Cryptocurrency and Blockchain ExplainedVanda Williams
Cryptocurrency is a digital currency that’s based on blockchain technology
With crypto, online transactions are secured through a strong cryptography-based online ledger. The currency can be used to buy both goods and services, however, many people invest in cryptocurrencies as they would stocks.
What is cryptocurrency?
Cryptocurrency is a decentralised, encrypted digital currency. Because it is decentralised, there is no one authority or system of government that controls or manages its value. When companies issue their own currencies or tokens, they can be traded for the specific good/service that that company provides. These tokens function in the same way as casino chips would, whereby you would use a real currency for the cryptocurrency to access the good/service.
Your cryptocurrency runs on blockchain technology. Blockchain records and organises transactions and is decentralised, distributed across many computers.
What is blockchain?
A blockchain is an open distributed ledger that records coded transactions. These types of transactions are accounted for in the form of “blocks” and are linked together, or configured in a “chain”. The chain, in essence, is a group of previous cryptocurrency transactions.
Why is cryptocurrency marketable?
Cryptocurrencies are known for these favourable qualities:
- Crypto is the currency of the future and is projected to only increase in value
- It removes banks from managing the money supply, reducing the risk of inflation
- Cryptocurrencies maintain a heightened level of security due to decentralisation
- Cryptocurrencies are a long-term investment for the movement of money
- Blockchain technology ensures that all crypto data is accurate and identical
How do I buy cryptocurrency?
Bitcoin, as well as other cryptocurrencies, are available for purchase with U.S. dollars. Other cryptocurrencies, however, require you to pay using bitcoins (or other cryptocurrencies). In order to do so, you will require a wallet which is an online app that holds your currency for you. Once you create an account on a cryptocurrency exchange like Coinbase, you can then transfer real money to buy your desired cryptocurrency, create a wallet, and buy and sell Bitcoin and other currencies. However, be careful of exchange costs – Coinbase, for example, charges a fee of 0.5% of your purchase in addition to a flat fee of $0.99-$2.99 depending on the size of your transaction.
How do I use cryptocurrency?
Although cryptocurrency is used to make purchases, the currency isn’t widely accepted yet. However, this may quickly change since PayPal recently announced a new service enabling users to buy, hold, and trade cryptocurrency straight from their PayPal accounts. Crypto is also an investment option, such as stocks and bonds, or even precious metals. More and more, people can load crypto onto their debit cards to fund purchases, as well as exchange cryptocurrency for certain gift cards.
Should I invest in cryptocurrency?
At this stage, crypto is a highly speculative investment. Experts claim that if you invest in cryptocurrency, you should invest 5% of your money or less. Cryptocurrencies are risky, in that they could become mainstream or remain niche, and you could lose all of your money or triple it, without any guarantees. As with any investment, you will need to do your due diligence and stray from placing all your confidence in one company or one cryptocurrency. You should spread your money around so that you equally spread the risk.