This guide explains what cryptocurrencies such as Bitcoin are, it sheds light on how they function and provides examples of common usage. It’s a good starter guide for those seeking to get into the field.
What is a cryptocurrency?
In simple terms, cryptocurrency is virtual money. Cryptocurrencies are decentralized and not backed by a government like fiat currencies such as the pound or dollar. A cryptocurrency is in its pure form, data stored in a network. This network is encrypted so that it takes an extreme amount of work (decrypting) to recover the data. It takes a powerful, dedicated machine to efficiently decrypt a cryptocurrency, a process known as mining. This is often done in groups for more efficiency and is the process by which cryptocurrencies are transferred and/or generated. Cryptocurrencies like Bitcoin can only be used electronically and are not printed in the form of notes or coins.
Benefits of cryptocurrency:
- No or lower fees
- Easier transactions/processing
- Globally valid
- Highly secure (if properly used)
- Bitcoin – the first cryptocurrency
Plus, many less popular but functional options.
How does one obtain cryptocurrency?
Before considering an acquisition, make sure you have somewhere to store the currency – a wallet. Options include making a software wallet on your computer or using an online wallet. Online wallets would likely be your simplest and best option, just make sure you use a reputable provider. Blockchain.info and Coinbase are some the biggest and more popular providers. Each cryptocurrency has its own wallet, so be sure to setup the correct wallet for what you need as their names can sometimes be similar. As soon as you have your wallet, you can purchase cryptocurrency from a broker or trusted seller. The most common ways to pay are using a credit/debit card or by bank transfer.
The many uses of cryptocurrency
Okay, you got yourself some Bitcoins! Let’s say you bought them from a trusted and secure seller and stored them properly and safely. What can you spend them on, now that you have them? Cryptocurrencies are essentially money. They can be used to purchase goods, services, make donations and so on, there are many options. A cryptocurrency is also unrelated to any government, and highly secure; this is extremely important – a cryptocurrency wallet is not directly linked to your identity!
This means that you are free to make anonymous purchases or donations, keep your money hidden from any peering eyes, or treat yourself to some bitcoin gambling without the risks of depositing your fiat money online. Being global and anonymous, cryptocurrencies can be used to purchase items and services that may be unavailable to you normally.
An overview of Cryptocurrency usage
Cryptocurrencies offer some unique qualities that other forms of money don’t, but they require a bit of technical know-how to use. It’s important to properly monitor your own security, as well as the rates of cryptocurrencies themselves as they can be volatile. As Bitcoin and other cryptocurrencies become more mainstream, it looks like their usability is only set to increase. There are even rumors of online retail giant Amazon possibly accepting Bitcoin in the near future.