Cryptocurrency is at the top of everyone’s mind lately in the financial space. With the promise of a decentralized banking system that aims to be globally recognized as a universally accepted form of currency, crypto is taking the world by storm. If you’re new to the space these terms can sound overwhelming. From Ethereum to the Blockchain to Bitcoin mining, the list of buzzwords never seems to end. This article aims to give you an overview of what cryptocurrency is and how you can get involved.
What is cryptocurrency?
Cryptocurrencies are digital coins or tokens that exist to move away from a traditional, centralized banking system. This allows people to have autonomy over their money without involving the government or large banks in the exchange or transfer of their funds. Essentially, users of crypto are in charge of how these currencies are valued. Cryptocurrency is encrypted making it difficult to counterfeit and by using a system known as the blockchain, it is easy to trace where it has been. Think of the blockchain as a receipt of all the previous owners of a crypto coin. Cryptocurrencies, like Bitcoin, can be used to buy goods online or are invested like stocks.
What are some popular cryptocurrencies?
The most widely known cryptocurrency is Bitcoin. Other notable digital currencies include Ethereum, Binance and Solana. Each cryptocurrency comes with unique values and potential for earning. Bitcoin remains at the top of the currency pile with over $130 billion in market capitalization. There is a finite number of available Bitcoin with 19 million Bitcoin mined among the 21 million in existence. This is said to possibly increase the value in the next few years as there will be a cap on the number of circulated Bitcoin on the market. So how do these coins come into existence?
How do you get crypto coins?
Most cryptocurrencies are mined. In Bitcoin mining, for example, the cryptocurrency is rewarded to users who are providing computer processing power toward the Bitcoin network. This means that Bitcoin miners essentially fuel the decentralized network that Bitcoin resides in by partaking in the mining process. The aim of Bitcoin mining is to have users guess a 64 hexadecimal number associated with the individual coin. The miner who gets this number is then rewarded with 6.25 Bitcoin (approximately $250,000). However, solo Bitcoin mining can be extremely expensive and does not guarantee a return. More and more, people are joining Bitcoin mining pools or utilizing cloud mining to offset these costs.
It should be noted that Bitcoin mining and other crypto extraction can be extremely energy-intensive. This has long been a criticism against cryptocurrency. However, there are companies aiming to change that and reduce the carbon footprint of Bitcoin mining. Gryphon Digital Mining is one of them. Gryphon aims to use 100% renewable energy to fuel Bitcoin mining to make the process more environmentally sound.
Where can you spend crypto?
As the popularity of cryptocurrency grows, these coins are being accepted in more and more places. From online shopping to airline tickets, cryptocurrencies, Bitcoin, in particular, are starting to be put towards a more diverse range of purchases. Major retailers are beginning to accept Bitcoin as payment including Microsoft and Home Depot. There are options to convert Bitcoin into USD and increasingly, larger cities are seeing Bitcoin ATMs pop up in local businesses.
Is it too late to invest in crypto?
With the space changing daily, it’s never too late to invest in cryptocurrencies. It is, however, important to understand the risks involved. Cryptocurrencies, much like stocks, can be volatile. As the market determines the value of each coin, this can change quickly. With traditional investing you wouldn’t put all of your money into a single stock. The same goes for crypto currency; it is wise to diversify your portfolio. Sending and receiving cryptocurrencies can also be tricky as they require a long string of numbers to act as the routing address. Should this number be off by even one digit, the transfer would be sent to the wrong address. Transactions in the blockchain space don’t allow for cancellations so there is no way to reverse this kind of mistake. Storing your cryptocurrency is another consideration as there are many digital wallets to choose from and some of these can become vulnerable to hackers. Taking the time to research cryptocurrencies and where you would like to store them is an important step in investing.
Cryptocurrency is an exciting and unique way to invest. There are so many facets to the digital currency space and it continues to evolve every day. Research and staying up to date with new information is a critical aspect of being a crypto investor as digital currencies. With great reward also comes great risk and being knowledgeable in the space is key to being a successful crypto investor.
