Cryptocurrency is digital money that uses cryptography for security. Cryptography is writing and solving puzzles. With the cryptography step, it is difficult to counterfeit. The currency does not have a central authority and can be used for a variety of things such as buying goods and investing.
The history of cryptocurrency begins with Bitcoin in 2008 and, as of 2015, there were 14.6 million bitcoins in circulation. Since its launch, cryptocurrency has found its way into many aspects of our everyday lives that we may not even be aware of. There are now several different kinds of cryptocurrencies. Cryptocurrency has the ability to make transferring funds easier between two parties. The transactions don’t cost much and allow users to avoid high fees experienced when using most banks and wire transfers.
What good would a currency be if you couldn’t use it for anything? Because cryptocurrency is digital, it’s not as easy as just pulling it out of your wallet and spending it at a grocery store, but we’re not far off.
Cryptocurrencies have proven to be effective at making many tech-savvy investors more money. With the help of financial advisors, many not-so-savvy investors have thanked cryptocurrency for their growing wealth. Many also enjoy digital cash to support the idea of one free, hard currency for the world.
Cryptocurrency can also be used to hedge your portfolio against the dollar.
Today, new cryptocurrencies are popping up all the time, each specialized with their own blockchain and purpose. Those don’t just come out of nowhere. Nobody just wakes up and creates a currency with a value out of thin air. Like other kinds of startups, cryptocurrencies need to be funded by other interested people to get the project up and running. Initial Coin Offering, or ICO, is like an IPO for cryptocurrency. When a new digital currency is developed, money is needed to fund it. Those who invest are hoping the currency will gain a lot of traction and raise the price of the coin.
Investors who are interested in making money through ICOs are usually hoping the project will become a success, making the cryptocoin value rise higher than what they initially paid.
Cryptocurrencies, mostly Bitcoin, can be used to buy several goods and services. It is a currency, after all. Many people use their Bitcoin to buy gift cards. Surprisingly, you can actually buy yourself dinner at some restaurants. Though there are not many that accept digital cash just yet, as the popularity of digital currency rises, so will the number of companies allowing this kind of payment.
One of the biggest, and most useful, goods bought with cryptocurrency is real estate. Many countries offer the ability to buy the property and pay fees and taxes with Bitcoin.
There are web-based stores all over the world that are selling goods purchased through cryptocurrency. High-end cryptomarkets are even allowing customers to buy aircraft, yachts, and anything else these customers can think of.
Travel companies have even dipped their toes into the waters of crypto-based sales. Expedia and Holiday Inn are just who examples of companies that are offering digital currency payment methods. The short-term housing sight Airbnb often lists apartments that allow Bitcoin payment.
One popular cryptocurrency activity is collecting it through the act of mining. Cryptocurrencies use blockchain technology to keep the currency decentralized. Mining for cryptocurrency means verifying and adding transactions to the public blockchain. This is also how new coins are released. Anyone with internet access and the correct hardware can mine.
Miners compile recent transactions into blocks and solve the difficult puzzles used to protect the transaction. Whoever can solve the puzzle first gets to place the next block on the blockchain and claims the reward. The incentive to solve the puzzle is the reward which consists of the transaction fees and newly released coins.
Through mining, individuals can profit from cryptocurrency without having to put money into it.
Mining also plays a different yet very important service to the crypto world. The only way to create a new coin is through mining. In this way, miners are essentially minting the digital currency.
This is no easy task, however. The act of mining is expensive, time-consuming, and only sporadically profitable. You don’t have to mine for crypto to earn it. You can buy crypto with any regular currency or you can trade for it online.
There is so much buzz around crypto and so much to learn. For more information about cryptocurrency, read our introduction to cryptocurrency page. We also have a cryptocurrency vocabulary list where you can learn all of the words associated with cryptocurrency. Once you get involved with digital money, you will also need to know how to stay tax compliant. For this, we have gathered some tax laws around the world regarding cryptocurrency.
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