Cryptocurrencies can be used to buy goods and services, or held as part of an investment strategy. They can be a powerful tool in advancing the global economy, but they also carry risks that can make them unsuitable for some people.
Use Cases
The first and most obvious use of cryptocurrency is to transfer money electronically. For example, an individual can send large sums of money to family members overseas without having to explain the source of the funds or where they are going. This can save money in transaction fees and can make it more convenient for consumers, as they don’t have to wait for banks or other financial institutions to process their transactions.
Another important use of cryptocurrencies is to send non-cash remittances from one country to another. For example, a blockchain startup called SureRemit enables individuals to transfer digital tokens to selected African countries. The tokens can then be used within the app to make non-cash payments for goods and services, such as mobile data top-ups or utility bill payments.
Despite these benefits, cryptocurrencies are still considered speculative assets. This means they can be volatile, and they may lose value rapidly if the market goes on a downward trend. This can cause investors to lose significant amounts of money, but it can also result in dramatic increases in the price of a given coin.
Regulation
While some governments have taken steps to regulate cryptocurrencies, others are still developing policy and guidelines. Some of the most prominent regulations involve preventing money laundering. Specifically, the United States and European Union have stepped up their scrutiny of crypto in recent years, with the United States cracking down on initial coin offerings after a massive mania erupted in 2017 and 2018.
What Is Cryptocurrency?
Cryptocurrency is a decentralized form of currency that uses blockchain technology to create a secure, encrypted record of every transaction. The system is powered by a computer program known as a distributed ledger, which stores a digitally signed copy of each transaction and its associated cryptocurrency.
How To Get Started
The most basic step in getting started with crypto is to open an account at a cryptocurrency exchange or broker. Depending on the exchange and your funding method, you may have to wait several days before you can buy or sell a coin.
Once you have an account, you can then search for coins that interest you and place a trade. You can choose from a wide range of cryptocurrencies, including popular names like Bitcoin and Ethereum or niche options like Cardano and Litecoin.
You can use a credit card to buy and sell coins, but you should be aware of the potential risk. If you deposit a cryptocurrency using a credit card, the company processing the transaction will charge high interest rates and fees, which can quickly wipe out your gains.
How Cryptocurrencies Work
Most cryptocurrencies, including the more established ones, run on the blockchain network. The network is based on an algorithm that calculates the amount of each coin by evaluating all previous transactions. This process, which is called mining, rewards users with cryptocurrency for participating in the network’s infrastructure. Those coins are then traded on a cryptocurrency exchange.
