Cryptocurrency seems to be all the rage these days. It’s splashed across our newsfeed, and announcements regarding new forms of cryptocurrency seem to be made with great frequency.
But when it comes to understanding what cryptocurrency is, there are very few people who can explain it in great detail. Furthermore, it’s hard to find someone who has used it for real-world applications. Other than financial wizards and investment gurus, it seems that regular folks have little interaction with what some say will be the money of the future.
So what is cryptocurrency? How does it work? Is it safe? Read on to learn some of the basics. Then you can decide whether this is an opportunity you’d like to pursue!
Cryptocurrency 101: What Is It?
Have you ever been to a casino or an arcade? Typically, in these scenarios, you exchange your government-approved currency for tokens or credits, which you then use to play the games. Your external currency becomes tokens, and those tokens pay for the opportunity to enjoy the services provided by the establishment.
Cryptocurrency is similar. It is offered by various companies, and you purchase that company’s specific currency offering using actual circulating money. You can turn US Dollars into Bitcoins, for example. But Bitcoins are just the tip of the iceberg. According to CoinMarketCap.com, there are over 6,700 types of cryptocurrencies available today.
What do you do with Cryptocurrency?
The idea is that it can be exchanged for goods and services provided online. Instead of paying for those new shoes with PayPal, which is linked to your bank account or credit card, you can pay with your cryptocurrency, which is stored on the blockchain (more about that in another article).
The American investor Warren Buffet, who knows a thing or two about finances, compared them to paper checks, stating “it’s a very effective way of transmitting money, and you can do it anonymously and all that”. And all that said, PayPal is looking into launching a cryptocurrency format, to allow for greater spending power online.
Most cryptocurrency purchasers are currently using it as an investment.
How to Invest in Cryptocurrency
The most appealing facet of cryptocurrency is that it is secure, decentralized money that can be used throughout the world. Many experts feel that this is the wave of the financial future, allowing for a secure way for transactions to be made all around the world.
Therefore, buying crypto now, while prices are low, means you’ll have a large quantity to sell once the value increases. “Buy low, sell high”, as per the laws of investment.
That being said, not all 6,700 types of cryptocurrency have the same prospectus.
If you do choose to get started with cryptocurrency investment, there are a few important things to keep in mind.
First, make sure you’re aware of the company. If the owner or owning group is well-known and well-renowned, you can feel a bit more secure in your investment. It’s not a bad idea to find out who other investors are, if possible. Seasoned investors have a feel for “good risk” and “too risky”, and will stay away from currency types that seem dodgy or unsustainable.
Since there is no managing authority, crypto has no value other than what someone is willing to pay for it. That means you, as the investor, assume all the risk. Take a look at the security practices and technology surrounding your investment.
Also, what does your initial investment get you? For some companies, your purchase will just get you tokens. In others, you’ll have the ability to own stake in the company and be a part of the earnings, as in other types of trades.
You’ll also want to double-check how far into the process the company is. If they’re just kicking around the idea of starting their own cryptocurrency, you might not want to stick out the ride, unless you’re fine with high-risk investments. On the other hand, if they’re well-established and have a detailed plan and prospectus, you might feel a little less risk.
Bear in mind that cryptocurrency is still in its infancy, and there are no guarantees about its future. While many are pulling for it to become the spending power of the world, there are still very few vendors who accept it as payment for goods and services.
How to Buy and Use Cryptocurrency
Cryptocurrency is accumulated in devices known as “wallets”. You’ll need to first establish your wallet online in order to send and receive cryptocurrency. Some cryptocurrency companies have established their own wallets, and some investment companies provide wallet options for investors, as well.
You can also buy cryptocurrency using some well established exchanges like Binance. If you open an account using this link, you’ll get a 10% discount on your trading fees for the first 30 days.
To purchase cryptocurrency, you’ll need to use government circulated currency, let’s call it “real money”. Just like the tokens at a casino or arcade, you need to exchange one type of money for another.
When transferring crypto, either through a purchase or sending to others, you’ll need to know either the receiver’s wallet address, or the QR code. Bear in mind that unlike credit card transactions, you won’t see an instantaneous shift of funds. There are several steps in the process on the back end that are designed to prevent fraud or hacking. This is why many feel that cryptocurrency is more secure than other forms of online monetary exchanges.
Though it may seem complicated on the surface, cryptocurrency does have its merits. Many individuals find it to be an outstanding prospect for investments, while others appreciate the potential for a world market.
However, it’s important to remember that this is not a well-established monetary system yet. There may be a great deal of risk involved when exchanging your hard-earned money for cryptocurrency.
For those familiar with high-risk investments, this may seem like a foregone conclusion, but it’s always a good idea to vet companies by reading through their prospectus. Just like any other type of investment, some cryptocurrencies are riskier than others, but in the rules of finance, that just makes the payoff that much sweeter!