A brief about Cryptocurrency and how does it work?
Cryptocurrency has become an increasingly important part of the global economy in recent years, with more people using it than ever before. Some people have even made a small fortune from investing in cryptocurrency! But, first and foremost, what really is a cryptocurrency? Where can I invest in cryptocurrency? And the way does it work Don’t worry — we’ll answer all your burning questions right here
Here’s what we will cover
- What are cryptocurrencies?
- How do they work?
- Why do they matter?
- Are they secure?
- Can I invest in them?
- Where can I find out more about them?
What are cryptocurrencies?
In short, cryptocurrencies are digital, decentralized currencies (aka tokens) that use cryptography to secure transactions. You’ve probably heard of Bitcoin—it’s been in headlines for years now thanks to its meteoric rise (and subsequent fall). But there are many other cryptocurrencies that aren’t quite as well-known; they all differ in what they offer investors and users. What we’re looking at today are what are known as platform coins, which have their own protocols that developers can create apps for. These coins aim to provide solutions for different industries and fulfil specific niches — including Bitcoin, Ethereum, Ripple, Litecoin and more. As noted above, these four coins make up 79% of the total cryptocurrency market cap at present time.
How do they work?
Cryptocurrencies are essentially a digital form of money designed to be secure, durable, portable, anonymous and free from centralized control. (To learn more about cryptocurrency in general, check out our guide to Bitcoin.) Bitcoin is different from regular fiat currencies because it’s decentralized—there isn’t one bank or organization that controls its supply. Instead, transactions are processed by a network of computers known as miners. The value of these transactions in turn affects what bitcoins can buy you. One of the main reasons for crypto’s popularity is blockchain technology, which acts like a transparent public ledger with information such as transaction amounts visible to all parties. This makes cryptocurrencies difficult to hack or counterfeit—something many financial experts have worried would happen when electronic cash began gaining popularity 20 years ago.
Why do they matter?
Most experts believe that cryptocurrency will change finance forever. The global market value of cryptocurrencies today—$153 billion in total—is paltry compared with other financial assets. But even if cryptocurrencies have staying power, it may be a stretch to expect them to replace cash or credit cards anytime soon.
Are they secure?
Cryptocurrencies are based on encryption techniques that are supposed to ensure security. But like any other form of money, you can lose your cryptocurrency to theft, fraud or simply misplacing it. It’s also not as stable as a government-backed currency—which means its value fluctuates much more than traditional fiat currencies such as U.S. dollars or euros.
Can I invest in them?
If you’re interested in finding out more about cryptocurrency, there are many resources available. You can also look at our tutorial on Cryptocurrency Investment Strategies.
Where can I find out more about them?
If you’re looking to learn more about cryptocurrencies, we highly recommend starting with a few popular cryptocurrencies. Bitcoin (BTC) was one of the first digital currencies. Launched in 2009, BTC currently has a market cap of approximately $65 billion USD. Ethereum (ETH) is another very popular cryptocurrency that you might consider purchasing as part of your investment portfolio. Right now, the overall value of ETH is 27 billion US dollars.