What Is Cryptocurrency: An Intro To What You Need To Know
If you’ve watched the news or been online recently, you’ve probably heard of cryptocurrencies… and then you’ve probably found yourself wondering, “What is cryptocurrency?” To understand cryptocurrency, you must first understand traditional currency.
When you pull a $20 bill out of your pocket, how do you know that it’s actually worth $20?
Despite the fact that $20 is printed right across the piece of paper, at the end of the day your bill is just that — a piece of paper. So what exactly makes it legitimate currency?
Currency becomes money when other people accept it to be so. When you understand that your $20 bill is worth $20, and so does your neighbor, the guy at the grocery store, your teacher and the teller at the bank, your piece of paper becomes legit.
While it’s been generally accepted for just about forever that currency is something that you can hold in your hand, modern technology has changed the rules of the game. Today, there are cryptocurrencies, and they might just be the currency of the future.
What is Cryptocurrency?
In simplest terms, cryptocurrency is digital currency — that is, currency that does not exist in physical form. Further, cryptocurrency is encrypted, which means that its data is stored and transmitted in code so that it’s protected against thieves, hackers and other bad guys.
Like traditional paper or coin currency, cryptocurrency has value because people have decided that it does hold a lot of value… and to the tune of over $2600 USD per Bitcoin as of mid-June 2017. As you can see, while cryptocurrency can’t be touched or held in your hand, it’s certainly real — and it’s serious business.
The next thing you might be wondering is what you can do with cryptocurrency, and the answer is just about anything you’d like. One characteristic of cryptocurrency is that there is no central regulating body — no government, bank or other entity has control over it.
That means there is no one to set rules on how the money is used, nor is there anyone who will investigate fraud or illegal dealings. It’s for this reason that cryptocurrency, with its added perk of near anonymity for users, has been popular in underground networks with not-so-legal dealings.
There are many different kinds of cryptocurrency available today, but Bitcoin — which was created back in 2008 — remains the most popular and valuable of them all. Many businesses, both large and small, have adopted payment with Bitcoin, so you can now buy everything– from home decor or electronics from your favorite online retailers to pizza or drinks at your local bar or restaurant.
What is a Cryptocurrency Wallet?
Just as you need a wallet with cold, hard cash to make purchases with traditional money, you’ll need something similar to utilize cryptocurrencies. Where physical wallets can help you store physical money, digital wallets are where you store digital money — sort of.
A cryptocurrency wallet doesn’t actually store your virtual money. Instead, it stores an encrypted code called a private key. This private key, which is only known to you, coincides with a public key. The public key is what actually keeps track of how much cryptocurrency you have, as all cryptocurrency transactions, including purchases and transfers, are meticulously detailed.
There are many cryptocurrency wallets available to choose from. If you’re a beginner in the world of digital currency, it’s recommended that you stick with the official wallet of the cryptocurrency in which you’re dealing. For Bitcoin, that would be the Bitcoin Wallet, while Feathercoin’s wallet is called… you guessed it: Feathercoin Wallet. When you’re more experienced with using cryptocurrency, you can move to a third-party or universal wallet.
Once you’ve established a wallet and filled it with some digital cash, you might wonder what else you can do with your new money. Just as you might with hard currency, one possibility is to start investing.
What are Cryptocurrency Investments?
Making a cryptocurrency investment is not unlike any other kind of investment: essentially, you are devoting some money to a cause that may bring you even more money. What cryptocurrencies have going for them right now that other mediums, such as savings accounts and 401ks, don’t is that they are red-hot.
The best way to illustrate just how hot cryptocurrency has been lately is to talk straight numbers. Let’s take Bitcoin as an example. In July 2010, just shy of a couple of years since its creation, a single Bitcoin was worth about 8 cents USD.
Clearly, this isn’t impressive in the least. However, just one year later, the value of one Bitcoin had risen to $31 USD. To put this in perspective, imagine you had 100 Bitcoins in 2010 — that would have been a whole $8. Just one year later, that $8 would have grown to $3100!
As if that wasn’t enough to blow your socks off, imagine this: those same 100 Bitcoins, the ones that were valued at a measly $8 in 2010, were worth $228,921 as of the last week of May 2017.
Clearly, as far as investments go, cryptocurrency investments have the potential to make you incredible amounts of money. Are you likely to see $10 skyrocket to over $200,000 in just under 10 years? Who knows. While cryptocurrencies are not new considering the lightning-fast pace of the digital world, they are growing exponentially in value even today.
Now that you have a better understanding of the important question of “what is cryptocurrency?”, it’s time for you decide whether you’re ready to make the jump into the world of digital currency.
Some will argue that digital cash, without its regulations and government overseeing, is the future of currency; others are terrified that this system could lead to a collapse of our economy as we know it.
And still others are, as you recently were, very much in the dark about what is cryptocurrency and how powerful of a tool it is. Now that you have an advantage over most people, you can use your newfound knowledge to set up a cryptocurrency wallet, make some cryptocurrency investments and hopefully turn an exciting return.