Cryptocurrency

Cryptocurrency is digital money that can be sent electronically anywhere in the world.

Crypto vs. traditional currency

Cryptocurrency is a system that relies on sophisticated encryption (hence the name) and a network of online users to function—compared with traditional currency, which is backed by a government. Here is what that difference means:

Crypto
• Decentralized—no one person, government, or corporation controls cryptocurrency.
• Digital—cryptocurrency only exists online and can only be traded online (although some companies will happily sell you souvenirs they describe as physical Bitcoins).
• Limited supply—crypto is typically created with a finite supply. That could help it hold its value over time.
• Anonymous—crypto transactions can’t be traced back to real humans.
• Brand new—the first cryptocurrency, Bitcoin, was launched in 2009.

 

 

Traditional
·        Centralized—traditional currencies are issued and regulated by government entities.
·        Physical—traditional money can exist digitally, as in your bank account, but can also exist as physical bills and coins.
·        Unlimited supply—governments can always print more money, which can make fiat currency lose value to inflation.
·        Not anonymous—traditional transactions generally can be tracked.
·        Well established—the mainstream currency has been around for eons.

 

How it works

Cryptocurrency is maintained by computer networks scattered across the globe that record each purchase, sale, or trade on a public database called a blockchain. The blockchain is essentially a secure online spreadsheet that shows transactions.

For an established currency, such as Bitcoin or Ethereum, investors typically buy units through online marketplaces called exchanges. You can use a credit or debit card or an ACH payment from a bank account to purchase the currency.

Cryptocurrency can also be obtained through “mining”—a high-tech process in which “miners” solve math problems and get rewarded with new currency units—or by exchanging other digital currencies. Once you receive cryptocurrency units, you store them in software called a digital wallet.

Top cryptocurrencies

Bitcoin was the first cryptocurrency to launch and remains the most popular, but there are thousands of different cryptocurrencies available today. Among the most popular cryptocurrencies (as measured by total value) are:

1. Bitcoin
2. Ethereum
3. Tether
4. XRP
5. Bitcoin Cash
6. Bitcoin SV
7. Litecoin
8. Binance Coin
9. EOS
10. Tezos

Cryptocurrency is an exciting but controversial part of the world of finance.

But the potential for great returns comes with the possibility of great losses. The risks of investing in cryptocurrency include:

• Hackers—Digital wallets can be vulnerable to hacking.
• Scams—Fraudsters may advertise a fake new cryptocurrency and then disappear overnight.
• No protection—If your crypto disappears or goes to $0 tomorrow, there may not be anything you can do.
• Volatility—Cryptocurrency prices can swing from $0 to the thousands and back again in the blink of an eye. They make the stock market look tame.

Conclusion

Cryptocurrency is digital money that runs on a worldwide computer network. Unlike traditional currency, cryptocurrency exists only online and isn’t controlled by governments or banks. Enthusiasts like that cryptocurrencies are secure and anonymous and aren’t controlled by any centralized entity. Skeptics say that the currencies are highly speculative and could end up worthless.