Cryptocurrency: A deep dive into internet money
Crypto is what people call crypto currency. I always called it internet money in my head if I'm being honest with you.
It is a form of currency that exists digitally and uses cryptography to secure transactions. It is decentralized, so Cryptocurrencies don't have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units. So no one is controlling it. Decentralized currency gains its value from the people who use it, so it’s a lot like Santa or the Bogeyman.
What can you buy with cryptocurrency?
When it was first launched, Bitcoin was intended to be a medium for daily transactions, making it possible to buy everything from a cup of coffee to a computer or even big-ticket items like homes.
Several companies that sell tech products accept crypto on their websites, such as newegg.com, AT&T, and Microsoft. Overstock, an e-commerce platform, was among the first sites to accept Bitcoin. Shopify, Rakuten, and Home Depot also accept it.
You can even buy Luxury goods with crypto, in the market for a Rolex or a Patek Philippe, you’re in luck if you have some bitcoin laying around. Nothing is off limits when it comes to purchasing anymore, from cars to insurance, everything is up for sale if you have some bitcoin.
If you want to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, such as BitPay in the US.
Cryptocurrency received its name because it uses encryption to verify transactions, which requires advanced coding when it comes to storing and transmitting cryptocurrency data between wallets and to public ledgers. The aim of encryption is to provide security and safety.
Units of cryptocurrency are created through a process called mining. Bitcoin mining is the process of creating new bitcoin by solving puzzles. It consists of computing systems equipped with specialized chips competing to solve mathematical puzzles. The first bitcoin miner (as these systems are called) to solve the puzzle is rewarded with Bitcoin. It is also a very lengthy process, it takes around 10 minutes to mine just one Bitcoin, and the ideal hardware and software is not always affordable for everyday folk.
Users can also buy the currencies from brokers, then store and spend them using cryptographic wallets. Bitcoin's price today is US$16,652.84, with a 24-hour trading volume of $17.49 B. These prices fluctuate constantly, because of their decentralized nature, Bitcoin's prices fluctuate because it is influenced by supply and demand, investor and user sentiments, government regulations, and media hype creating massive price volatility.
Cryptocurrencies have exploded within the last few years and there are thousands of them in the market right now. Remember dogecoins that started as an internet joke? Some of the best known include:
–Bitcoin is the first and most valuable cryptocurrency. The OG if you will.
–Ethereum is commonly used to carry out financial transactions more complex than those supported by Bitcoin, and is perhaps the second most popular.
–Litecoin is an adaptation of Bitcoin intended to make payments easier.
–Solana is another competitor to Ethereum that emphasizes speed and cost-effectiveness.
–Dogecoin began as a joke but has grown to be among the most valuable cryptocurrencies.
–Shiba Inu is another dog-themed token with more complex mechanics.
–Stablecoins are a class of cryptocurrencies whose values are designed to stay stable relative to real-world assets such as the dollar.
Great, you just purchased some bitcoin, how do you store it?
You need to make sure your purchase is protected from theft or hacks. Usually, cryptocurrency is stored in crypto wallets, which are physical devices or online software used to store the private keys to your cryptocurrencies securely. Some exchanges provide wallet services, making it easy for you to store directly through the platform.
There are different wallet providers to choose from.
Hot wallet storage: "hot wallets" refer to crypto storage that uses online software to protect the private keys to your assets.
Cold wallet storage: Unlike hot wallets, cold wallets (also known as hardware wallets) rely on offline electronic devices to securely store your private keys.
Typically, cold wallets tend to charge fees, while hot wallets don't.
Investing in Crypto
Cryptocurrency is a relatively risky investment, no matter which way you put it. Generally speaking, high-risk investments should make up a small part of your overall portfolio — one common guideline is no more than 10%. You may want to look first to shore up your retirement savings, pay off debt or invest in less-volatile funds made up of stocks and bonds.
There are other ways to manage risk within your crypto portfolio, such as by diversifying the range of cryptocurrencies that you buy. Crypto assets may rise and fall at different rates, and over different time periods, so by investing in several different products you can insulate yourself — to some degree — from losses in one of your holdings.