Cryptocurrency has been on the rise in recent years, showing no signs of slowing down anytime soon.
But what exactly is cryptocurrency? How do people use it, and how can you use it to better your life?
This guide will help demystify cryptocurrency and help you understand what this revolutionary technology means for your future.
What is cryptocurrency?
Before you can invest in or use cryptocurrency, it’s important to understand what it is. Cryptocurrency is a digital currency that uses cryptography and blockchain technology to ensure security.
Instead of dealing with banks and other financial institutions, which are centralized and have a central database, cryptocurrency deals only in encrypted code that has been processed through complex algorithms by computers all over the world. There are several hundred different types of cryptocurrencies available online.
The most common ones include Bitcoin, Ethereum, Ripple, APE coin, and Litecoin; they’re known as altcoins (short for alternative coins). Each one serves a different purpose (for example, Ripple aims to bring together banks and payment systems).
However, investors should be wary-the currencies’ values can fluctuate wildly. The APE coin would be the best choice for initial investors as it is just getting started. But where to buy APE coins? Well, you can do that on Coinbase or Binance like a crypto marketplace.
Who invented cryptocurrency?
It was invented by an anonymous person or group known as Satoshi Nakamoto. They developed and created it through a very complex encryption system that no one has been able to crack yet.
When discussing cryptocurrency, people usually refer to Bitcoin, but many other forms exist. This form of currency exists online and is decentralized. In fact, it’s so difficult for anyone to track down who owns it that some have dubbed it the new Swiss bank account due to its anonymity features.
Another reason why its currency is growing in popularity is that transactions with Bitcoin can be made instantly and free of charge worldwide too.
How does the blockchain work?
The blockchain is a public ledger where all transactions are recorded. By combining digital cryptography and network technology, bitcoin provides online users with a tamper-proof system for moving money around.
It’s essentially a decentralized database that tracks transactions in an ongoing chain-hence its name. The blockchain serves as both a verification tool and an accounting mechanism.
Users can add blocks (which represent transactions) to the chain by using specialized software, which verifies each transaction based on unique characteristics. Because no party or organization can control it, there’s no central point of failure.
If someone were to try and corrupt a block in some way, it would be obvious because it wouldn’t match up with other blocks on the chain. This makes hacking very difficult (if not impossible).
Each block contains information about who owns how much currency at that moment in time. This information is also publicly available, so anyone can view it. Every time a new block gets added to the chain, every copy of that blockchain gets updated across every computer that has a copy of it.
What are altcoins?
Altcoins are a subcategory of digital coins. An altcoin is anything but Bitcoin. As such, all alternative cryptocurrencies fall under altcoins (and yes, they typically fall under cryptocurrencies as well).
When someone says something like, Hey, I just invested in Dogecoin. They could be referring to an altcoin. Alternately, when people say that bitcoin is going up or down against some currency (e.g., USD), they usually mean that its value is going up or down against that particular currency – not necessarily against every other cryptocurrency.
So why would we care about any other type of coin besides Bitcoin? Bitcoin has the first-mover advantage and has name recognition for starters.
How do I invest in cryptocurrency?
The fastest way to invest in cryptocurrency is through a digital wallet. There are a number of different options available, with Coinbase being one of my favorites and widely considered an industry standard.
If you choose Coinbase, all you have to do is connect your bank account or credit card and buy away. Just be aware that once your transaction has been processed, it may take several days before your currency arrives in your wallet-and coin prices change daily (sometimes hourly).
I don’t advise investing more than you can afford to lose. Crypto markets are insanely volatile, so if something goes wrong, the chances are good that it will cost more than 5% of everything you own just to get back out. And remember: never invest money that you can’t afford to lose.