Cryptocurrency 6 Minute English

What Is Cryptocurrency? Here’s What You Should Know
Cryptocurrencies let you purchase products and services, or trade them for profit. Here’s more about what cryptocurrency is, how to buy it and how to protect yourself.

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A cryptocurrency (or “crypto”) is a digital currency that can be used to buy items and services, however uses an online ledger with strong cryptography to secure online deals. Much of the interest in these uncontrolled currencies is to trade for profit, with speculators sometimes driving rates skyward.

Here are 7 things to inquire about cryptocurrency, and what to look out for.

1. What is cryptocurrency?

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

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized innovation spread across many computers that manages and tapes transactions. Part of the appeal of this innovation is its security.

2. How many cryptocurrencies exist? What are they worth?

More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to multiply, raising money through preliminary coin offerings, or ICOs. The overall worth of all cryptocurrencies on Dec. 18, 2020, was more than $645.7 billion, according to CoinMarketCap, and the total worth of all bitcoins, the most popular digital currency, was pegged at about $421.7 billion. (You can inspect the present rate to purchase Bitcoin here

3. Why are cryptocurrencies so popular?

Cryptocurrencies appeal to their advocates for a range of reasons. Here are a few of the most popular:

Fans see cryptocurrencies such as Bitcoin as the currency of the future and are racing to purchase them now, presumably prior to they become more valuable Some fans like the reality that cryptocurrency eliminates central banks from managing the money supply, given that gradually these banks tend to lower the value of cash through inflation Other advocates like the innovation behind cryptocurrencies, the blockchain, since it’s a decentralized processing and recording system and can be more safe than traditional payment systems Some speculators like cryptocurrencies due to the fact that they’re going up in worth and have no interest in the currencies’ long-term acceptance as a method to move money

4. Are cryptocurrencies a good financial investment?

Cryptocurrencies may go up in worth, however numerous investors see them as simple speculations, not real investments. The factor? Much like genuine currencies, cryptocurrencies create no cash flow, so for you to profit, somebody needs to pay more for the currency than you did.

That’s what’s called “the greater fool” theory of financial investment. Contrast that to a well-managed service, which increases its value gradually by growing the success and capital of the operation.

For those who see cryptocurrencies such as bitcoin as the currency of the future, it must be kept in mind that a currency requires stability.” As NerdWallet writers have noted, cryptocurrencies such as Bitcoin might not be that safe, and some noteworthy voices in the financial investment community have actually encouraged would-be investors to avoid them. Of particular note, famous financier Warren Buffett compared Bitcoin to paper checks: “It’s a really efficient way of transmitting cash and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a great deal of money? Just because they can transfer money?” For those who see cryptocurrencies such as Bitcoin as the currency of the future, it needs to be kept in mind that a currency needs stability so that merchants and consumers can identify what a fair price is for products. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. For instance, while Bitcoin traded at close to $20,000 in December 2017, its worth then dropped to as low as about $3,200 a year later on. By December 2020, it was trading at record levels once again.

This price volatility develops a conundrum. If bitcoins might be worth a lot more in the future, individuals are less most likely to invest and circulate them today, making them less feasible as a currency. Why spend a bitcoin when it could be worth 3 times the value next year?

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