Understanding Cryptocurrency

Bitcoin is widely known as a cryptocurrency or digital currency or virtual currency and by many other names. It has been in the news a lot in the recent times as its value has soared. In fact, the total capitalization of bitcoin has already passed USD 100 million. There are several other cryptocurrencies also available in the market but bitcoin remains the most valuable cryptocurrency as it was the first cryptocurrency.

In simple terms, cryptocurrency may be defined as a virtual currency that only exists digitally. There is no central bank or a central authority or anything like that that controls the generation and flow of this currency. Everything is decided by open source algorithms and users need to solve complex mathematical problems in order to generate coin. Crypto’s offer several advantages over traditional fiat currencies and this is the reason, these have been gaining in popularity over the last few years.

One of the biggest advantages of a cryptocurrency is that there is no central authority or central bank that decides the fate of this currency. In case of traditional currencies, the value of a currency usually changes based on the decisions taken by the central bank that controls the currency. Since there is no central bank control for Bitcoin and other Altcoins, its value is determined purely by market action. In other words, it’s a purely democratic currency where buyers and sellers decide the value of this currency.

Bitcoin also has been in news over the past few years as it has turned many of its early investors into millionaires. In fact, some people also claim to have bought big houses by selling bitcoin they collected in the initial years. All this news and speculation has led to a soaring interest in bitcoin and other digital currencies. This has also given rise to a variety of investment products based on bitcoin and various other coins.

The value of cryptocurrency going up

However, bitcoin, in its purest sense, isn’t just an investment opportunity. It was created to offer a decentralized digital medium of exchange worldwide. And it has succeeded, to a large extent, in achieving that goal. There are thousands of merchant establishments that accept bitcoin. In fact, some of the biggest online retailers have also started accepting bitcoin. There are also bitcoin ATMs where you can buy bitcoin. There are also a number of exchanges all over the world that allow users to exchange fiat currencies into bitcoin and other cryptocurrencies.

If you are also thinking of investing in bitcoin, and you have no idea how it works, it is important that you first learn about how this currency works before investing in it. It’s not a magic pill or a get rich quick scheme. It is volatile in nature and its value varies a lot. Therefore, there is an inherent risk in bitcoin investment, especially if you don’t understand the factors that affect the price of bitcoin as well as various other cryptos. There are several online resources that can help you in understanding the various factors that affect the price of bitcoin. You should read up and try to understand as much as you can about this crypto currency before you invest your hard earned money in it.

Another important thing you need to keep in mind is that it is a digital asset and like all other digital assets, security is paramount if you want to keep your bitcoin secure. Therefore, you should learn about various security issues associated with bitcoin. There are ways for you to keep your investments secure but you need to understand that if someone gets their hand on your money, there is no way for you to recover it. Since there is no central authority and no insurance, once your crypto currency is gone, it’s gone forever. Thankfully, there are several security solutions available in the market, software as well as hardware solutions, to keep your crypto currency safe.

Overall, many experts are of the opinion that digital currencies such as bitcoin are the future. However, these experts are more excited about the underlying technology called blockchain that powers the bitcoin. Bitcoin is an application built on the top of blockchain technology and many governments are already doing experiments with blockchain for land records and several other things. It can be safely said that bitcoin isn’t going away but you need to understand the risk associated before you put your hard earned money into it.

Written by Jrock

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