What the heck is cryptocurrency really? Find out how it emerged and what the average Joe can do with it
Cryptocurrency has turned into a buzzword in 2017, but how much do you know about it? Learn the basics of crypto technology, its advantages, and spheres of application.
Although the encryption technology and cryptocurrencies appeared in 2013 or earlier, the world witnessed its meteoric rise in demand in 2017. This is when millions of people caught the crypto bug and started investing heavily in Bitcoin and tokens alike. But what do we know about this buzzword? In the US, only 20% of residents are aware of what cryptocurrency is. Only 10% out of these people can explain crypto’s nuts and bolts, and the number of people who actually invest, implement, develop crypto products is even lower.
If you’re also in the dark about cryptocurrency, it’s time to shed some light on this phenomenon. Let’s answer a few popular questions concerning this technology and find out how it can be beneficial to you personally.
What Is Cryptocurrency?
Compared to fiat currency that exists in both physical and virtual forms, cryptocurrency is a 100% digital financial asset. The lynchpin technology underlying it is encryption: a certain form of data coding that prevents it from exposure to third parties. One more crucial advantage of crypto is decentralization, i.e. storage of data on multiple nodes in the form of the Blockchain. Encryption and decentralization have made cryptocurrency invincible and failure-proof. It allows for anonymous transactions and makes crypto totally independent from governments and banks.
“Through decentralized cryptography, Bitcoin eliminates the need for banking intermediaries, significantly lowering transaction costs. This holds promise for liberating poverty-stricken economies around the globe by providing access to capital to one-third of humanity which is currently excluded from the financial world,” - Perianne Boring, Founder & President of the Chamber of Digital Commerce
How Is It Created?
In its essence, cryptocurrency is a virtual asset that has no real value. Typically, the company standing behind a crypto project puts out a certain number of tokens and sells them or gives users a chance to mine them.
During mining, people provide their computing power in order to perform complicated mathematical calculations and create data blocks (PCs, mine rigs, and cloud servers are used for that). As soon as one data block is created, miners get rewarded with crypto tokens, as they use their own facilities to execute all crypto transactions.
Crypto vs Fiat Currency: What’s The Difference?
While regular currency units are printed by governments and are 100% controlled by states and banks, cryptocurrency is a totally independent asset. What exactly makes crypto superior? The list is a mile long:
Absence of geographical restrictions: transactions are made worldwide.
100% anonymity of transactions (though, some cryptocurrencies do not support this feature on purpose).
Crypto money is not controlled by centralized entities like governments, banks, etc.
The crypto market offers thousands of currencies, each with its own technical feature.
It makes investment easier than ever before.
Can I Personally Benefit From Cryptocurrency?
There are many examples of successful cryptocurrency investors: Roger Ver, The Winklevoss Twins, Erik Finman, Jeremy Gardner, and others. These entrepreneurs were both smart and lucky to invest in cryptocurrencies before they built the necessary momentum and their prices soared into space. You can start investing, too: the opportunities are out there! Be that as it may, it requires quite a bit of financial literacy, patience, intuition, and analytical skills. A hit-or-miss strategy here is likely to fail.
Some choose to invest in ICOs (a buy-into option known as the Initial Coin Offering). Startups emit tokens to raise funds, and if things go well, their proprietary cryptocurrency grows in price. Nevertheless, statistics show that 90% of all ICOs are actually drowning ventures, as their tokens never make it to the exchange market. This means that you should think twice before spending your hard earned cash on questionable projects, that is, you should definitely do your homework before leaping ahead.
The crypto perks extend well beyond investment. Mining used to be arguably the quickest and easiest way to earn cryptocurrency, but now it requires a lot of computing power and, consequently, electricity and equipment costs.
When you do become a proud owner of cryptocurrency though, you can:
Perform anonymous transactions across the globe for a minimal fee.
Make purchases with Bitcoins and a handful of other altcoins.
Cash out your crypto coins when the time is right.
The Bottom Line
Even if you want to stay away from cryptocurrency right now, having some basic information about it most certainly wouldn't hurt. Sooner or later, we’re bound to witness the true rise of the crypto commodity all over the world, the world in which crypto knowledge will hold the true power. Hold tight!