What is Cryptocurrency?
Then first thing every investor is taught is to have a diversified portfolio. This simply means to get a wide range of investment products. Cryptocurrency is all the rage today, with many investors making it a part of their portfolios. Despite its popularity, not many people know what it’s all about. It’s wise as a new investor to start with the basics of this particular investment product.
A cryptocurrency is a form of virtual money that you can use as a medium of exchange. This form of currency uses cryptography in all transactions ensuring their security. With the onset of the digital age, there was a need for a new form of currency in the world. After many attempts to launch various types, cryptocurrency was born in 2009 with Bitcoin as the first one.
Currently, there are more than 2000 types of cryptocurrencies available for transactions across the world. More are on the way, with each raising money through what is known as Initial Coin Offering (ICO). As of 2019, cryptocurrencies were valued at above $240 billion, with Bitcoin valued at above $130 billion.
Purpose of Cryptocurrency
Now that you know what cryptocurrency is, the next question is, what can you do with it? This form of currency serves several purposes:
- Buy Goods and Services
When Bitcoin first hit the market, not many traders and service providers accepted it as a form of currency. But that has all changed with more people embracing most types of cryptocurrencies. Many traders and service providers accept cryptocurrency as a form of payment, whether offline or online.
- Investing
With many investors becoming millionaires after investing in them, it’s no wonder they have increased in popularity. Bitcoin remains the most widely used and invested type that many people are familiar with. This is closely followed by Ethereum, which is the second most known cryptocurrency.
- Mining
The Cryptocurrency network much relies on miners who act as bookkeepers. Mining is seen as a form of investing in cryptocurrency. Miners benefit by providing sophisticated networks that come in handy when solving complicated cryptographic puzzles. This is crucial when confirming a transaction and entering it on the blockchain, which is the public ledger. The puzzles become increasingly more challenging to solve, depending on how many people are trying to solve each at a time. Miners have made millions this way, but it’s not a natural fit to achieve.
Tips for beginners looking to invest in cryptocurrency
- Invest the money you can afford to lose. Like any other form of investing, cryptocurrency has its risks.
- Do thorough research on cryptocurrency before you delve into it. Never rely only on what another person is saying.
- Make Cryptocurrency one of the investment products in your portfolio. Avoid putting all your money into it. Under cryptocurrency, invest in different types like Bitcoin, Ethereum, among others.
- Start investing small amounts as you learn the ropes about cryptocurrencies. Don’t invest all of your hard-earned money at once.
Conclusion
Cryptocurrency is quite different from traditional investment products. As a form of accepted currency, you can use it for daily transactions as well. Take time to master this subject before you invest money in it. Start with a small amount as you learn how it works.