Understanding the Internet: Cryptocurrencies
When it comes to understanding the Internet, there are plenty of fascinating things to learn. However, one of the most interesting and contemporarily important points to investigate is that of cryptocurrency.
To that end, this article aims to give a brief guide into cryptocurrency, ranging from what crypto is to the benefits and drawbacks that crypto can pose. So, read on if you are interested in learning about what makes cryptocurrency one of the most interesting points on the internet.
What is a cryptocurrency?
In simple terms, a cryptocurrency is a form of digital currency that is intended to be decentralized, meaning it isn’t bound to a single government or ruling body. This means, in theory, that cryptocurrencies are a freer form of economy.
The decentralization of crypto is mainly due to the process of recording and verifying crypto transactions through a blockchain, which is stored across a huge number of devices. This makes it practically impossible to falsify cryptocurrency, as there is not a single point of attack through which the record of existing cryptocurrency can be altered. As a result, blockchain records are far more secure than most banks.
The benefits of cryptocurrencies
Speaking of which, the security that this decentralized system of verification provides is one of the biggest benefits that cryptocurrencies have to offer. After all, it is through this blockchain decentralization that cryptos manage to free themselves from a central authority without fear of having their value ruined by falsified versions of the currency.
What’s more, the frequent fluctuations in the value of cryptocurrencies mean that a thriving day trading market has grown around the economies, meaning that there is almost constant engagement with the currencies. This can help to stimulate the growth of crypto and has led to some incredible increases in the value of popular cryptos such as Bitcoin. There are plenty of tools that can be used to help track the value of cryptos against more regulated currencies, such as converters that allow you to see the conversion of one btc to usd.
The drawbacks of cryptocurrencies
One of the biggest drawbacks of cryptocurrency as a form of investment and income is that it is massively unpredictable in terms of its value. Putting large amounts of money into cryptocurrency is a huge risk, as you have no way of determining whether your investment will be worth as much even so soon as an hour after you make that investment.
Of course, there are plenty of ways to mitigate the risks associated with investing in cryptocurrency, namely investing no more than you can afford to lose. However, the point remains that cryptocurrency investments pose a massive risk. One of the biggest examples of the sudden and extreme shifts that crypto can experience is shown in the aftermath of the bankruptcy of FTX.
On top of that, cryptocurrencies are not as widely accepted as many other forms of currency, meaning that you might struggle to spend crypto in the same way as you would expect to be able to spend money from a bank account. This presents additional risk around cryptocurrencies, as there is no guarantee that the money that you have invested in crypto will be easily accessible.