Cryptocurrency has now been around for several years and really hit its mainstream stride in 2017. Over the course of that year, some of the most prominent cryptocurrencies reached their peak values, and in doing so exceeded even some of the most bullish of expectations. Now, however, they’ve settled down considerably, and the crypto market, while not as exciting as it was a year ago, is somewhat easier to take stock of. So, given that many people are still not particularly familiar with this fintech phenomenon, this is our late introduction to it all.
What Is Cryptocurrency?
Cryptocurrency is for all practical purposes a tech-based currency that is “mined” into existence on computers and then traded and stored with whatever monetary value the market dictates it to have. More specifically, it is a digital currency that uses encryption techniques in its own generation and then to verify and track transactions. Cryptocurrency can be bought and used anonymously, and networks called “blockchains” record and ensure all transactions that are ever made. To some, all of this amounts to a new generation of money; others view it as an online trend lacking substance or a legitimate value.
Which Ones Matter?
Determining which cryptocurrencies “matter” is somewhat subjective by nature. You can, however, look to the biggest ones by market cap, which tends to provide a decent picture of the most valuable or widely used options. Bitcoin is the original cryptocurrency and remains the industry leader by a fairly wide margin in market cap and monetary worth. However, alternatives including Ethereum, XRP (or Ripple), bitcoin cash, and EOS, among a few others, can also certainly be said to matter. There are also innumerable smaller cryptocurrencies out there at this point that are either less than serious or built to address specific, niche purposes.
How Do You Use Cryptocurrency?
Using cryptocurrency can actually be a tricky process for beginners, but it doesn’t have to be. Really, the main thing you need to understand is something called a private key. As it’s described by a prominent online gaming resource (a suitable source given that online gaming is one area in which cryptocurrency is used fairly regularly), private keys are used to assign ownership and transactions using the blockchain. Basically, when you purchase cryptocurrency, you’re given a digital address (usually public), and your own private key. You don’t actually receive a physical coin or even a certificate. That key though accesses the address where your cryptocurrency is stored and allows you to send it elsewhere over the blockchain. This is a simplistic and not entirely accurate comparison, but it’s almost like logging into your PayPal account to send funds.
Is Cryptocurrency A Useful Alternative To Money?
For most people, in a word, the answer to this would be no. Cryptocurrency is still somewhat unnatural for people to use, and it can often be hard to find opportunities to spend it anyway given that relatively few merchants accept it. There are some benefits to using it – namely, security and the assurance offered by the blockchain – and for this reason, cryptocurrency is viewed by its own proponents as a very important alternative. However, in terms of broad use or its ability to supplant fiat currency, cryptocurrency is not particularly useful just yet.
Is Cryptocurrency Investable?
It is, and this is really where its main value lies for the majority of crypto holders. To be completely transparent, that doesn’t mean that it’s a wise investment. As with any stock or asset, it can make or lose you money depending on the market, which means it’s extraordinarily important to be careful and strategic about any investments you might make. However, people can and do buy and sell cryptocurrency purely for the sake of investment. In fact, many people are now calling cryptocurrencies commodities rather than currencies (but “cryptocommodity” isn’t exactly the catchiest name!).
What Is The Significance Of Blockchain?
As you’ve gathered by now, the blockchain is essentially the network that makes cryptocurrency hum. When you send bitcoin to another address, it happens via the blockchain, and is recorded on what’s often described as a universal public ledger. However, it’s become clear already that the blockchain has applications beyond the simple transfer of cryptocurrency. The idea of an encrypted public ledger that can record and verify transactions is already being used for various applications and creative means, to the point that some view it almost as a new version of the internet. At this point, many tech analysts are openly suggesting that the blockchain, rather than bitcoin and cryptocurrency, may be the biggest innovation in all of this.