Do you understand what Cryptocurrency is?

A cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the goods or services.

Cryptocurrencies work using a technology called Blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. (Learn More: Blockchain Technology)

Below is a list of seven things that every cryptocurrency must be in order for it to be called a cryptocurrency:

1. Digital: Cryptocurrency only exists on computers. There are no coins and no notes.
2. Decentralized: Cryptocurrencies don’t have a central computer or server. They are distributed across a network of (typically) thousands of computers. Networks without a central server are called decentralized networks.
3. Peer-to-Peer: Cryptocurrencies are passed from person to person online. Users don’t deal with each other through banks. They deal with each other directly. Banks are all trusted third parties. There are no trusted third parties in cryptocurrency where all transactions work with blockchain technology.
4. Pseudonymous: This means that you don’t have to give any personal information to own and use cryptocurrency. 
5. Trustless: No trusted third parties means that users don’t have to trust the system for it to work. Users are in complete control of their money and information at all times.
6. Encrypted: Each user has special codes that stop their information from being accessed by other users. This is called cryptography and it’s nearly impossible to hack. It’s also where the crypto part of the crypto definition comes from. Crypto means hidden. When information is hidden with cryptography, it is encrypted.
7. Global: Countries have their own currencies called fiat currencies. Sending fiat currencies around the world is difficult. Cryptocurrencies can be sent all over the world easily. Cryptocurrencies are currencies without borders!

You may be familiar with the most popular versions, Bitcoin and Ethereum, but according to CoinMarketCap.com, there are more than 6,700 different cryptocurrencies in circulation.

The number of cryptocurrencies continues to grow rapidly due to the public raising money through Initial Coin Offerings (ICO) or Security Token Offering (STO). Based on CoinMarketCap data, the total value of all cryptocurrencies on 6th April 2021, was more than $1.9 trillion. The most popular crypto, Bitcoins was pegged at about $1,099 billion.

These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data, and analytics provider. (Data as at 6th Apr 2021)

Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:

• Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable
• Some supporters like the fact that cryptocurrency removes central banks from managing the money supply since over time these banks tend to reduce the value of money via inflation
• Other supporters like the technology behind cryptocurrencies, the blockchain, because 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 value and have no interest in the currencies’ long-term acceptance as a way to move money

Like most investments, crypto assets come with a host of risks but also vast potential rewards. Cryptocurrency is at the (very) “high-risk” end of the investment spectrum. The price of cryptocurrencies is volatile; some can go bust, others could be scams, and occasionally one may increase in value and produce a return for investors. Cryptocurrency could be a good investment if you want to gain direct exposure to the demand for digital currency and the projects or businesses they facilitate.

Several publicly traded companies can provide limited exposure to the cryptocurrency market, such as Square (NYSE:SQ), PayPal (NASDAQ:PYPL), MicroStrategy (NASDAQ:MSTR), or CME Group (NASDAQ:CME). But those investments won’t come with the same focus on a cryptocurrency or blockchain project as investing directly in a crypto asset.

Using cryptocurrencies isn’t like using fiat currency. You can’t hold cryptocurrency in your hand and you can’t open a cryptocurrency account. Cryptocurrency only exists on the blockchain. Users access their cryptocurrency using codes called public and private keys.

It’s a bit like sending emails. If you want someone to send you an email, you tell them your email address. Well, if you want someone to send you cryptocurrency, you tell them your public key.

Now, if you want to read your emails or send an email, you need to enter your email password. This is how private keys work. Private keys are like passwords for cryptocurrency. Public keys can be seen by anyone, but private keys should only be seen by you. 

Private and public keys are kept in wallets. Crypto wallets can be online, offline, software, hardware, or even paper. Some can be downloaded for free or are hosted by websites. Others are more expensive. For example, hardware wallets can cost around a hundred US Dollars. Whoever has the private and public keys owns the cryptocurrency, so don’t lose your wallets! Remember that Cryptocurrency is pseudonymous. There is no way to prove your own cryptocurrency unless you have the keys to it.

There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country. Also, be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to fraud investors. As always, buyer beware.

Data retrieved from finder.com

Cryptocurrencies have the power to change our lives. They can help you take back control of your money and your information. Some people will ignore them and hope they go away. Others will join the party. Which will you be? In the next article, we will share how cryptocurrencies help the global economy.