Starting with the basics of cryptocurrency
Cryptocurrency receives quite a bit of attention these days. This mainstream attention came as a surprise to many people who were previously familiar with it. The popular press seldom delves very deeply into complex technologies. And to be sure, cryptocurrency can be complex. But the reason why people are paying attention to it is the fact that it’s become both important and surprisingly easy to use. But one does need to learn a few basics before jumping into the world of cryptocurrency trades.
The core of cryptocurrency
People new to cryptocurrency often ask what it is. However, the most meaningful answer involves complex math and engineering concepts. It’s often easier to simply think of cryptocurrency as a digital version of a metal coin. The value of a coin comes from scarcity of material and overall control through closed political and economic systems. The value of a coin comes from encrypted algorithms and complex systems to work with that data. But the central idea of cryptocurrency as a valuable coin made of digital information serves as a valuable metaphor.
The scope of the cryptocurrency ecosystem
Just as there are multiple types of currency in the world one can find multiple types of currency online. Different forms of cryptocurrency can be thought of as analogous to any given country’s form of currency. The US dollar and the Canadian dollar are different forms of monetary exchange which are still convertible from one system to another. Likewise, market fluctuations cause the value of any cryptocurrency to change in relation to the others. But they’re fundamentally similar and can be exchanged fairly easily as well.
Cryptocurrency has been around for a while
Cryptocurrency has only been in the public eye for a short time. One shouldn’t make the mistake of thinking that this means cryptocurrency is a new technology though. The first real success in cryptocurrency, bitcoin, has been around since 2009. It’s been around long enough now that even long running charities have caught up with it to accept donations.
Cryptocurrency is real money with similar issues
People new to cryptocurrency often assume that it has the benefits of standard cash without all the associated headaches. But again, one needs to consider the fact that they’ve been around since 2009. It’s often said that the only certainties in life are death and taxes. And yes, taxes have proven their inevitability by working into the way most countries relate to cryptocurrency. For example, capital gain tax applies to cryptocurrency if held for over a year.
However, there are similar ways to get around some of the headaches we face with our personal accounting. Just as one can find standard tax software, there are also options for crypto tax software. And just as cryptocurrency has become easier to use so has software designed to account for its impact on our taxes. The most important point there is to simply keep the necessity of doing so in mind. There’s countless reminders out there that we need to do our taxes. But it’s probably going to be some time before we see public reminders that we need to account for cryptocurrency as well.
Getting an early start
One of the last things to keep in mind about cryptocurrency is the fact that it’s still growing. The oldest form of cryptocurrency is still relatively young in the greater scope of things. And mainstream attention is even more recent. This places it in an unusual position as far as currency goes.
It can be seen as both currency and investment. There’s some issues to this as well. New investors are typically concerned about the level of volatility in the market. But in general one simply needs to spend time noticing that rises and falls tend to even out to slow growth in the long term.
Bringing it all together
Finally, it’s important to keep in mind that while this is a new technology it’s not a new concept. It’s a new iteration on established economic certainties. This means that aspects of cryptocurrency might seem intimidating at first. But one will usually find that working with it becomes second nature fairly quickly.
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