Cryptocurrencies are seeing a massive surge in popularity. While they used to attract a very niche audience just a few years ago, today, everyone and their grandmother want to learn how to invest. You probably can’t avoid seeing a news article about the latest Bitcoin price or stumbling upon investment advice on social media.
What is Cryptocurrency?
Cryptocurrency is a broad term for digital assets with transactions that are verified and records maintained by a decentralized blockchain system using cryptography, rather than by a centralized authority like a Visa credit card or a bank.
What Makes Cryptocurrencies Different From Fiat Money?
Fiat money — money like the American (USD) or Canadian (CAD) dollar — is issued by the government, meaning there’s a central authority that controls its value, interest rates, and supply (how much is in circulation). Many view this degree of government involvement in the mechanics of the free market as manipulation and as an archaic (and futile) attempt to manage a vast and complex economic system. A noble intention at best, a catalyst of hyperinflation that makes wealth building very difficult for the average person, at worst.
Cryptocurrencies, on the other hand, are decentralized — all transactions are done peer-to-peer or through smart contracts and there’s no authority overseeing them. Many people consider this a massive advantage over traditional money because it gives them full control of their assets.
How Do Cryptocurrencies Work?
When a new cryptocurrency transaction occurs, it gets added to a digital ledger of all other transactions on a decentralized network of computers called the blockchain. Computers or ‘nodes’ of blockchain can have varying degrees of centralization and decentralization and can be spread all across the world. Before a new transaction can be added to the blockchain, these nodes check the new data to be added or ‘block’, against each other’s records to verify it.
This makes the blockchain incredibly secure and virtually impossible to hack. If someone wanted to fake a transaction, they’d essentially need to hack 51% of the nodes in a network, which would be incredibly time-consuming and expensive to ever be worth it.
Investing in Cryptocurrency
Before we dive into how to invest in cryptocurrency, it’s important to understand that there are good reasons to get involved, and there are poor ones. Remember that for every person who made an overnight fortune trading Bitcoin, there is someone who lost their entire life’s savings, so if you’re not willing or able to tolerate high-risk and extremely volatile investments with the potential for high rewards and losses, then cryptocurrency investing may not be for you.
However, if you’re genuinely curious about the possibility of cryptocurrencies forever changing the way we deal with finances and are willing to learn and able to manage the risk, then read on.
Good Reasons to Invest in Cryptocurrency
- You believe that cryptocurrencies are the way of the future and will likely replace the traditional fiat money — if this happens, you want to be educated, prepared, and experienced.
- You support the social vision behind cryptocurrencies — that currency should be decentralized and under full control of the people who use it.
- You understand and appreciate how blockchain technology works — you value the peer-to-peer aspect of transactions, their security, and confidentiality.
Is Cryptocurrency a Good Investment?
The cryptocurrency markets are far more volatile than the stock markets. With less liquidity and more speculation than traditional financial markets, the value of any given cryptocurrency can rise and fall by 30% or more in a day.
What Cryptocurrency Should You Invest In?
First, Blockgeeks does not give financial advice, and second, never asks anyone else what to do with your money, least of all Google! Always educate yourself, understand the risks, the all possible outcomes, and don’t make any investments if you are not 100% comfortable with your decision.