Let’s be honest, we have all heard of Bitcoin, but what is it? Cryptocurrency and Bitcoin are not the same thing, but Bitcoin has sort of become a term like “Google” or “Xerox” when applied to crypto. These next few paragraphs try to simplify cryptocurrency for those of us not born in the digital age. I suppose for those that were born prior to airplanes, the idea of getting on a plane and flying seemed pretty extreme. Cryptocurrency has been similar for me, I don’t understand how it works and that has caused fear and hesitancy. However, my lack of understanding has not seemed to impact its success. I still don’t understand how lift makes a plane fly, but I get on one without much of a second thought. I don’t understand cryptocurrency either, but have taken some small positions in it to I don’t miss the plane.
If you are going to get into Crypto, please finish this article before you jump to Coinbase, Bittrex, or Binance.
What is Cryptocurrency?
Cryptocurrency, or just crypto, is digital money, without centralized government control and based on blockchain technology. The blockchain is essentially a digital ledger or record of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. There are no real coins, so don’t be fooled by the picture to the right.
Crypto can be used to buy things like regular goods and services, but many people are treating it like stocks or gold and silver. Cryptocurrency is money and also a commodity. One of the things that makes cryptocurrency different is that it seems to fit in multiple financial categories, or maybe it is its own category. These currencies are typically tokens, think about them like their own money. You have things like Bitcoin, Dogecoin, Litecoin and the like.
How does Cryptocurrency Work
Cryptocurrencies can work just like cash. Tesla started taking it for payment, and gambling websites like Bovada and precious metal distributors (Provident Metals, Bullion Exchange, moneymetals, etc.) have taken it for years. Bovada even gives big bonuses to people that use Bitcoin, so they must think it works.
Typically we think of money being issued by a government and as a hard or tangible thing. While not always the case, most think of it in that fashion. In the past there have been attempts at the creation of digital money, but they have not been successful. Typically people don’t trust a digital currency. If someone creates digital money, what is to stop them from just creating more or worse, taking yours? Cryptocurrencies try to solve this problem by either capping the number of coins or using a blockchain.
Most normal databases have someone in charge who can change the entries (e.g. giving themselves a million coins). Blockchain is different because nobody is in charge; it’s run by the people who use it. You may have heard of the term miners – it is these “miners” that verify the transactions in the blockchain and prevent anyone from giving themselves a million coins.
Is it gambling
It is likely gambling, but people are looking for places to put their money now and some of the returns have been incredible. A lot of people are getting in now for a fear of missing out, which seems a lot like gambling or even a ponzi scheme. The supporters of Cryptocurrency would tell you that it is the future and it can’t be stopped, hard to say. Right now it does not seem much different than playing black jack at Bovada, but I could be wrong.
Why is Crypto so Popular?
Cryptocurrencies appeal to their supporters for a variety of reasons:
- Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable
- Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation
- Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems
- Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money
How to buy it?
Buying cryptocurrency is easy today there are multiple online sites that allow you to buy. Coinbase, Bittrex, and Binance are three of the big ones and they make it very easy. Be prepared to submit your full details like a credit card. You will need to submit your name, address, SSN, photo of your driver’s license and a picture of yourself. You will also get a tax statement at the end of the year, as the government wants it cut. Make sure you do your research on fees as each of these sites has different fees.
When you sign up for Coinbase, please use this link.
If you sign up for Bittrex, please use this referral code of XX0-C32-ZPK.
When you sign up for Binance, please use our referral code 54731047.
Coinbase appears to be the most popular and just went public, so if you don’t think cryptocurrency is for you, but want to invest in a company that handles crypto transactions, check them out.
I don’t know if it is here to stay or just a fad, but I have $50.00 a month going into my bitcoin account on coinbase, just in case!
We are not financial managers and are not giving any financial or legal advice. This is purely educational in nature, make sure you do your own due diligence!
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