Put simply, cryptocurrency is a digital currency. Cryptocurrency is secured by cryptography, which is the practice of encoding and decoding data. Because of this security, cryptocurrency is impossible to duplicate or forge. Cryptocurrency is bought and sold in “coin” amounts, and backed by encryption to establish its validity and value. Most cryptocurrency is bought and sold exclusively online through various platforms.
In the span of just a few decades, cryptocurrency has risen exponentially in popularity, becoming a frequent buzzword within the finance and technology industries; a well-recognized term in the general population. More and more people today are learning about its various forms, uses, and functionalities. At first glance, cryptocurrency as a concept can be rather confusing due to its intangibility and seemingly elusive nature. To gain a better understanding of what cryptocurrency is, and how it works, let’s start from the beginning of its history.
How Did Cryptocurrency Start?
Cryptocurrency was invented with the intention of being a currency that cannot be controlled by the government. Unlike the traditional currency, we are familiar with and use every day, most cryptocurrencies are not regulated by the government, banks, or any overseeing body. Instead, it is decentralized, meaning it is run by an open-source network around the world. Cryptocurrency is publicly accessible by anyone and everyone, anywhere. There is no singular “owner” of a cryptocurrency, thus no one has complete control over its value and transaction.
You may have already heard of the first established cryptocurrency: Bitcoin. Bitcoin was first made available for purchase and exchange starting in 2009. The cryptocurrency was intended to provide a means for individuals to make purchases and exchanges completely online securely and without any governing body overseeing the currency regulation itself. Bitcoin users can buy, sell and exchange by simply using a mobile app, or on their computer, functioning as a sort of digital “wallet” to house their cryptocurrency. There is no tangible Bitcoin currency – it is solely available online, validated by encrypted data.
All Bitcoin transactions are held in a public ledger that uses blockchain technology to keep track of the supply of Bitcoin. Blockchain technology, similar to cryptocurrency, is also decentralized – there is no specified owner of the Bitcoin public ledger.
Many people commonly use Google Docs as an example to understand blockchain. When you work in Google Docs, updates are made in real-time and can be accessed from anywhere. There is no singular user that governs updates in a Google Doc, and you do not need to request permission or wait for another user to finish their updates before accessing. You can simultaneously make updates while another user is making them, and be able to see each other’s work. Though there are details that differentiate Google Docs from blockchain, the general concept is similar enough to understand.
Updates to Bitcoin’s public ledger are made individually each time the currency is bought or exchanged, and continuously updated in real-time to account for all individual purchases. Any digital purchases of Bitcoin are protected by digital signatures corresponding to their Bitcoin address.
How Does Cryptocurrency Gain Value?
Cryptocurrency value is determined based on its supply and demand, and its perceived utility. On any given day, a singular coin can fluctuate throughout the day depending on the current purchasing and selling activity. Using Bitcoin as an example, we can see how supply and demand factor into a cryptocurrency’s value. Bitcoin’s finite amount never exceeds 21 million coins. As the demand for Bitcoin rises, the supply decreases, making coins more valuable. Should the demand recede, coins’ value would recede as well.
Bitcoin’s value was significantly less when it was first launched than what it is today. The first Bitcoin transaction exchanged 10,000 Bitcoins for 2 pizzas. Currently, in 2021, a singular Bitcoin exceeds $50,000 USD. Though first, it was virtually impossible to find places that took Bitcoin as a legitimate form of currency, nowadays it is accepted globally in various online and brick-and-mortar locations.
How Do I Purchase Cryptocurrency?
As you have probably already guessed, you can’t walk into a regular bank or brokerage firm and purchase cryptocurrency there. You can buy cryptocurrency very easily online. You will first have to decide where you would like to buy it from. You can purchase cryptocurrency through platforms specifically intended for trading cryptocurrency, or certain traditional brokers.
There is a multitude of different mobile apps you can use to purchase and sell cryptocurrency. Research your options and ensure the cryptocurrency you are interested in buying is offered on the platform you choose before you create your profile. Be sure to make your cryptocurrency purchase in a place where you have a safe and private internet connection – ideally, at your own home.
Start small with your cryptocurrency purchases so you can get used to the ins and outs of the platform you are using. Though Bitcoin is certainly the most popular right now, you can look into other types of cryptocurrency available for purchase. After doing some background research, you will find there are plenty of cryptocurrency options beyond Bitcoin you can choose to invest in over time. Try to find an investment you believe to be secure, as you don’t want to invest in a more volatile currency that rises and falls significantly on a regular basis.
It’s very likely cryptocurrency will continue to grow dramatically over just the next few years. More and more businesses will adapt to accept Bitcoin and other cryptocurrencies as acceptable payment methods. The earlier you purchase, the earlier you may be taking advantage of the newest popular cryptocurrency buy. Learning more about it now can be a fun and exciting way to invest in your future.
