gaining traction.
Consumers can pay for items at digital registers with a quick wave of their smartphone. Now, a new type of payment system is gaining traction: cryptocurrency.
By now, almost everyone has heard of Bitcoin. It was the first cryptocurrency to gain mainstream acceptance, but others are gaining traction. There are over 2,000 different types of cryptocurrencies, and new ones are being created every day.
According to research, the majority of people have heard of cryptocurrency but do not understand fully what it is. So, what exactly is it, is it safe, and how do you go about investing in it? We’ll answer those questions to assist you.
Consider it Cryptocurrency Investing 101.
Table of Contents
What is Cryptocurrency?
Cryptocurrency is a digital payment system that does not rely on banks for transaction verification. It’s a peer-to-peer system that allows anyone to send and receive payments from anywhere. Cryptocurrency payments are digital entries to an online database that describe specific transactions, rather than physical money that is carried around and exchanged in the real world. The transactions that you make with cryptocurrency funds are recorded in a public ledger. A
digital wallet is where you keep your cryptocurrency.
The name cryptocurrency comes from the fact that it uses encryption to verify transactions. This means that storing and transmitting cryptocurrency data between wallets and to public ledgers requires advanced coding. Encryption’s goal is to provide security and safety.
Cryptocurrency Meaning and Cryptocurrency Definition
Why are cryptocurrencies so popular?
Cryptocurrencies have a wide range of supporters. Here are a few of the most well-known:
Supporters see cryptocurrencies like Bitcoin as the currency of the future, and they’re rushing to buy them before they become more valuable.
Some supporters like the fact that cryptocurrency frees central banks from controlling the money supply because central banks tend to devalue money over time through inflation.
Other supporters support the blockchain technology that underpins cryptocurrencies because it is a decentralized processing and recording system that is potentially more secure than traditional payment systems.
Some speculators are interested in cryptocurrencies because they are increasing in value, but they are uninterested in the currencies’ long-term acceptance as a means of money transfer.
Are cryptocurrencies legal?
They are unquestionably legal in the United States, though China has effectively banned their use, and whether they are legal in other countries is ultimately a matter of national sovereignty. Also, think about how to protect yourself from scammers who see cryptocurrencies as a way to defraud investors. Buyer beware, as always.
How Secure Is Cryptocurrency?
Blockchain technology is commonly used to create cryptocurrencies. The way transactions are recorded in “blocks” and time stamped is described by blockchain. It’s a lengthy, technical process, but the end result is a secure digital ledger of cryptocurrency transactions that hackers can’t alter.
Transactions also necessarily require a two-factor authentication process. To begin a transaction, you might be asked to enter a username and password. Then you may be required to enter an authentication code sent to your personal cell phone via text message.
While security measures are in place, this does not mean that cryptocurrencies are impenetrable to hackers. In fact, several high-dollar hacks have impacted negatively on cryptocurrency startups. In 2018, hackers stole $534 million from Coincheck and $195 million from BitGrail. According to Investopedia, this made them two of the biggest cryptocurrency hacks of 2018.
Main Types of Cryptocurrencies
Bitcoin is generally viewed as the first cryptocurrency, and other individual cryptocurrencies are referred to as “altcoins” (a combo word derived from “alternative coin”). It’s difficult to say which cryptos are the best, but Bitcoin and some of the largest altcoins are top-tier options due to their scalability, privacy, and breadth of functionality.
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Should you buy cryptocurrency?
How do I buy cryptocurrency?
While some cryptocurrencies, such as Bitcoin, can be purchased with US dollars, others require bitcoins or another cryptocurrency to be purchased.
To purchase cryptocurrencies, you’ll need a “wallet,” which is an online app that stores your funds. In general, you open an account on a cryptocurrency exchange and then use real money to purchase cryptocurrencies like Bitcoin or Ethereum. More information on How to invest in Bitcoin can be found here.