What is Cryptocurrency (The Basics about Cryptocurrency)

Posted on

Cryptocurrency goes by many names. You have probably read about some of the most popular types of cryptocurrencies such as Bitcoin, Litecoin, and Ethereum. Cryptocurrencies are an increasingly popular alternative to online payments. Before converting real dollars, euros, pounds, or other traditional currencies to ₿ (Bitcoin symbol, the most popular cryptocurrency), you should understand what cryptocurrencies are, the risks of using cryptocurrencies. are, and how to protect your investment.

What is cryptocurrency? A cryptocurrency is a digital currency, an alternative form of payment created using an encryption algorithm. The use of encryption technologies means that cryptocurrencies act as both currency and a virtual accounting system. To use cryptocurrency, you need a cryptocurrency wallet. These wallets can be software that is a cloud-based service or stored on your computer or your mobile device. Wallets are tools where you store your encryption keys that verify your identity and link to your cryptocurrency.

What are the risks of using cryptocurrency? Cryptocurrencies are still relatively new, and the market for these digital currencies is very volatile. As cryptocurrencies do not require banks or any other third party to regulate them. They tend to be uninsured and difficult to convert into tangible currency (such as US dollars or euros.) Also, since cryptocurrencies are technology-based intangible assets, they cannot be converted into any other intangible assets. Feel like a technology asset can be hacked. Finally, since you store your cryptocurrencies in a digital wallet, if you lose your wallet (or access to it or the wallet backup), you’ve lost your entire cryptocurrency investment.

Follow these tips to protect your cryptocurrencies:

  • Look before you leap! Before investing in a cryptocurrency, be sure you understand how it works, where it can be used, and how to exchange it. Read the webpages for the currency itself (such as EthereumBitcoin or Litecoin) so that you fully understand how it works, and read independent articles on the cryptocurrencies you are considering as well.
  • Use a trustworthy wallet. It is going to take some research on your part to choose the right wallet for your needs. If you choose to manage your cryptocurrency wallet with a local application on your computer or mobile device, then you will need to protect this wallet at a level consistent with your investment. Just like you wouldn’t carry a million dollars around in a paper bag, don’t choose an unknown or lesser-known wallet to protect your cryptocurrency. You want to make sure that you use a trustworthy wallet.
  • Have a backup strategy. Think about what happens if your computer or mobile device (or wherever you store your wallet) is lost or stolen or if you don’t otherwise have access to it. Without a backup strategy, you will have no way of getting your cryptocurrency back, and you could lose your investment.