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

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A cryptocurrency (or “crypto”) is a digital currency that can be utilized to purchase goods and services, however uses an online ledger with strong cryptography to secure online deals. Much of the interest in these uncontrolled currencies is to trade for profit, with speculators at times driving prices skyward.

Here are 7 things to inquire about cryptocurrency, and what to look out for.

1. What is cryptocurrency?

Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many business have released their own currencies, frequently called tokens, and these can be traded specifically for the excellent or service that the company supplies. Consider them as you would arcade tokens or casino chips. You’ll need to exchange genuine currency for the cryptocurrency to access the great or service.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computer systems that handles and records transactions. Part of the appeal of this technology is its security.

2. How many cryptocurrencies exist? What are they worth?

More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a marketing research website. And cryptocurrencies continue to proliferate, raising money through preliminary coin offerings, or ICOs. The total worth of all cryptocurrencies on Dec. 18, 2020, was more than $645.7 billion, according to CoinMarketCap, and the total value of all bitcoins, the most popular digital currency, was pegged at about $421.7 billion. (You can examine the existing price to buy Bitcoin here

3. Why are cryptocurrencies so popular?

Cryptocurrencies interest their fans for a variety of reasons. Here are some of the most popular:

Fans see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, most likely before they become better Some advocates like the truth that cryptocurrency gets rid of reserve banks from handling the money supply, because gradually these banks tend to decrease the value of money via inflation Other supporters like the technology behind cryptocurrencies, the blockchain, due to the fact that it’s a decentralized processing and recording system and can be more secure than traditional payment systems Some speculators like cryptocurrencies because they’re going up in worth and have no interest in the currencies’ long-term acceptance as a method to move money

4. Are cryptocurrencies a great investment?

Cryptocurrencies may go up in value, but lots of investors see them as simple speculations, not real investments. The factor? Similar to genuine currencies, cryptocurrencies produce no cash flow, so for you to profit, somebody needs to pay more for the currency than you did.

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

For those who see cryptocurrencies such as bitcoin as the currency of the future, it must be kept in mind that a currency needs stability.” As NerdWallet writers have kept in mind, cryptocurrencies such as Bitcoin may not be that safe, and some significant voices in the investment neighborhood have encouraged potential investors to stay away from them. Of specific note, famous financier Warren Buffett compared Bitcoin to paper checks: “It’s an extremely efficient way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting cash too. Are checks worth a whole lot of money? Even if they can send money?” For those who see cryptocurrencies such as Bitcoin as the currency of the future, it ought to be noted that a currency needs stability so that merchants and consumers can identify what a fair price is for goods. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. While Bitcoin traded at close to $20,000 in December 2017, its worth then dropped to as low as about $3,200 a year later on. By December 2020, it was trading at record levels once again.

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

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