If you’re like most people, the word cryptocurrency is about as familiar to you as the Akkadian Empire. It keeps showing up in the news and is all over the internet, but it probably leaves you scratching your head and wondering what the fuss is all about. You might have all these questions about cryptocurrency, but where are the answers?
Before going any further, let’s clear up one big misconception–you don’t have to be a tech wizard to understand cryptocurrency. Anyone can do it. And by the end of this post, you will not only have a good understanding of what cryptocurrency is but you will better understand the potential it has to fundamentally change the world of finance for the better.
1. What is cryptocurrency?
Let’s get right to it: most people’s top question about cryptocurrency. What is it? Cryptocurrency is a digital currency that uses blockchain technology to store funds on a decentralized ledger. Military-grade cryptographic algorithms protect these assets. People use cryptocurrencies for making payments and purchasing goods and services. Just like traditional fiat currencies such as dollars or euros!
2. Okay, but what is a blockchain?
Blockchain technology is a system of recording information in a way that makes it difficult to change or hack. It is the underlying technology utilized by all cryptocurrencies. It can also be called a “decentralized ledger.” Its purpose is to secure the records of all transactions made with cryptocurrencies.
We can compare blockchains to typical databases, with one significant difference. Every blockchain is stored in hundreds of thousands of exact copies called “nodes.” These are updated in real-time and located in independent locations around the world. Because of that, blockchain-based cryptocurrencies are fully decentralized.
3. What is decentralization and why is it so important?
Decentralization and cryptocurrency go hand in hand. So, that’s why this is one of the most important questions about cryptocurrency. As you may know, fiat currencies like the US Dollar are entirely centralized. They are issued and controlled entirely by central banks. This can lead to wild fluctuations in the market, resulting in increased inflation stemming from the unrestrained printing of money.
Unlike fiat currencies, cryptocurrencies operate in a decentralized way. Everyone can join the network and send and receive transactions without asking anyone else for permission in a very secure and efficient manner. How cool is that? There is no single governing authority capable of controlling or seizing your funds. Whatever you own on the blockchain is yours and yours alone. As it should be!
4. You’ve mentioned inflation – is crypto really immune to it?
Inflation occurs when politicians and central bankers keep printing money out of thin air. Untethered from any underlying value such as gold, they can print as much as they like. The value of the money goes down, while the price of everything goes up. Now your money has about as much value as monopoly money. Inflation wipes out your savings and your comfortable lifestyle goes along with it.
Most cryptocurrencies are fully deflationary and have a strictly fixed total supply. For example, a particular cryptocurrency might be limited to 1,000,000,000 coins. Since cryptocurrencies are decentralized, nobody has the power to create even a single coin over that limit. Because of that, the supply stays the same as the demand grows, which means that instead of lowering down over time, the value of cryptocurrencies keeps rising.
5. Is crypto a good store of value?
With the threat of inflation looming, crypto is a much safer bet. Its immunity from inflation makes it a great store of value. Some experts even compare crypto to gold, because just like precious metals, the value of cryptocurrencies cannot be ruined by politicians and central bankers always printing more and more.
6. But is crypto actually usable?
Sure you can use crypto for investment purposes, but at the end of the day, cryptocurrencies are currencies. We can use them to make payments!
Cryptocurrencies have been around for well over a decade. Global blockchain adoption is becoming more and more advanced. Numerous businesses worldwide now accept crypto as a payment method. Amazing! You can use cryptocurrency to buy everything – from pizza to luxury supercars, so stop hoarding and start spending. This is one of the biggest questions about cryptocurrency. And you should definitely share the answer with your friends!
7. Is using crypto to make payments secure?
Using cryptocurrency to pay for goods and services is actually more secure than using traditional fiat currencies. Who would’ve thought! It’s pretty easy to counterfeit paper money, and using debit and credit cards includes the risk of data leaks. Cryptocurrencies, on the other hand, utilize state-of-the-art cryptographic algorithms. It’s impossible to counterfeit crypto or hack your assets stored on the blockchain. Sounds like a better plan to me!
8. I’ve heard that crypto is bad for the environment, is it true?
People who want you to keep using fiat currencies love to make up stories. So, you’ll see a ton of fake news about the alleged bad impact of crypto on the environment. These people want you to keep losing your life savings to inflation. Always, always question the source! Some cryptocurrencies are “mined” in a process that consumes a lot of electric energy. But the majority of electricity utilized in crypto mining comes from clean energy sources such as wind, solar, and hydropower.
Fiat currency advocates like banks and others, consume a great deal of energy, but they’re oddly silent about their own use. Seems like they want to ask a lot of questions about cryptocurrency, without producing any answers about their own environmental impact.
9. Okay, but is crypto actually backed by anything?
Cryptocurrencies are backed by a unique technology called blockchain, which is the next step in the evolution of money. It enables you to send, receive and store funds in the most efficient, secure, and decentralized way ever conceived. Crypto is a booming industry that has already revolutionized the world of finance, and some of the world’s most innovative entrepreneurs and software engineers consider blockchain to be one of the most innovative sectors of the economy.
In other words, crypto is backed simply by the fact that it’s the future of money. Who doesn’t want to be a part of innovation? It’s a revolutionary technology that will very likely soon replace fiat currencies. Fortunately, it’s still not too late to get into crypto and become one of its early adopters!
10. How do I purchase cryptocurrency?
So now you know a little something about cryptocurrency, it’s time to take the next step…buying some. There are a few ways to buy crypto. The easiest and most inexpensive is through an online crypto exchange. You set up an account and convert your cash into the crypto of your choice. Once on the exchange, you can buy, sell or hold onto your crypto. I promise, getting started is a lot easier than it sounds.
With that, we hope that we’ve answered some of your top questions about cryptocurrency!