Beginners Guide to Cryptocurrency
If you’re reading this right now, chances are that you’ve at least heard of cryptocurrency. In recent years, cryptocurrency has grown in popularity as both a safe currency type and an investment opportunity. While many people are fascinated by the concept and practicality of cryptocurrency, it is important to understand what it really is first. So, what is cryptocurrency?
Cryptocurrency is a form of money that is made up of digital data; the files are usually constructed in the same way that cryptography is. In a way, cryptocurrency is just highly sophisticated digital cryptograph. Digital signatures can be used to keep transactions secure and let others to verify that they are legitimate. The early cryptocurrencies were designed to be independent of government-issued money. This is because cryptocurrencies operate under ‘decentralized control’, which means they are not governed by a single individual or government. The technology that allows cryptocurrencies to function is known as blockchain, a decentralized system that allows several computers to operate and record transactions. Part of the appeal of blockchain is its security, and rightly so as blockchain is quite hard to hack into. Each cryptocurrency is controlled by a public financial blockchain database, which is basically a distributed record of transactions. Cryptocurrency was originally designed as an electronic payment system that may be used to buy and sell goods and services. Many companies have built their own currencies, termed tokens, that can be traded for goods or services. They’re like casino chips, and in order to enjoy the product or service, you’ll need to trade real money for them.
One major interest in cryptocurrency in recent years is the use of them for profit trading, with speculators sometimes driving prices unreasonably high. According to CoinMarketCap, the total value of all cryptocurrencies was more than $1.9 trillion as of August, 2021, and many people want a piece of that juicy pie. More than 10,000 different cryptocurrencies are traded publicly, and cryptocurrencies continue to grow in popularity, with initial coin offerings being used to raise funds. Since the boom in the price of Bitcoin (with it reaching $64,863 at its peak), many investors have rushed in hoping to make money from highly volatile and constantly changing cryptocurrencies. Interest of big companies and firms like Microsoft, Starbucks and Overstock have also drawn people in, turning it into what has been termed as “the new gold rush”. It is important to note, if you are interested in cryptocurrency as an investment opportunity, that it, like other forms of investment, is unpredictable and there is no guarantee of returns.
Cryptocurrency still continues to grow and be more acceptable by businesses and even governments (like Senegal, Singapore and China that have gone as far as to develop their own forms of cryptocurrency) due to its security and decentralized nature, and even though there have been efforts by several governments to monitor and sanction crypto, it still largely remains decentralized.