Cryptocurrency is a term that has been around for a while now, but it’s still a mystery to many people. In simple terms, cryptocurrency is a digital or virtual currency that uses cryptography for security. Cryptocurrencies are decentralized and operate independently of traditional banks. But what that means and how that applies to you can still be quite confusing. So here are 4 simple things you should know about cryptocurrency. Note, none of this is financial advice!
Decentralization
The most important thing to know about cryptocurrency is that it’s decentralized. This means that it’s not controlled by any central authority. Transactions are recorded on a public ledger called the blockchain, which is maintained by a network of computers all around the world. The blockchain ensures that transactions are secure and that there is no need for a middleman, like a bank, to verify transactions.
Security
One of the most significant benefits of cryptocurrency is the level of security it can provide. But note that not all provide the same level of security which means you should do your research. Cryptocurrencies use advanced cryptography techniques to secure transactions and protect users’ identities. Every transaction is verified by the network of computers on the blockchain, which means that it’s almost impossible to hack or cheat the system. This makes it a safe and reliable way to store and transfer money. With that being said, it can be susceptible to fraud and scams if you don’t pay attention. Approach this the same way you approach protect your banking information.
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Speed & Cost
Another benefit of cryptocurrency is that it’s fast and cheap to use. Transactions can be completed almost instantly, and there are no fees or very low fees for transactions. This is because cryptocurrencies do not require any intermediaries, like banks, to process transactions. Instead, transactions are processed directly between users on the blockchain, making it a much more efficient system. An example is someone sending money to a family member in another country. Typically this is associated with fees to you and the recipient. This can be a cheaper alternative.
See also: LeBron James Announces Major Partnership with Crypto.com
Volatility
Finally, it’s important to note that cryptocurrency is highly volatile. The value of cryptocurrencies can fluctuate rapidly, sometimes in a matter of hours or even minutes. This means that investing in cryptocurrency can be risky, and it’s important to do your research before investing. While some people have made a lot of money by investing in cryptocurrencies, others have lost a lot of money due to the volatility of the market. Like anything else, do your homework, make sure you understand the risks and always seek out professional financial advice.
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Feature image by Karolina Grabowska
