With the world becoming more and more reliant on technology, it is not surprising to find that cryptocurrency, a form of digital currency that was once obscure, is becoming a viable option for investing as well as for paying for physical and digital products online. But since it is a fairly new concept for the general population, you may be looking to learn a little more about it and how their associated websites work. Below is an introduction to cryptocurrency including what it is, how it is bought and sold, and the different kinds that are available.
So What Is It?
The first thing that you should remember is that cryptocurrency is purely digital. It only exists electronically unless you utilize a service online that exchanges this currency for a physical item. Cryptocurrency can go by many names: Dogecoin, Bitcoin, Ethereum, and the list goes on. You can purchase cryptocurrency online using your federally regulated money on websites that act as exchanges. If you ever have any questions about the site you are using, then contact their customer service department or use their chatbot service. What is a chatbot? To be brief, it is an artificially intelligent service to assist customers when live agents are not available.
Once you have bought your cryptocurrency, you have the option to store it online on the same site you bought it on, depending on their services, for easy buying and selling, but you can also store it in a digital wallet. Digital wallets are physical external drives that are typically protected with a key that needs to be held or manipulated in real-time in order to access your currency. An advantage of using a digital wallet is the added security of this route. Because cryptocurrency is not government regulated or issued by a central issuer or authority, security can be an important aspect to think about when you are considering buying and storing cryptocurrency. Physical money, as opposed to cryptocurrency, is issued by the government, has a fixed amount, and has protections like from the FDIC.
The fact that cryptocurrency does not have a fixed amount is why many see it as similar to stocks and bonds, whose value fluctuates depending on outside forces. So why buy cryptocurrency? Some people see it as an investment because of the rise and fall of the currency’s value and it is used to buy and sell items online. These items could be physical and others can be digital, like items in a video game.
But Really, What Is It?
So you understand the basic concept of what cryptocurrency is, but you may still be asking yourself what it actually is, which is a little more complicated than the basic concept. Cryptocurrency runs on a blockchain and is created by mining, which is when a new set of transactions are created and added to the blockchain. So cryptocurrency is not regulated by a governing party, which means it occurs across a peer-to-peer network. Think of a blockchain as a decentralized registry of cryptocurrency transactions within this network. All of this is done by software on computers processing the transactions and completing the action of adding new blockchains. A very time-consuming process, mining also utilizes very large amounts of energy as well.
What Kinds of Cryptocurrencies Exist?
You may hear the two terms cryptocurrency token and coin, which are actually two different kinds of cryptocurrency. They differ in how they are developed. Coins are defined by network protocol and tokens are defined by a project or concept. Of these two types, there are more than 10,000 types of cryptocurrency being used. In addition to the ones listed earlier, there is also Ethereum, Cardano, Binance Coin, and Polkadot, which are all valued at billions of US dollars. This is why many see it as a good investment, but cryptocurrency is also extremely volatile and the price can change in an instant.
Cryptocurrency can now be considered a legitimate investment as well as currency online. It can be extremely useful to buy some because of this. Before doing so, consider researching specific sites and kinds since there are so many options.