These days, it seems like every day brings a fresh piece of news about cryptocurrency. Over the last few years, crypto has gone on a huge journey from something that most people may have heard of but had very little interest in, to something that we hear about regularly.
At a time when there has certainly been no shortage of major global events to dominate our news cycles, somehow cryptocurrency continues to make headlines. But there is still a lot of mystery around crypto, and a lot of people still do not really know what it is exactly or how it works.
And let’s face it, part of the appeal is that it does that a certain mystique. It is a new and exciting prospect for investors and traders, and it offers a freedom that centralized currency does not allow for. But all that can make it a little tricky for people to wrap their heads around the basics. As we look ahead to a new year with a new sense of optimism, a lot of people out there will be thinking about putting some of their money into crypto—and why not?
It seems to have proven itself to be a potentially-lucrative asset to add to your investment portfolio. So, while you’re comparing the various retirement account options available to you, perhaps you should consider looking into those that include crypto. Naturally, all of this can make it a little tricky for people to wrap their heads around the basics. With that in mind, we have put together a list of the most commonly asked questions about crypto for you.
1. What Is Cryptocurrency?
Let’s start with the most basic question, shall we? The chances are that you probably have a decent idea of the answer to this, but just in case: cryptocurrency is a decentralized form of finance. Cryptocurrency coins are digital assets that are used just like regular currency, but they use cryptographic functions and blockchain technology. People use cryptocurrency to exchange goods and services.
2. Is Bitcoin Cryptocurrency?
Well, yes, but there are many different forms of cryptocurrency out there. Bitcoin is undoubtedly the best known, which is why a lot of people might think that Bitcoin and cryptocurrency are one and the same. You can check the Bitcoin History to learn more. The second most popular form of cryptocurrency is Ethereum, but there are many other forms (or coins) out there. Each has its own value, and some have a specific purpose.
For example, it’s worth noting that one of the reasons why Bitcoin is so valuable is that it was created with a finite supply. Ethereum is a little different in that it was created as part of a specific platform and is used to promote the development of its software.
3. What Is Blockchain Technology?
When you are researching cryptocurrency, you are going to see the word “blockchain” pop up a lot. As a result, many people think that blockchain is a cryptocurrency coin. This is not the case. Blockchain technology is what is used to keep a record of every single transaction that a cryptocurrency coin goes through. It is a public ledger that is available to everyone.
Every time a coin is traded, that transaction goes on the record. The technology also means that it cannot be erased or altered, adding a level of security to these decentralized transactions. Blockchain technology is of tremendous interest to a wide range of different big businesses which is one of the reasons why everyone is so excited about cryptocurrency.
4. How Do I Buy Cryptocurrency?
If you want to start buying and selling cryptocurrency, you will need to sign up for coin exchange. There are a lot of different cryptocurrency exchanges out there so make sure that you do your research and find a safe and reputable one. You should also look for an exchange that suits your experience level and your goals.
When it comes to actually buy coins, you can use an online payment or wallet to conduct the transaction safely. You can buy Bitcoin with Cash App, which allows you to send money to your friends and family with the push of a button. Paxful makes it easy to find the best deal for your coin and to conduct your transactions safely and smoothly.
5. Is Cryptocurrency Safe?
Right now, everyone is a little twitchy when it comes to online safety and with good reason. Over the course of the pandemic, we saw a huge rise in cybercrime as businesses and ordinary people suddenly had to do all their business online. The bad guys knew that a lot of people would not be taking adequate security measures and they took full advantage of it. But this is not the only reason why people want to know if cryptocurrency is safe.
One of the biggest myths out there is that trading cryptocurrency puts you at risk. The truth is that even though crypto is a valuable asset, with the proper safety measures it is no more dangerous than conducting any other financial transaction online.
So, make sure that you use your two-factor authentication and your password generators, and that you invest in crypto wallets. These are available as hot wallets (software that protects your assets while you are online) and cold wallets (hardware that you can download your coins to and unplug when you are not actively using them).
6. Is Cryptocurrency A Good Investment?
One of the main reasons why people are drawn to cryptocurrency is its volatility. No doubt you will have seen the news stories about Bitcoin suddenly skyrocketing in value, and you will also have seen the stories about how coins can suddenly start tumbling in the opposite direction, as was seen with Ether in November. This means that the answer to the question about whether or not crypto is a smart investment is a little complicated.
The answer is yes if you do your research, and you go about things sensibly. You need to understand that things move incredibly quickly in this market and if you get caught napping, your stock could plunge before you have the chance to do anything about it.
But if you are the kind of investor who lives on the pulse of the stock market, who thrives on having to make quick decisions, and who is confident enough to hold fast to see things through, there are plenty of reasons why getting into trading crypto could be just the thing for you.