What Is Cryptocurrency? Beginners Guide to Digital Cash - Deepstash
What Is Cryptocurrency? Beginners Guide to Digital Cash

What Is Cryptocurrency? Beginners Guide to Digital Cash

Curated from: nerdwallet.com

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What is Cryptocurrency?

What is Cryptocurrency?

Cryptocurrency is a form of payment that can be exchanged online for goods and services.

Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

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What is blockchain ?

What is blockchain ?

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security.

Bitcoin is the most popular crypto-token and thus the most popular blockchain. But there are many more.

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How many cryptocurrencies are there? What are they worth?

How many cryptocurrencies are there? What are they worth?

More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs.

The total value of all cryptocurrencies on Feb. 18, 2021, was more than $1.6 trillion, according to CoinMarketCap, and the total value of all bitcoins, the most popular digital currency, was pegged at about $969.6billion.

Starting with 2022 the prices have gone down and the industry is experiencing a "crypto winter".

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Best cryptocurrencies by market capitalization

Best cryptocurrencies by market capitalization

Crypto projects come and go. However you can think of crypto projects in 2 buckets:

  • Bitcoin: the OG value-storing coin. It's the new digital gold.
  • Programable blockhains: where Ethereum rules. And where most competition lies with projects like Solana, Polkadot or Cardano. 

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Why are cryptocurrencies so popular?

Some of the reasons:

  • Some see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable
  • Some like the fact that cryptocurrency removes central banks from managing the money supply since over time these banks tend to reduce the value of money via inflation
  • Some like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems
  • If price in $ goes up it may hurt long-term acceptance as a new way to move money

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Are cryptocurrencies a good investment?

Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did.

Cryptocurrency needs stability and Bitcoins price volatility creates a conundrum.

If bitcoins might be worth a lot more in the future, people are less likely to spend and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth three times the value next year?

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How do I buy cryptocurrency?

How do I buy cryptocurrency?

While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.

To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum.

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Are cryptocurrencies legal?

Are cryptocurrencies legal?

There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country.

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Should you buy cryptocurrency?

Should you buy cryptocurrency?

Cryptocurrency is an incredibly speculative and volatile buy. Stock trading of established companies is generally less risky than investing in cryptocurrencies such as Bitcoin.

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IDEAS CURATED BY

yugjain

Generalist. Great minds discuss ideas, average minds discuss events, small minds discuss people.

Yug Jain's ideas are part of this journey:

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