Investing in cryptocurrencies is similar to exchanging your money in a new country. Bitcoin, Litecoin, and Ether are some examples of "foreign currencies" that work in a very specific context within certain online communities.
The exchange of any type of currency is based on shared trust. We value dollars and euros because we know that we can buy goods or services with them.
The question is, can you trust cryptocurrencies? And should you jump into the world of crypto investment?
WHAT IS CRYPTOCURRENCY?
Cryptocurrencies are digital assets that people use as investments and for online purchases. Exchange real currency, such as dollars, to buy "coins" or "tokens" of a certain cryptocurrency. There are many types of cryptocurrencies. Bitcoin is the most famous, but Ether, Bitcoin Cash, Litecoin, and Ripple are a few others. All kinds of big tech and financial companies want a slice of the crypto pie. Even Facebook has created a cryptocurrency called Libra.
The word cryptography means the art of writing or solving codes. (Sounds like an Indiana Jones movie setup, right?) Each "coin" is a unique line of code. Cryptocurrencies cannot be duplicated, which makes them easy to track and identify while trading.
You've probably heard of people making (or losing!) Hundreds of thousands of dollars investing in cryptocurrencies. It feels like a gold rush today. But cryptocurrency news have been around for about 10 years. The first cryptocurrency was Bitcoin, created in 2009 by an unknown person who goes by the name of Satoshi Nakamoto.
HOW DOES CRYPTOCURRENCY WORK?
Cryptocurrencies are exchanged person-to-person on the web without intermediaries, such as a bank or a government. It's like the wild west of the digital world. There is no bailiff who upholds the law.
Here's what we mean: Did he ever hire a kid in his neighborhood to mow the lawn or watch his dog while he was out of town? Most likely, he will pay them in cash. It was not necessary to go to the bank to make a formal transaction. This is how it is to exchange cryptocurrencies. They are decentralized: no government or bank controls how they are produced, what their value is, or how they are exchanged.
As a result, cryptocurrencies news today are worth what people are willing to pay or exchange for them.
Now hang out with us. We are about to get technical! You store your cryptocurrency in a digital wallet, usually in an app or through the provider where look at this website you buy your coins. Your wallet gives you a private key, a unique code that you enter to digitally "log out" of purchases. It is a mathematical proof that the exchange was legitimate.
Cryptocurrencies operate on what is called blockchain technology. A blockchain is like a really long receipt that keeps growing with every exchange. It is a public record of all the transactions that have occurred in a certain cryptocurrency.
What can be bought with cryptocurrencies?
At this point, most people still see cryptocurrency latest news as an investment. But spending on cryptocurrencies could become popular as these currencies gain confidence. There are online retailers, such as overstock.com, that accept cryptocurrencies. And of course, two people who value the tokens can exchange them for goods or services.
Some major retailers, such as Whole Foods and Nordstrom, are experimenting with accepting Bitcoin as a valid source of payment. But for the most part, cryptocurrencies are still on the sidelines.
4 THINGS YOU SHOULD KNOW BEFORE INVESTING IN CRYPTOCURRENCY
Before you say goodbye to your dollars and say hello to Bitcoin or Ether, there are a few things you need to know.
- Cryptocurrencies are volatile. The value of crypto news goes through extreme ups and downs. In 2017, the value of Bitcoin ranged from $ 900 to $ 20,000! 2 Someone sneezes and the price goes down! Investing in cryptocurrencies is risky, to say the least. Of course, every investment carries a certain degree of risk. But you should always avoid unnecessary risks, especially when it comes to hard-earned money. Don't play poker with your financial future.
- There are many unknowns. There is still a lot to resolve on how cryptocurrencies work. Think about it: no one knows who the founder of Bitcoin is! In relative terms, only a small percentage of people in the world understand the system and know how to operate it. Ignorance makes you vulnerable. We always advise people that if you can't explain your investments to a 10-year-old, you don't have to invest in them to begin with. You are preparing to do something stupid.
- Cryptocurrencies can be used for fraudulent activities. People who want to remain anonymous and avoid regulation by banks or the government will use cryptocurrencies to do shady business on the black market. Money laundering is also a problem in the world of cryptocurrencies. Now hear us out on this: we are not saying that everyone who uses cryptocurrencies is a bad person. But we are saying that if someone wants to commit criminal activity and avoid being tracked, the world of cryptocurrencies is an ideal place for them.
- Cryptocurrencies have an unproven rate of return. Cryptocurrency trading is like gambling. Because it is traded on a peer-to-peer basis without any link to regulatory standards, there is no pattern of rising and falling in value. You can't predict changes or calculate returns like you can with growth stock mutual funds. There is simply not enough data, or enough credibility, to create a long-term cryptocurrency-based investment plan.