If you’ve been around the internet for quite some time, you’ve probably seen a few headlines about different types of cryptocurrencies rising or losing their value. This might not have meant anything to you, but to someone who is involved in crypto, news like this could mean thousands of dollars earned or lost.
Managing your money is not always as easy as it seems. That’s why we try our best to determine which investments would grow our money and which ones are a bit risky. In essence, that is what cryptocurrency is—an investment.
Whether you want to be part of the crypto-trading world or you’re just generally curious about this new form of currency, we’ve got you covered! This article will provide you with a brief understanding of cryptocurrencies.
What Is Cryptocurrency?
If you pull your wallet out right now, you’d probably find a few paper bills and some coins inside. This is the money that you use to purchase various products and services, and this money is tangible. On the other hand, you can think of cryptocurrency as digital money. It’s a virtual currency that can be used for a wide variety of purposes, some of which will be discussed later.
While there have been a few attempts to create a digital form of money, the first sign of the cryptocurrency we know today was when an anonymous developer made bitcoin. This cryptocurrency was primarily intended to allow transactions without the need for third-party giant corporations to take a share from these transactions. These include banks, companies, and the government.
How Does Cryptocurrency Work?
During the early years of bitcoin and cryptocurrency, the question that was always present in everyone’s mind is this, if cryptocurrencies are digital forms of money, wouldn’t they be counterfeited or multiplied easily? As you can imagine, this will be a problem for the world of crypto-trading because if people can multiply their money, then the crypto economy will collapse. The currencies will not be of any value.
The first thing you need to know about cryptocurrencies lies in the first two syllables of the world. The term “crypto” can be roughly translated to “code.” This means that every single coin of every cryptocurrency that exists out there has a unique code. This prevents the coins from being copied or multiplied.
What is Cryptocurrency Used For?
There are hundreds, if not thousands, of different types of cryptocurrencies in existence as of today. While bitcoin is perhaps still the most popular and valued one, other currencies are currently in pursuit. You can purchase crypto coins from various outlets if you want to have your own digital money, but the real question is, what will you use it for. Generally, there are a few major uses of cryptocurrencies, and below are some of them.
Since cryptocurrencies are, in essence, a form of money, they can be used for financial transactions. You’re probably asking why do you need cryptocurrencies in the first place if you can use online banking for these transactions. Well, the thing about cryptocurrencies is that they function independently from the national economy. This means that the government or any bank does not regulate transactions that include crypto. In turn, the value of crypto fluctuates. If you wish to use cryptocurrencies to purchase goods and services, you need to ensure that the business accepts the currency you own you plan to buy the goods or services from.
Now that we’ve mentioned it, did you know that multiple businesses are also starting to use cryptocurrencies for their development? Despite being independent of governmental control, cryptos still follow the basic rule of economics, which is, if the supply is low, the price is high, and vice versa. This paved the way for businesses to join the crypto world.
They would create a credible and reliable cryptocurrency, sell it to investors, and people can use this cryptocurrency to purchase the business’s products. The value of the crypto would then depend on the current supply in the market. That’s why businesses also employ the services of PR agencies focusing on ICO or Initial Coin Offering. This allows businesses to gather investors and therefore raise the value of their cryptocurrency.
Aside from business development, you can also use cryptocurrencies for personal investment. As we’ve mentioned, the value of crypto fluctuates, which means that your money can grow significantly if the cryptocurrency you purchased improves. Did you know that back in 2010, you can purchase one bitcoin for $0.08? If you purchased one bitcoin ten years ago, you would have $54,680 today without doing anything. That’s how much bitcoin has improved over the years.
There are still lots of things you need to know about cryptocurrencies, but for now, this is more than enough to get you started. If you plan on joining the crypto world soon, be sure to do your research and make wise investment choices.