What is cryptocurrency? A Beginner’s Guide
A cryptocurrency is a digital or virtual currency designed to function as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. In essence, cryptocurrencies are limited entries in a database that no one can change unless certain conditions are met.
What can you do with cryptocurrencies
Purchase of goods
In the past, trying to find a trader who accepted cryptocurrency was extremely difficult, if not impossible. However, these days the situation is completely different.
There are many traders – both online and offline – who accept Bitcoin as a method of payment. They range from large online retailers such as Overstock and Nevegg to small local shops, bars and restaurants. Bitcoins can be used to pay for hotels, flights, jewelry, applications, computer parts, and even college.
Other digital currencies such as Litecoin, Ripple, Ethereum and so on are still not so widely accepted. Things are changing for the better, and Apple has authorized at least 10 different cryptocurrencies as a possible method of payment in the App Store.
Of course, users of cryptocurrencies, except Bitcoin, can always exchange their coins for BTCs. Moreover, there are gift vouchers that sell on websites like Gift Off, which accepts about 20 different cryptocurrencies. Through gift vouchers, you can essentially buy anything with cryptocurrencies.
Finally, there are markets such as Bitifi and OpenBazaar that only accept cryptocurrencies.
Many people believe that cryptocurrencies are the most popular investment option currently available. There are many stories about how people become millionaires through their Bitcoin investments.
Ethereum, probably the second most well-known cryptocurrency, recorded the fastest growth ever shown by any digital currency. Since May 2016, its value has increased by at least 2,700 percent. When it comes to all cryptocurrencies together, their market turnover has increased by more than 10,000 percent since mid-2013.
However, it is worth noting that cryptocurrencies are high-risk investments. Their traffic volume varies like no other. Moreover, they are partially unregulated, there is always a risk of being banned in certain jurisdictions, and any cryptocurrency exchange can potentially be hacked.
If you decide to invest in cryptocurrencies, Bitcoin is obviously still dominant. However, in 2017, its share of the crypto market dropped dramatically from 90% to only 40%. There are many options currently available, with some coins focused on privacy, while others are less public and decentralized than Bitcoin, and some simply copy it.
Although it is very easy to buy Bitcoin and there are numerous exchange offices that trade BTC, other cryptocurrencies are not so easy to acquire.
This situation is slowly improving with large exchange offices such as Kraken, BitFinex, Bitstamp and many others who are starting to sell Lightcoin, Ethereum, Monero, Ripple and so on. There are several other ways to trade coins, for example, you can trade face to face with a seller or use a Bitcoin ATM.
If you’re looking to buy Bitcoin at most affordable prices, you can also check Buy Bitcoin Finder, which lists various exchanges based on your location and other preferences.
Miners are the most important part of any cryptocurrency network, and just like trade- the mining is an investment. Basically, miners provide a bookkeeping service for their communities. They contribute with their computing power to solve complicated cryptographic tasks, which is necessary for confirming a transaction in a distributed public register called blockchain.
One of the interesting things about mining is that the difficulty of the tasks is constantly increasing, in correlation with the number of people trying to solve them. So, the more popular a certain cryptocurrency is, the more people try to mine, the more difficult the process becomes.
Many people have created wealth by mining Bitcoin. During the day, you could make a significant profit from mining using just your computer, or even a powerful enough laptop. These days, Bitcoin mining can only become profitable if you are willing to invest in the industrial level of hardware. This, of course, brings large electricity bills and the cost of all the necessary equipment.
The future of cryptocurrency
The cryptocurrencies are around for more than 10 years already. It was an interesting journey with many ups and downs.
On one hand, they provide real value, cutting intermediaries like banks from the financial systems. On the other hand, they aren’t fully regulated yet and lots of scams have uncovered over time. As with any other investing instrument, you can never know for sure what’s going to happen in the future.
Still, many people found them lucrative and were able to improve their financial situation by involving in cryptos from early stages. If you decide to try it yourself, be sure to read as much as possible and remember- if something sounds too good to be true, it probably isn’t.