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

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A cryptocurrency (or “crypto”) is a digital currency that can be utilized to purchase items and services, but uses an online journal with strong cryptography to protect online deals. Much of the interest in these uncontrolled currencies is to trade for profit, with speculators at times driving prices skyward.

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

1. What is cryptocurrency?

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

Cryptocurrencies work utilizing a technology called blockchain. Blockchain is a decentralized technology spread across lots of computers that handles and tapes deals. Part of the appeal of this technology 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 initial coin offerings, or ICOs. The overall value of all cryptocurrencies on Dec. 18, 2020, was more than $645.7 billion, according to CoinMarketCap, and the overall worth of all bitcoins, the most popular digital currency, was pegged at about $421.7 billion. (You can examine the existing rate to buy Bitcoin here

3. Why are cryptocurrencies so popular?

Cryptocurrencies attract their advocates for a variety of reasons. Here are a few of the most popular:

Advocates see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, most likely before they end up being more valuable Some fans like the truth that cryptocurrency eliminates reserve banks from handling the money supply, because with time these banks tend to minimize the worth of cash via inflation Other fans like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more safe than standard payment systems Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-lasting approval as a way to move money

4. Are cryptocurrencies a good investment?

Cryptocurrencies might go up in worth, however numerous financiers see them as mere speculations, not real financial investments. The factor? Much like genuine currencies, cryptocurrencies generate no capital, so for you to benefit, someone has 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 company, which increases its value gradually by growing the profitability and capital of the operation.

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.” As NerdWallet authors have kept in mind, cryptocurrencies such as Bitcoin might not be that safe, and some noteworthy voices in the investment community have recommended prospective investors to stay away from them. Of specific note, legendary investor Warren Buffett compared Bitcoin to paper checks: “It’s a really effective way of transmitting cash and you can do it anonymously and all that. A check is a way of sending money too. Are checks worth a lot of money? Even if they can transfer money?” For those who see cryptocurrencies such as Bitcoin as the currency of the future, it must be noted that a currency requires stability so that merchants and customers can identify what a reasonable cost is for goods. Bitcoin and other cryptocurrencies have actually been anything but stable through much of their history. 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 cost volatility develops a problem. If bitcoins might be worth a lot more in the future, people are less most likely to spend and distribute them today, making them less practical as a currency. Why spend a bitcoin when it could be worth 3 times the worth next year?

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