The 411 on Cryptocurrency and How it Works

Cryptocurrency - Complete Controller

Cryptocurrency is quickly becoming a more used type of currency used for online transactions. It is based on blockchain technology or a chain of information controlled by multiple digital transactions that are not dependent on traditional central banks or financial institutions. Check out America's Best Bookkeepers

Blockchain technology has many technical details that you don’t need to know to understand. It provides layers of protection to online transactions done using cryptocurrency. The main advantage of cryptocurrency and blockchain technology is that it allows transactions to be done without a middleman. This cutting of a third party in the transaction severely lowers or even eliminates fees third parties charge for using their payment platforms for transactions.

Cryptocurrency functions within its network and cannot be purchased via banks or other traditional banking institutions. Cryptocurrency is the credit card of today. Back when credit cards came on the scene, they were not widely accepted by banking and other financial institutions. Now they are more used than cash for purchases, especially in the form of a debit card.

Banks may accept and sell a cryptocurrency at some point, but for now, they don’t. However, these institutions follow its price, especially in the most popular cryptocurrency form, Bitcoin.

Cryptocurrency has a few reasons. It is an attractive choice of currency for online transactions. One of the main reasons people like using it is that you can own and use it anonymously, which adds a protection layer. Though the drawback of that is that criminals who use it for purchases and transactions on the dark web can render the transactions anonymous using cryptocurrency. This anonymity can make it difficult to catch criminals through their payment. Check out America's Best Bookkeepers

People like using it because it can appear to be an investment while being useful as a payment form. Because cryptocurrency value can increase with price explosions, you can get purchasing dollars without doing a thing but purchasing it and owning it during a price explosion.

However, you should not dedicate a large part of your portfolio to the purchase of cryptocurrency because it is not an investment with expected returns. It is only an “investment” if there is a price explosion (they don’t happen all the time) while you own it, and you have to spend it during the price explosion to reap the benefits. You can’t cash it out like a stock.  

Choosing Cryptocurrency

Choosing a type of cryptocurrency can be a challenge since there are hundreds of them. Not only that, but it seems more are coming online regularly. Many of these cryptocurrencies go as quickly as they come on the scene, which can add to the confusion when trying to choose one for yourself.

Bitcoin is currently (and for a long time standing) the number one cryptocurrency. Others come in a distant second and behind Bitcoin. This fact makes Bitcoin the most reliable cryptocurrency. It is so popular that its name has become synonymous with cryptocurrency, much like Kleenex’s name became synonymous with facial tissues. While Bitcoin is a reliable and stable cryptocurrency, some others have performed better, but it is chosen over those due to name recognition. Check out America's Best Bookkeepers

Where to Buy Cryptocurrency

Cryptocurrencies cannot be purchased through traditional banking and financial institutions. They have to be purchased through cryptocurrency exchanges. These exchange platforms charge fees for both buying and selling of cryptocurrencies.

One platform called Robinhood disrupts the cryptocurrency market by charging no fees for the purchase of cryptocurrencies. You can also purchase cryptocurrency from other individuals holding them for a lesser fee.

Storing Cryptocurrency

The storage of cryptocurrency is done through a wallet. A cryptocurrency wallet is software that stores public and private keys that connect you to where the cryptocurrency exists through blockchain technology. Your cryptocurrency is not stored in the wallet; only the keys give you access to your cryptocurrency. They’re called “keys” because they unlock your cryptocurrency on the blockchain.

In addition to enabling you to access your cryptocurrency, you can send and receive it through your digital wallet. It also provides a record of transactions stored on the blockchain and your current balance.

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