what is cryptocurrency

What Is Cryptocurrency?

If you are here, it is probably because you are new to cryptocurrency and interested in it.

Cryptocurrency is a digital currency. They are neither paper nor coin. You cannot touch them or hold them in your hand. They exist like invisible ether, but they exist as a real asset and something of value. You can buy them, purchase goods and services with them, invest them, and trade them like stocks.

Who or what makes cryptocurrencies a thing of value? You and I do. For example, you may have heard of bitcoin. What or who makes bitcoin so popular and a thing of value? You can I. All who use it! If millions of persons worldwide use bitcoin to purchase goods and services, for example, it is a thing of value. If only a few people, for example, used it for the same reasons no one would be interested in it and it would have no value. So “the people” (the users and consumers) decide the value of any cryptocurrency.

There are many cryptocurrencies. As of April 9, 2020, there are 5311 cryptocurrencies in the Cryptocurrency Market Place! (According to Coin Market Cap) Last year, there were just over 2000 cryptocurrencies!

How Are Cryptocurrencies Held?

Men carry dollar bills in their wallets/billfolds, right? The ladies, in purses or handbags. Well, cryptocurrency is held in wallets. Each cryptocurrency has its own wallet. Cryptocurrency wallets – like the cryptocurrencies themselves – are also digital.

View a cryptocurrency wallet as a software program that secures your cryptocurrency assets.

It is also important to understand that each cryptocurrency has its own wallet. For example: The top three cryptocurrencies are bitcoin, ethereum, and ripple. Each has its own unique wallet. So if you purchased all three, you will have three wallets. You cannot place bitcoin, for example, in an ethereum wallet. You cannot place ethereum in a bitcoin wallet.

So cryptocurrencies are held and stored electronically. You can store them on a website that provides you with free “website wallets,” in a software program you install on your computer that provides you with a “desktop wallet,” or in a physical “hardware wallet” – such as a Ledger Nano X. (See my “Guide To Crypto Currency Wallets”)

What Can You Do With Cryptocurrency?

You can use it to buy goods and services at establishments that accept cryptocurrency. Bitcoin is the oldest and chief of all cryptocurrencies and many places around the world are beginning to adopt it as a method of payment. You can get bitcoin debit cards (Visa or Mastercard) that are used in the same way as traditional debit cards. (See the section on Bitcoin Debit Cards) There are bitcoin ATM machines that allow you to withdraw cash!

Why Cryptocurrency As Opposed To Cash?

For one simple and important reason: It is decentralized and anonymous What does this mean? Well, if you have a debit card issued to you from a bank and you use it to purchase goods and services, your bank stands in the middle of those transactions. Your bank will charge you a fee every time you use your debit card to withdraw cash from an ATM machine. Your bank may place a limit on the amount you can withdraw! If you wire money to someone, there is a fee attached. Banks make their money from your money by reinvesting it and charging many mysterious fees. They love it if you bounce a check or if your account gets overdrawn! Banks have a lot of power over your money because it sits in their banks. Banks are centralized entities. That means that everyone in the world who wants to transact (buys goods and services or even send someone money) must go through them. So you have A, B and C. A is YOU. C is the entity or person you want to buy from, and B is the bank standing in between the two of you.

Plus, banks know everything about you. They know your name, address, age, place of employment, social security number, credit score, and much more. Plus, in the United States, banks – by law – are to report to the IRS any deposits you make that $10,000 or more!

Cryptocurrency changes the game and gives power to the people, not to the banks. It is your money, right? Cryptocurrency is a direct A to C relationship. It is peer-to-peer. The transaction is between you (A) and the recipient (C). The bank is not in the picture!

If you want to purchase something from another person who has a cryptocurrency wallet – let’s say a bitcoin wallet – (that you can send to), it is a simple matter of that person giving you their bitcoin receive or deposit address.

For example, my bitcoin wallet address is: 1HkHRygTL9Yf5gp4mpbFPcaVru6Wjxrj6x

If someone wanted to send me bitcoin, I simply give them the above line of code. Then, within their bitcoin wallet where they have bitcoin, they paste in my bitcoin wallet address, enter in the amount of bitcoin they want to send me, press the send button and within a few minutes or an hour I will see the bitcoin in my wallet.

