Before Investing In Cryptocurrency Here is What You Should Know
Digital currency or cryptocurrency is becoming popular. Today, millions of people are using cryptocurrency like Bitcoin to shop online at hundreds of shops and even place bets on websites like Sportbet. Hey, even my local pizzeria accepts bitcoin! With the harsh economic time, everyone is probably looking for a way to make more money, and that means coming up with new ways to invest.
There are many investment opportunities available online during this lockdown, and you can grab one to smile your way to the bank. Have you been thinking of cryptocurrency and ready to make that move? Well, before, investing your hard-earned money on any digital currency, you have to research widely and ensure you have all the important information you need.
What is cryptocurrency?
A cryptocurrency is any form of digital asset that people use to make a purchase online. You can exchange your real currency with digital currency like Bitcoin, Litecoin, and Ripple to do some shopping online. Today, almost every multinational company is looking for a way to come up with its unique digital currency; for instance, Amazon is using Ethereum and Facebook has its unique crypto called Libra.
Cryptocurrency originates from the word ‘crypto’ which is the process of writing and solving computer codes. That said, every crypto is just a representation of a computer code that is almost impossible to duplicate. Every line of code that represents a cryptocurrency is unique, and this is what makes the currency safe for online transactions.
So, you’ve heard of people investing a lot of money on digital assets and losing millions investing on crowds, right? Well, cryptocurrency has been around for over a decade now, and most people still don’t know how it works. The most popular cryptocurrency used all over the world is Bitcoin and is said to be a brainwork of an anonymous person, Satoshi Nakamoto.
How Cryptocurrency works
Unlike the real currency, where you need a middleman like a bank or government to exchange money, cryptocurrency operates independently on the web. It does not need a bank or government to operate – the reason it has not to be fully recognized as a legal tender in most countries. Cryptocurrency may not stand the test of inflation and is forever at liberty. The government or central bank cannot regulate how people use cryptocurrency and influence its exchange rates.
Cryptocurrency is decentralized, which means you don’t need a third party to use it. Take it this way, you hire someone to design your website, and you agree to pay them some $100, instead of writing them a cheque, you can just pay them fast with cryptocurrency. All you need is the person’s email address, and you are good to go.
You hold your cryptocurrency in a digital wallet that normally comes in the form of an app provided by the platform selling you the cryptocurrency. As a digital wallet holder, you must have a secret password to access your money, and this is called a private key. A private key is a unique digital code that you enter on your digital wallet to access your funds and initiate a transaction online.
Blockchain technology is what drives a cryptocurrency. This is a long receipt showing all the valid transactions taking place on a given cryptocurrency. When you transact using cryptocurrency, the record is kept on a blockchain to eliminate duplication or double transaction.
Four important issues with cryptocurrency
- Very volatile
Unlike your traditional real currency, cryptocurrency is the most volatile form of currency you can have. It can fall in value at any second, which means you have to be keen when investing your money here. Change in value can happen overnight, unlike real currency, where you get to watch the economic trends to forecast the future exchange rates. It is a bit challenging to predict the future value of a cryptocurrency because of its high volatility.
- Nobody knows the origin
Well, we all know the history of real money, right? However, with cryptocurrency, everyone seems to be in the dark. Nobody even knows the true founder of Bitcoin – the most popular cryptocurrency today.
Only a few people understand how the currency operates, and that makes it a bit confusing for most people to invest in it. If you are thinking of putting your money in digital currency, you must learn all its ups and downs before making the final move.
- It is confidential
If you want to shop online or make some deal and remain anonymous, the best way to do it is by using a cryptocurrency. Most people use cryptocurrency to seal some shady deals online, which make it unsafe to use the currency. Additionally, money laundering is also common in the crypto world.
- Not easy to track
There is no trend in the rise and fall in the value of a cryptocurrency because it is peer to peer and no middlemen regulate it. When investing in the crypto market, it is almost impossible to gauge your rate of return. It is also difficult predicting the right time to invest your money and calculate your returns like in the stock market.
If you are thinking of investing your money in cryptocurrency, you should first take your time to research and educate yourself about what you should know about cryptocurrency. There is a lot you should learn about the crypto world before putting your money here.