Understanding The Basics of Cryptocurrency.

What is Cryptocurrency?

You may have heard about cryptocurrency in the news, from a friend, or maybe you’re researching it just now. It’s said to be the new form of digital payment that can be exchanged for goods and services worldwide. Let’s understand what this all means.

Cryptocurrency is essentially a decentralized digital currency. This means that no institution or government is acting as the intermediary between a transaction. Instead, it’s verified by code through the blockchain.

What makes them so valuable is the freedom, value, the opportunity it provides, and also as a hedge against inflation from central bank figures. When people recognize these traits as favorable fundamentals, they push the price up of these cryptocurrencies on crypto networks and exchanges.

However, sometimes individuals might not understand the technology but instead purchase cryptocurrencies based on speculative bets that the value will increase in the short-term, then cash out when they have made a profit. This isn’t a viable long-term strategy since all forms of cryptocurrency are exposed to high amounts of volatility.

Want to learn more about Value investing and add another skillset to your trading arsenal? Check out the Book “The Intelligent Investor”. You can get your copy here.

Also, cryptocurrencies weren’t invented for short-term gain, they were invented to send payments directly from one party to another in a secure decentralized process.

How Crypto Works With Blockchain

Blockchain is the code that surrounds the back-end of almost all crypto networks. It is the decentralized process of storing data on virtual blocks that are interconnected and verifiable, hence why it’s called the blockchain.

An example of a blockchain network is Bitcoin. The blockchain is a shared public ledger that stores the verified transaction data of Bitcoin. The order of the blocks is dependent on when they were deemed verifiable, this is also enforced by cryptography.

Cryptography is very simple if you break down the fundamentals. Essentially it provides high levels of security by using complex mathematical proofs. Cryptography makes it virtually impossible to send funds from a different user’s wallet. These proofs secure the users and the blockchain technology itself from malicious attack attempts on many crypto networks.

Cryptography is very simple if you break down the fundamentals. Essentially it provides high levels of security by using complex mathematical proofs. Cryptography makes it virtually impossible to send funds from a different user’s wallet. These proofs secure the users and the blockchain technology itself from malicious attack attempts on many crypto networks.

Blockchains can not only be used for crypto networks but also as a way to store data securely from multiple sources such as medical information, education certificates, or identification. The number of use cases has continued to grow over time with more developments in blockchain technology.

Why Cryptocurrency Is Important

Cryptocurrency is important for many reasons. As much as it gives people financial security, it also shows that cryptocurrency and blockchain technologies are possible now, and maybe even better versions in the future.

These crypto networks are laying the groundwork for financial systems that won’t need an intermediary, where you can send your money anywhere around the world with little to no fees. However, it’s important to note that while using cryptocurrency does bring you many opportunities, you now hold far more responsibility.

If funds are stolen or lost there’s unfortunately nothing you can do to recover them since transactions are irreversible. This a big factor to realize when beginning your journey into crypto. This is why you need to safely store your cryptocurrency keys in a private place, and make sure you don’t reveal any of those keys to anyone.

The Crypto Future

The future where cryptocurrency is used everywhere, where people no longer need a transaction intermediary, and when we don’t need to rely on central banks is a possible outcome. Despite this, it’s important to recognize the path to this future will be extremely volatile because of regulation, restrictions fears, and added responsibility. These fears affect the price of these digital currencies heavily and can shake less convinced investors out.

As more people around the world recognize the potential of crypto networks and blockchain technology, there will undoubtedly be increased adoption over the long term regardless of outside factors. It all just comes down to the patience and conviction of the individuals fueling this decentralized future of digital payments.

Enjoyed this article? Click HERE for more just like it. Don’t forget to subscribe to our Weekly Newsletter and never miss a publication!

Default image
Andre Mitchell
Andre Has been trading financial markets for 5+ years. Has consistently grown small account sizes to medium sizes. Andre is a long term income investor that primarily operates in the stock options market and loves sharing his insight and experience with people who love investing and growing their financial wealth.
Articles: 53

Newsletter Updates

Enter your email address below to subscribe to our newsletter