Unless you’re in the crypto space, you may not know much about cryptocurrency, but even if you don’t have any investments of your own, it’s probably worth familiarizing yourself with this new frontier of finance. Crypto is the name given to any digital asset that uses blockchain technology. The most popular are Bitcoin and Ethereum, but there are also many others. Blockchains are distributed, peer-to-peer record-keeping systems that don’t rely on a single company to oversee them. They use advanced computer science and mathematical innovations to be secure, verifiable and transparent.
Crypto fans tout the many advantages of their investment: Privacy
Unlike sending money through a bank, you don’t have to give out your name when you buy something with crypto. You can also transfer it globally, almost instantly, 24/7, for low fees. It’s also censorship-resistant. It’s difficult for governments or other central authorities to tamper with transactions or change the money supply. It’s also untraceable, which is attractive to people who want to hide their identity.
Proponents say that crypto gives everyone equal opportunity to participate in the financial system. It’s especially popular among people from marginalized groups, who might have had their property unjustly taken by the government in the past. A 2021 Pew Research Center survey found that black and Latino adults were more likely than white ones to own crypto. The crypto market is also booming in developing countries, which can’t easily rely on a global banking system.
Critics say that crypto is an exploitative scheme. They compare it to buying stock in Apple, which (theoretically at least) reflects a belief in the firm’s underlying business. But with crypto, the only underlying asset is a promise that the currency will go up in value. And if enough people stop believing that, then the prices will plummet.
You can use crypto to pay for goods and services online, though the list is still limited compared to what you can buy with traditional currency. For example, you can buy a laptop with Bitcoin, but you’d have to find a seller who accepts it. And to make a purchase, you’ll need a wallet that holds your cryptocurrency. You can get a wallet on a website or app, but be sure to protect it with a strong password and don’t store your seeds in public places like email files.
There’s also an ecosystem of applications that are built on top of the blockchain, including everything from video games to social networking sites. It’s not clear how successful these will be, but the potential is there. And the number of options keeps growing as more companies and individuals join the crypto fold. As the cryptocurrency landscape changes, you’ll need to keep up with it to understand what it can do for you. Getting started is as easy as searching for a wallet and entering your seed words. Then you’ll need to decide whether you want to buy and hold, or become an active trader.