Crypto 137 Edition

What Is Cryptocurrency? Here’s What You Ought to Know
Cryptocurrencies let you purchase products and services, or trade them for profit. Here’s more about what cryptocurrency is, how to buy it and how to protect yourself.

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A cryptocurrency (or “crypto”) is a digital currency that can be utilized to purchase items and services, but uses an online ledger with strong cryptography to protect online deals. Much of the interest in these unregulated currencies is to trade for profit, with speculators sometimes driving rates skyward.

Here are 7 things to ask about cryptocurrency, and what to watch out for.

1. What is cryptocurrency?

Cryptocurrency is a type of payment that can be exchanged online for items and services. Many companies have actually issued their own currencies, often called tokens, and these can be traded specifically for the excellent or service that the business supplies. Think about them as you would arcade tokens or casino chips. You’ll need to exchange genuine currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized innovation spread throughout lots of computer systems that handles and tape-records deals. Part of the appeal of this technology is its security.

2. The number of cryptocurrencies are there? What are they worth?

More than 6,700 different cryptocurrencies are traded openly, according to CoinMarketCap.com, a market research site. And cryptocurrencies continue to multiply, raising money through preliminary coin offerings, or ICOs. The overall worth of all cryptocurrencies on Dec. 18, 2020, was more than $645.7 billion, according to CoinMarketCap, and the overall value of all bitcoins, the most popular digital currency, was pegged at about $421.7 billion. (You can check the current price to purchase Bitcoin here

3. Why are cryptocurrencies so popular?

Cryptocurrencies attract their advocates for a range of factors. Here are a few of the most popular:

Fans see cryptocurrencies such as Bitcoin as the currency of the future and are racing to purchase them now, most likely prior to they become more valuable Some fans like the fact that cryptocurrency gets rid of reserve banks from managing the cash supply, since over time these banks tend to minimize the value of money through inflation Other fans like the innovation behind cryptocurrencies, the blockchain, due to the fact that it’s a decentralized processing and recording system and can be more secure than standard payment systems Some speculators like cryptocurrencies since they’re increasing in worth and have no interest in the currencies’ long-term acceptance as a method to move cash

4. Are cryptocurrencies a good investment?

Cryptocurrencies may go up in worth, but lots of investors see them as mere speculations, not real investments. The reason? Similar to real currencies, cryptocurrencies create no cash flow, so for you to profit, someone has to pay more for the currency than you did.

That’s what’s called “the greater fool” theory of financial investment. Contrast that to a well-managed company, which increases its worth with time by growing the profitability and cash flow of the operation.

For those who see cryptocurrencies such as bitcoin as the currency of the future, it must be noted that a currency requires stability.” As NerdWallet authors have actually kept in mind, cryptocurrencies such as Bitcoin may not be that safe, and some notable voices in the financial investment community have actually recommended prospective financiers to avoid them. Of particular note, famous financier Warren Buffett compared Bitcoin to paper checks: “It’s a very effective method of transmitting cash and you can do it anonymously and all that. A check is a method of transferring cash too. Are checks worth a lot of money? Just because they can send money?” For those who see cryptocurrencies such as Bitcoin as the currency of the future, it needs to be noted that a currency requires stability so that merchants and consumers can determine what a reasonable rate is for items. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. For example, while Bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later. By December 2020, it was trading at record levels once again.

This cost volatility creates a dilemma. If bitcoins might be worth a lot more in the future, individuals are less most likely to invest and circulate them today, making them less viable as a currency. Why spend a bitcoin when it could be worth 3 times the worth next year?

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