What Is Cryptocurrency?
Cryptocurrency is digital money. There are no physical coins or cash representing any of the crypto coins on the market- and there never will be. This is strictly electronic money.
Bitcoin was the first cryptocurrency to hit the market but thousands of other coins have since been launched. That’s the nature of crypto: anyone can use blockchain technology to create a coin; how much it will be worth depends on its utility and perceived value in the market. Most coins are not accepted by the masses and ultimately wind up useless.
For crypto enthusiasts, cryptocurrency represents the future of money. It’s still hard to say how much or how little this technology will change our traditional financial system. Nevertheless, the blockchain technology underlying cryptocurrency has many applications and is likely here to stay.
The History of Crypto (Its Ups and Downs in the Market)
Cryptocurrency made its debut in 2009 when Bitcoin became the first coin on the market. Two years later, Litecoin entered the scene, after which many other cryptocurrencies followed. The price of Bitcoin and other currencies showed the volatility characteristic of crypto right from the start. Almost immediately after Bitcoin surpassed $1,000 per coin for the first time in 2013, it crashed down $300. It wouldn’t see a four-figure valuation again for more than 2 years. By 2017 it surpassed $10,000 and in 2021 hit over $50,000.
In addition to the extreme run-ups and crashes, cryptocurrency has been plagued by fraud, theft, and various scams. As the value of cryptocurrencies increased over the years, so did the number of cyberattacks on trading platforms. Some trading platforms suffered 9-figure thefts of Bitcoin and other cryptocurrencies from cyberattacks.
What Is Blockchain?
Blockchain technology is the heart of cryptocurrency, but few understand exactly how it works and why it’s so important. To put it simply, a blockchain is a database of stored information. Every new piece of information is submitted, such as a transaction, it is stored as a block. All the blocks of information are arranged chronologically and chained together, making – you guessed it – a blockchain.
Blockchain technology means that every transaction is electronically stored directly in that coin. This is different than traditional money, where the details of a transaction are kept in a ledger at the retailer or financial institution. Instead, the crypto coin itself is its own ledger. This means no single person or group has control of the coin. This is why Bitcoin and other cryptocurrencies are not regulated by any national banks or governments. It also means the information is immutable, meaning it cannot be reversed or tampered with, and is incredibly secure.
While cryptocurrency is getting all the publicity right now, blockchain technology can be applied to many other uses from medical records to real estate. The security and privacy provided by blockchain makes it ideal for handling sensitive information, and that makes it incredibly useful across many industries. It’s possible the real future of blockchain will be everywhere but digital currency!
Crypto vs. Bitcoin
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Many people, especially new crypto investors, will use the term “Cryptocurrency” and “Bitcoin” interchangeably. Bitcoin is the most expensive and most popular cryptocurrency coin on the market but it’s not the only one. As the leader in this space, Bitcoin’s price and its investors’ sentiments typically reflects that of the whole cryptocurrency market.
When more seasoned investors refer to cryptocurrency, they are typically referring to the leading coins Bitcoin, Ethereum, and Litecoin.
There are plenty of other cryptocurrencies you can consider to invest in, typically called “alt coins”, but they are of lower value and less frequently traded than the main 3. When you hear the word “Cryptocurrency” you can assume the speaker is definitely talking about Bitcoin, and possibly the crypto market as a whole.
Where Can I Use Cryptocurrency?
Presently, cryptocurrency can only be stored and spent on limited platforms. More and more fintech brands and retailers are switching to support cryptocurrency every day.
Shopify was one of the first large e-commerce platforms to accept Bitcoin as a form of payment. They’ve since expanded, partnering with cryptocurrency trading platforms that also support Ethereum, Litecoin, and more than 300 other cryptocurrencies as forms of payment.
How Can I Use Cryptocurrency?
Many people are so excited by the price rally of Bitcoin and other cryptocurrencies, they don’t think about exactly what they’ll use their crypto for after they buy it. There are three main ways to use cryptocurrency.
Asset Storage
Cryptocurrency is a great way to store wealth. If you already have investments in the traditional stock market, you might be looking for another place to park your cash where it can still remain fairly liquid and potentially appreciate in value.
Speculative Investing
Since cryptocurrency remains so volatile, it’s a fun and exciting space for speculative investing. If you’re okay with taking on high risk for high rewards, cryptocurrency is the perfect market to place your bets.
Spending Money
While not a dominant way to use cryptocurrency yet, spending cryptocurrency at retailers is becoming more mainstream, and we can expect there to be more ways to spend cryptocurrency as it gains in popularity.
Credits: https://www.greedyrates.ca/blog/the-ultimate-guide-to-cryptocurrency/
By Bridget Casey