Finances can be complicated at the best of times. Trying to figure out your outgoings vs. your incomings can be tricky, especially when it seems there is far more going out that coming in. Then there are the financial markets, a completely different ball game, and something that is infinitely more complicated than many will ever comprehend. As we are now living in the age of the internet, there is yet another form of finance that we must consider, the cryptocurrency. What’s a cryptocurrency you ask? We’ve got you covered in this basic guide to the online currency.
What is it?
In a nutshell, it is like many other currencies. It can be used to buy things, exchanging the cryptocurrency for goods and services, except it is used purely digitally. It kind of works like the token that you buy at a fair. You’ll have to change your real money for the tokens, and then if you want to go on any of the rides, you’ll have to pay in tokens rather than real-world money. The same theory works with casinos and buying their chips.
How do they work?
Cryptocurrencies use a technology known as blockchain. The technology is used across many computers, and it is resistant to being modified, meaning that many people who chose to use cryptocurrencies believe their payments and transactions are more secure than regular currency. The blockchain technology records the transactions between users but is not used as part of the regular banking systems across the world.
Why do people use them?
Many people think that cryptocurrencies are the future of trading and are simply trying to get ahead of the game. They are racing each other to get their hands on as many as possible now to sell them for a much higher price should they ever become common currency. They do not use central banks which some people like as the banks cannot control things like inflation on cryptocurrencies because they are not involved with them.
How can I get my hands on some?
If you want to own some cryptocurrency, you will have to use an online app that allows you to exchange your money for the currency. The most commonly used cryptocurrency is bitcoin. Once you have your online wallet, or ‘bitcoin wallet,’ you will have to register your identity and bank details. Then you can begin changing your money from regular currency to bitcoin, or another form of cryptocurrency – there are currently over 1,000 forms of cryptocurrency.
Are they safe, or legal?
It depends which country you live in. In the USA cryptocurrency is legal, but it was banned by China’s Central Bank in 2014. Similarly, in Russia, it is not outlawed, but it is illegal for people to purchase good with any currency that is not the Russian ruble. There are risks involved with changing your money into cryptocurrency, and you should investigate the currency before exchanging. If you can see who owns the company and major firms and famous people are investing it is probably safe, but you should always be cautious about putting your money into something without doing thorough research first.
Are there physical coins?
Not exactly. The currency is purely digital, so you can’t go to an ATM and fill your wallet full of bitcoin notes. There have been physical coins made, but these are used as tokens that are a physical representation of the digital currency.
The world of cryptocurrency can be incredibly confusing the more you dig into it, but some fundamentals are fairly straightforward. If you think of it as a purely digital currency to use online that you change into tokens, like you would at a fair or a casino, then you’re on the right track.