4 Things to Know About Cryptocurrency
Many have heard of cryptocurrency before now.
It’s actually been around for over a decade.
But it’s not been until the recent months that mainstream media and the general public have really taken notice of it. Before, only the tech-savviest of techies and niche investors took an interest in it.
Now, it’s looking like it may push its way onto the same playing field with traditional currencies.
But while there is increased awareness, the average individual still knows little about what cryptocurrency is, why it’s worth investing in, how to buy it, or how to store it.
So, before deciding whether you want to start investing in cryptocurrency, here are four things you should know about it.
What Is Cryptocurrency?
Cryptocurrencies, most famously Bitcoin, Ethereum, and Litecoin, are digital currencies that have a limited supply, function as digital mediums of exchange, and use cryptography to absolutely verify and secure transactions.
It is this cryptography that also controls the number of units generated each day and that puts an ultimate cap on the number that will be created.
Finally, because it is not centrally controlled through a bank or third-party, but is decentralized, cryptocurrency functions more like a peer-to-peer cash flow system.
The currency cannot be artificially inflated, and no third party can decide to make more – the amount is set by mathematical equations and absolutes.
History of Cryptocurrency
So when and where did the idea of cryptocurrency begin, and why is it suddenly taking off today?
Well, to most people’s shock, the concept was originally conceived toward the end of the 1980s. However, these early concepts still relied on a third-party to regulate it, and this ultimately led to their demise.
The rise of cryptocurrency’s popularity only began after 2008/2009 when a programmer or team of programmers using the pseudonym Satoshi Nakamoto introduced the concept of fully decentralized cryptocurrency, which Satoshi dubbed Bitcoin.
This system prevents “double-spending” and allows for true transparency and accuracy through a public ledger that records all transactions for all users to review.
Since the development of Bitcoin, its rise in popularity has been steady.
But it has only been during the last few months of 2017 and the first months of 2018 that it has truly exploded even for the general populace.
During this recent boom, Bitcoin has stayed on top.
It is the most recognized and most valuable to date. However, there are actually many cryptocurrencies now available that offer competition.
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They all still function on a decentralized system, but each has unique traits that make them preferable for one reason or other.
Because many of them can be broken down into smaller units, these alternative crypto-coins, often called altcoins, are frequently referred to as the silver of cryptocurrency, while Bitcoin is considered the gold.
Nothing quite shows digital currency’s rise to success as clearly as the sudden increase in value of cryptocurrency units.
Bitcoin, which started out 2017 valued at $800 a unit was worth $7,000 a unit by November 2017. Ethereum, another major crypto-coin, saw an increase in value of 2,700% since May of 2016.
Why Invest in It?
Odds are, if you read the previous paragraph, you have at least a vague inclination as to why investing in digital currency is attractive.
And it’s not purely because of playing the investment game.
Increasingly, digital currency can be used to buy a ton of different goods and services, from online purchases to local retailers, from a cup of coffee, to a hotel stay and even a college degree. Some believe that cryptocurrency is the future.
However, before taking the plunge, you need to be clear on what the pros and cons are, especially since there are many cons, and since the pros are not constant:
- Pros: At the moment, cryptocurrency is a hot commodity.
As noted above, the increase in value it is seeing almost overnight is astounding. For those who are wise and patient, a lot of money can be made through investing in digital currency.Furthermore, the very nature of the currency means it is a much more private and secure way to invest and spend.
Your actual name and personal information is not tied to your crypto-coins like it is to your bank account, and because of how they are programmed, crypto-coins are more secure than any other form of currency.Finally, with its rise in popularity has come its rise in acceptance for use.
You are likely to have the increasing ability to use your crypto-coins for day-to-day purchases.
- Cons: Though its hot, digital currency is also extremely volatile and unpredictable.
It’s market value fluctuates more than any other currency. Thus, investing in it is seriously high risk.This risk is even higher if you try investing in the altcoins, where very wealthy investors can falsely pump up a coin’s value by purchasing a large amount, then sell them all off for a big profit, leaving those caught in the middle of the process in a bind.Besides cryptocurrencies volatility on the market, there is also their still uncertain future.
Many countries have yet to regulate cryptocurrency, and in some countries, it is banned or penalized through taxes.
In other countries, the potential for banning it is still there. Even for those countries with regulations, the regulations are not the same across the board.
The bottom line is that cryptocurrencies can be a good investment if you are smart about it. Do your research and don’t just follow trends that you observe.
Because of its sudden rise in popularity, there are many out there investing, hoping for a get-rich-quick scheme.
But as always, slow but steady wins the race.
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Do your research, only invest what you can afford to lose, and be patient.
How to Buy It in Canada (Exchanges)
Buying digital currency is becoming increasingly easy to do in Canada, especially if Bitcoin is what you are after.
There are now many exchanges that trade in not only Bitcoin, but also Litecoin, NEO, Ripple, Ethereum, etc. These are exchanges such as BitStamp, Coinbase, and BitFinex, to name a few.
Purchasing altcoins tends to be a bit more difficult. However, more and more exchanges are trading in altcoins as well.
Exchanges like Cryptsy, Kraken, and even BitStamp and BitFinex are now trading in altcoins like Ethereum, Litecoin, Monero, Ripple, etc.
Where to Store It
Once you purchase your cryptocurrency, you do have a few options of where to store it.
Many exchanges actually offer storage, or “wallet” services. However, such storage, dependent on someone else’s servers and running internet, is not the most secure.
Already, there have been large hacks and thefts from some major exchanges that have left investors devastated.
Rather than take that risk, it is advisable that you keep your cryptocurrency somewhere offline where you are in control. There are a variety of options for this, all of which can be stored offline on your hard drive.
While the exact future of cryptocurrency is unknown – whether or not it will truly replace traditional currency – for now, it looks like it is here to stay and likely will at least become a major player in investment and even daily life.
If you are thinking about investing in it, the time is now, but make sure you research thoroughly and be patient with each step.