Having been around since late 2008, when Satoshi Nakamoto published the white paper called Bitcoin: A Peer-to-Peer Electronic Cash System and introduced the term to the world, cryptocurrencies have taken the market by storm. These digital currencies were built around very complicated mathematics and computer engineering, which is why it can often be overwhelming to understand them fully. And while the code to create them was developed back in the 1980s, it didn’t get used until much later.
These virtual currencies can be used to buy goods and services. Still, unlike any other currency, cryptocurrencies are digital and use cryptography, which makes it nearly impossible to counterfeit or double-spend. The majority of cryptocurrencies are decentralized networks based on blockchain technology - a distributed ledger enforced by a disparate network of computers.
While they can be used to buy things, a great deal of interest in these unregulated currencies is the ability to trade them for profit. Cryptocurrency trading has become immensely popular in the last decade, but even the seasoned investors have found it challenging to learn the trade in crypto. And while crypto trading is proving massively beneficial to many investors, there are numerous tokens to choose from and various exchange markets on which to trade, so not everybody is well equipped to make a profit out of it.
If you happen to be a novice in the crypto world and are still learning the industry, you might want to have some expert answers on what a cryptocurrency is, how people purchase it, and what it’s worth, what does it do, is it legal and is it worth investing in crypto. Well, you are in the right place. We’ve spent some time talking to experts, digging on our own, and found valuable information for this new financial trend. Let’s dive in and find out everything beginners need to know about cryptocurrencies.
What Is a Cryptocurrency?
First and foremost, a cryptocurrency is a virtual currency format that can be exchanged or traded online for other goods and services. A broad spectrum of companies has issued their currencies called tokens to be traded for the products or services that the company provides.
You can think of them as you would casino chips or arcade tokens because you will have to exchange real currency for the cryptocurrency to access the good or the service you want to purchase. Most of the cryptocurrencies work using a technology called blockchain, a decentralized technology spread across millions of computers that manage and record transactions.
How Can You Purchase a Cryptocurrency?
Cryptocurrencies use a blockchain that stores and records all cryptocurrency transactions in the world. The blockchain itself is run by crypto miners, people who produce cryptocurrencies with the use of computer systems and complex equations. The cryptocurrency transactions only take a couple of minutes to be completed and are kept remarkably secure through codes generated by the user that are nearly impossible to hack.
You can buy a cryptocurrency as easy as buying something off of eBay. Select a service you’d like to use to purchase cryptocurrency, and from there on, you can use your debit or credit card to acquire and exchange cryptocurrency.
How Much Are Cryptocurrencies Worth?
Cryptocurrencies are much like the stock market: its value can go up or down depending on the day. Before you invest in a particular cryptocurrency, take your time to do research, and ensure that the specific crypto you’re investing in is stable. Yet, how can one know if one particular cryptocurrency is stable or not?
We can explain that through a straightforward economics principle. When the demand for a particular item is higher, the price usually skyrockets. On the contrary, when the need for a specific item is lower, down goes the cost of the item as well. The more crypto has been issued, the higher the price, and unlike standard currencies, cryptocurrencies cap out at a certain point. Besides, always pay attention to how useful the crypto you want to purchase is, since if one cryptocurrency is more accepted than others, its value will increase significantly.
There is a wide variety of cryptocurrencies available, as over 5,000 of different types of cryptocurrencies exist and continue to increase, raising money via initial coin offerings, or ICOs. The total value of all cryptocurrencies on August 10, 2020, was a little over $350 billion, and the full value of all Bitcoins, the by far most famous digital currency, is about $216 billion.
What Can You Do With Cryptocurrencies?
One way to spend your cryptocurrencies is through online shopping, as some online retailers offer the possibility to pay with cryptocurrencies in addition to standard methods of payment. Most retailers who embrace this method of paying will have an icon of a cryptocurrency when entering the shopping cart feature.
One of the most popular things holders use cryptocurrencies for is developing an investment portfolio for themselves and trade and investing their cryptocurrency. With investing crypto, one can grow that investment even more and receive fantastic gains from doing so.
Are Cryptocurrencies Legal?
Even though Ecuador, for example, permanently banned their use, cryptocurrencies are 100% legal in the United States. Ultimately, the legal status of cryptocurrencies varies substantially from country to country and is yet undefined or changing for many of them. While most countries around the globe don’t make the usage of Bitcoin itself illegal, its status as a commodity varies as different government agencies, departments, and courts classify cryptocurrencies differently.
Should You Invest In Cryptocurrencies?
As much as we want to give you a straightforward and honest answer to this question, there is none. Investing in cryptocurrencies could become a good investment, or it could not. With cryptocurrencies still being young and the market being unstable, there is no yes-or-no answer to whether you should invest in them.
The best advice is to stay prepared to lose every penny you’ll invest in cryptocurrency even though it probably won’t happen, so go into the adventure with some stored up resilience. Know that the least risky cryptocurrencies are those that have been around the longest and have the highest market cap and highest volume like Bitcoin, Ethereum and Litecoin.
Cryptocurrency is a growing industry, and it comes with a financial structure very similar to the traditional one. If you are on the brink of investing some of your money into cryptocurrencies, we strongly suggest waiting for a few years and learning and understanding the whole system before you dive into the matter. We hope that this article assisted you in understanding what a cryptocurrency is and why it created an industry around it. Good luck with your next crypto adventures!