With cryptocurrency transactions, no names, addresses, phone numbers are used. Within the crypto-universe, you exist only as a piece of code as shown above.

Cryptocurrency Knows No Borders

Cryptocurrency is borderless. This means that anyone anywhere in the world who has a cryptocurrency wallet can conduct cryptocurrency transactions.

If I had 10 million dollars in bitcoin sitting in my bitcoin wallet, I can at the push of a few buttons send it to anyone in the world who has a bitcoin wallet and they provide me with their bitcoin receive/deposit address. The transaction is anonymous because no personal details are associated with the transaction. And the transactions are faster and less expensive than bank transfers!

The Cryptocurrency Wallet

All cryptocurrency wallets come with two addresses: (1) A public deposit/receive address. The bitcoin wallet address I posted above is a receive/deposit address. It is a public address. Meaning, I do not care who sees it. I give it to anyone who needs to send bitcoin to my bitcoin wallet. Or, if I want to send bitcoin to someone, they would give me their bitcoin receive/deposit address. (2) A private address. The private address is “for your eyes only.” If someone gets ahold of your private address, they will have access to all of the bitcoin in your wallet and can withdraw and steal it. View your private address (a long string of code) as the lock and key to your wallet. NEVER show or give it to anyone you do not know or trust.

NOTE: Millions of dollars of bitcoin are tied up in anonymous wallets by people who have either lost their private keys (thus they do not have access to their wallets) or persons passed away and never shared their bitcoin private addresses with anyone. SO ALWAYS SAFEGUARD YOUR PRIVATE ADDRESS. Some people write them down or take a snapshot of their private addresses and place them in safe deposit addresses or give them to someone they trust.

Let me give you an example. Let’s say on August 1, 2016, you purchase $100 worth of an Altcoin that was priced at $0.00693426 (a fraction of a cent). Your portfolio will show that you own 14,408 units of that Altcoin. Now, let’s further say that you hold on to that Altcoin for a year. You do not panic within that year when you see the dips. A year later, on August 1, 2017, your Altcoin has increased in value to $5. Your $100 investment would now be $72,040. (14,408 units x $5 = $72,040). Suppose that Altcoin increases in value to $10, $20, $100 or more!

Look at the chart below. If you had purchased $1000 worth of Bitcoin Plus (XBC) in September 2016 it would have cost you $0.07 yielding you 14,285 units of XBC.  A year later – September 2017 – the value of XBC increased to about $80. You would be a millionaire. (14,285 x $70 = 1,000,000)

However, cryptocurrencies are volatile. You play with uncertainty. Cryptocurrencies can have unexpected highs as well as unexpected lows. But I tell you, the highs can be exceptional.

The above example is very realistic. It is oftentimes a matter of being informed, conducting good research on potential high-gain Altcoins, and being patient and holding on to them. If you play the long game with some of these cryptocurrencies, you can make an incredible amount of money.

The second-largest cryptocurrency is Ethereum. (It is second in market capitalization) Ethereum is an Altcoin. Why? As stated above, all cryptocurrencies created after Bitcoin are Altcoins.

So, in this article, you learned that cryptocurrency is “digital currency.” You also learned that it is independent of government and banking systems. You learned that cryptocurrency has its own Exchange marketplaces where you can buy, sell and trade cryptocurrency. You learned that cryptocurrency investing is highly volatile. You learned that your cryptocurrency is held and stored in a wallet. You learned that this “new frontier” of currency is t

I believe that cryptocurrency will transform the world and the way in which we conduct financial transactions. It is only a matter of time when this spark will ignite in a very large way to catch fire all over the world.

RJ

A retired Information Technology Specialist and Foreign Service Officer with a large U.S. Government Federal Agency, Technical Instructor, Blogger, WordPress Instructor, Web Designer, Internet Marketer, and Cryptocurrency Investor and Mentor.

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