Cryptocurrencies are often called the currency of the future, as they represent a young, ambitious technology that has great potential for development. But what actually are cryptocurrencies and what are their practical uses?
Technology of the future?
According to the Investopedia:
A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
It means that cryptocurrency is a digital currency that isn’t emitted by any government and its code uses cryptography. Considering the fact that governments can’t influence the creation or supply of a cryptocurrency, it is unable to control it, although it can use law to regulate the usage of e-coins.
Cryptocurrencies function thanks to the blockchain technology, which is a series of unchangeable data entries with a timestamp that are managed by a cluster of computers not belonging to any one entity. Every such data block is secured and linked to another one using cryptography, creating a chain.
Blockchain network has no central organ and its source code is public. Because of this, the information included in the blocks are available to everyone. Using blockchain also doesn’t involve any transaction costs, it’s just the infrastructure that takes money. You can say that blockchain is an easy way to get information from point A to point B in a fully automated and safe manner.
Ways to use digital coins
There are many ways to use e-coins. The most popular ones include:
- Online payments. The most popular way to use cryptocurrencies is treating them as a means of payment. There are both online and stationary shops that accept cryptocurrency payments, many cryptocurrencies also have dedicated platforms where they can be used to trade goods and services.
- Investment asset. Cryptocurrencies are a known and relatively new investment asset. It’s estimated that most of the accumulated e-coins are treated that way, and cryptocurrency trade is worth over a hundred million USD.
- Elections, surveys, and research. Thanks to the transparency of the sent data, public access, and no way to falsify it, cryptocurrency can ensure full transparency in social research and surveys.
- Supply chain audit. Crypto-based distributed ledgers offer an easy way to confirm if the claims of the producers are true. Audits include blockchain-based time and location stamps.
Cryptocurrency as an asset?
Cryptocurrency investments have been happening for almost a decade now. 2013 brought us a record bull market in Bitcoin that made some lucky investors earn as much as a hundred million dollars. That’s when specialists with ties to investing began analyzing cryptocurrencies as an asset on a mass scale. Interest in this form of investing was attributed to two factors: potentially high profit and the phenomenon of mining. Cryptocurrency mining, which means solving cryptocurrency puzzles in order to create another blockchain block, was a highly lucrative business until the rising costs of energy made it unprofitable.
When it comes to investing, as time went on, the profile of investing in cryptocurrencies started to change. The interest in this form of investing peaked at the same time that Bitcoin reached another record-breaking Bitcoin price by the end of 2017. Ever since the investors’ interest in Bitcoin started to fall, while the interest in other cryptocurrencies grows, which is why there is now more need for services that enable to safely buy many different cryptocurrencies, i.e. online crypto-cantors or cryptocurrency ATMs.
How to get it?
There are many ways to get e-coins. One of the most popular ones is a cryptocurrency exchange, where you can exchange fiat currency for crypto or one crypto for another. However, a major downside of exchanges is a faulty security system, which makes them susceptible to scams and hacker attacks. Another downside is the identity verification process, which requires using an identity document. It is a legal requirement, as exchanges registered in the USA and EU are required to verify their users. People who seek an exchange that allows cryptocurrency trade without registration are forced to use less trusted exchanges, located outside of the US and EU jurisdiction.
The most trustworthy place you can get cryptocurrencies without registration is a crypto-cantor, where you can quickly and easily get e-coins. In addition, unlike crypto exchanges, some cantors don’t require you to verify your account.
I have it, what now?
Cryptocurrencies can be used for online shopping, as many big and small online retailers accept e-coins as payment. There’s also the option to buy things or services in stationary shops, from shopkeepers that accept e-coin payments at checkout. For paying in stationary shops you will need a configured e-wallet, topped up with crypto units. The process is similar to mobile payment with a credit or debit card. To determine whether or not the shop accepts a certain cryptocurrency you should look for its logo or a suitable information by the cash register.
When it comes to investment, you invest in cryptocurrency by speculating. That means buying a chosen cryptocurrency and then selling it once the price rises to a desirable level. There are two main risks associated with speculating, as you can make a wrong assumption at the beginning (the asset isn’t gaining value) or miss the moment the speculation bubble bursts. The asset price will rise to a certain point, and then start to drop very quickly. That is why before you start to invest it’s important to learn the basics of cryptocurrency speculation. Investing in e-coins that way also requires a trusted place to get cryptocurrency, i.e. a good online crypto-cantor.
Cryptocurrencies, as well as the technology behind them, has great practical significance. Cryptocurrencies are used as a means of payment, both on- and offline, and as an investment asset. In the future they will most probably develop and conquer other areas of everyday life.