The topic of cryptocurrency is often in the news lately, and for good reason. There are thousands of cryptocurrencies available, but even the term is nonetheless confusing, and many people wonder even how to buy Bitcoin. In addition, a great deal of misinformation exists regarding the topic. In these five steps, it is possible to gain a firm understanding of cryptocurrency.
1. Understand What it Is
To use cryptocurrency, it is important to first understand exactly what it is (and what it is not). To do so, it is helpful to simply break down the word. First, “crypto” is a prefix that indicates that something is hidden or secret, usually to circumvent laws. Currency, of course, is another term for a system of money.
Therefore, cryptocurrency is a secret or hidden system of money. But that is not entirely accurate either. After all, if cryptocurrency were truly secret, how would this article even come to be? Instead, Internet cryptocurrencies such as Bitcoin operate online and out of the reach of government regulation and interference (any government). Their value is determined by simple principles of supply and demand. The more people want it, the more valuable it becomes.
Just because cryptocurrencies are secret and unregulated does not mean that they are necessarily illegal. It is perfectly legal in much of the western world to buy, sell, and use cryptocurrency. Each country may have its own laws about it, though. In addition, it is easy for buyers of cryptocurrency to avoid paying income taxes on it, which makes its ownership a bit more dubious.
2. Understand How it Might Be Useful
Cryptocurrency has several practical uses and reasons why some people prefer it. For one thing, because of the way it is transferred, it is very secure. The risks associated with using traditional currency via banking are nonexistent with cryptocurrency.
Some people regard cryptocurrency as a sound investment in and of itself. Its value has undoubtedly skyrocketed in recent years, but traditional investors shy away from a market with so few regulations. In a similar way, other people truly believe that cryptocurrency will become the only form of tender sometime in the future, and thus believe it is wise to stock up now.
Finally, it is secret and unregulated, and that is very important to some people. To put it plainly, cryptocurrency is the preferred tender for illegal or dubious transactions. Some people might prefer it for pornography, while others have much more sinister uses.
3. Procuring Cryptocurrency
Anyone who has traveled outside of their home country has probably been to a currency exchange, used a currency machine, or exchanged domestic for foreign money at a bank. A simple process that is different in the world of cryptocurrency, but not entirely.
To buy cryptocurrency, one must first deposit “real” currency and then purchase the shares of cryptocurrency so that it can then be exchanged. Some forms of cryptocurrency, such as Bitcoin, can be bought directly from the company using regular currency, while others, such as Cardano and Chainlink need to be purchased using another brand of cryptocurrency, usually Bitcoin.
This method of procurement is especially beneficial for Bitcoin. It keeps demand for their product very high, which in turn makes it valuable. Simple instructions also exist for how to buy Bitcoin, making it even more available to the general public.
4. Using Cryptocurrency
Cryptocurrency is becoming easier to use as more and more companies discover its popularity. In general, the majority of retailers and other businesses do not accept Bitcoin or other cryptocurrencies directly, for several reasons (one of the most pressing is the additional costs associated with converting it back to their own currency and tax issues).
That said, a person holding cryptocurrency may still be able to use it with a wide variety of businesses. Virtual wallet applications offer debit card options, through which some cryptocurrencies can be spent. There are also many websites that sell gift cards that can be purchased using cryptocurrency and then used at other retailers.
Finally, there are several forward-thinking businesses that accept some cryptocurrencies—usually Bitcoin—directly. Many cryptocurrency users appreciate this since it helps them avoid additional fees. Some of these retailers are quite well-known, including the travel booking site Expedia, Microsoft, and Overstock.
5. Saving Cryptocurrency
Many people buy cryptocurrency because they believe it is a good investment. Its value has the potential to grow much faster than regular currencies, and indeed, exactly that has happened in the recent past. For those investors who buy cryptocurrency as a form of savings, it is wise to hold onto it. That said, a word of caution: as fast as a cryptocurrency has grown in value, it can likewise fall. Be sure to keep a watchful eye on the market and trends to protect any investment made.