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Mainstream media is doing a terrific job confusing the general public about cryptocurrency and scaring people away from a potentially world-changing technology. I’m a young, broke, early-adopter of cryptocurrency and today I’m breaking down some common questions about what cryptocurrency actually is and why you would or wouldn’t want to invest in it.
What is cryptocurrency?
When you transfer money from your checking account, you aren’t moving dollar bills by wifi. You’re just moving a digital representation of dollars, euro, etc. whose value is reflected in your bank account. This money can be withdrawn and used to purchase goods or services that accept your form of currency. The bank simply keeps a record of how much money you have.
Cryptocurrency is just like any other currency, except that it has no bank.
Instead, the value of any cryptocurrency you hold is verified by many sources using cryptography. No one sees your personal information, and that’s what makes cryptocurrency different.
Bitcoin is the most common and recognizable cryptocurrency, but currently, there are over 1600 registered, circulating cryptocurrencies. The word currency makes this concept confusing, since most of us are only familiar with government-issued fiat currencies like the U.S. dollar, British pound, euro, etc.
What’s the point?
Cryptocurrencies have a numerous benefits that government-issued currencies don’t:
1. It offers a solution to people in areas with little access to banking.
In developing nations, access to the internet grows rapidly every day, but access to banking can be practically non-existent. Migrant workers sending wages back to their home countries risk their earnings requiring high Western Union wire fees, and limited ability to keep their money safe in a bank. With a cryptocurrency wallet, they can receive funds instantly, safely, and typically for fees that are fractions of pennies.
2. It helps women protect their money.
In Afghanistan, for example, women cannot have their own bank accounts unless their husband, brother, or father co-own it.
While women can have a business, the male account owner could have access to the funds and spend it without any punishment. With a cryptocurrency wallet, she can run her business while keeping what she made as her own without government regulations.
3. It is a new option for funding startups.
All over the world, new technology startups are taking advantage of the technology on which cryptocurrency was built: blockchain. These companies issue cryptocurrencies (also called tokens) as a means of funding their startup, rather than issuing stocks which distribute the ownership of their company.
How are cryptocurrencies valued and why is Bitcoin so expensive?
Like the stock market, cryptocurrency is a speculative market. That means that investors utilizing their funds within exchanges are speculating the value of their currencies based on their research and perception of the currency’s trends. Bitcoin is the “godfather” of cryptocurrency and is disproportionately more expensive than other currencies, basically because the market says so.
Cryptocurrency is an extremely volatile market. It is wracked by the woes and wills of individuals who lose and gain ten million dollars in a day without a second thought. But, it is the ultimate crowdfund for the future of technology, and it has the potential to earn investors sizable returns if they engage intelligently.
So, should I invest in cryptocurrency?
If you have researched the cryptocurrency you want to invest in and are confident in losing your entire investment in the blink of an eye, then you are in the perfect place to give it a shot. Why on earth would I be comfortable with this? Because I believe in the future possibilities that cryptocurrency is creating. When the masses first started to access the internet, nobody knew what they were looking at or what it would become. The dot com bubble was immense, and some people made a lot of money. What the misleading name “dot com bubble” doesn’t showcase is that the folks involved who took a chance on the internet revolutionized technology with their risky bets.
If you are considering cryptocurrency investment, it’s up to you to get to know who and what you are investing in. Bitcoin is the most common and well-known cryptocurrency, and its movement has been known to impact the market, but there are endless opportunities for you to invest and make a profit. For example:
Ethereum: The second largest cryptocurrency on the market whose primary focus is on revolutionizing liabilities using a Smart Contract system.
Qtum: A top-20 cryptocurrency whose focus is to create blockchain-based business applications, such as PoS services, mobile applications, and more.
Steem: A top-50 cryptocurrency that has a massive social media platform called Steemit where users earn STEEM for their engagement and content production on the site.
Cryptocurrency is revolutionary, and to get involved, your first step is to learn.
Though Bitcoin launched nearly a decade ago, we are still in the very early stages of cryptocurrency and blockchain’s potential. Each new company, blockchain update, and currency is an opportunity to decentralize and improve the industries that power our world.
To further your research, take a look at Coin Market Cap to learn about the cryptocurrencies currently circulating on the market. Read the Whitepapers, and team pages on the websites of currencies whose mission aligns with your values. Learn more about utilizing exchanges safely and efficiently. Talk about cryptocurrency with your friends and family from a place of curiosity, rather than a place of fear. Don’t be afraid of the future. Be a part of it.