At its core, cryptocurrency is decentralised digital value or money, designed to be used over the internet. Bitcoin, which launched in 2008, was the first cryptocurrency, and it remains by far the biggest, most influential, and best-known. In the 15 years since it's launch, Bitcoin and other cryptocurrencies like Ethereum, Polygon, Solana, Cardano, & Ripple have grown as digital alternatives to FIAT currencies issued by governments.
Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor. Allowing value to transfer globally, near-instantly, 24/7, for drastically lower fees.
Cryptocurrencies are not controlled by any government or other central authority. They’re managed by peer-to-peer networks of computers running free, open-source software. Generally, anyone who wants to participate is able to.
If a bank or government isn’t involved, how is crypto secure?
It’s secure because all transactions are vetted by a secure digital ledger called a blockchain. Find out more about Blockchains in our articles.
What are the benefits of Cryptocurrency?
Transferability
Crypto makes transactions with people on the other side of the planet as seamless as paying with cash at your local grocery store.
Privacy
When paying with cryptocurrency, you don’t need to provide unnecessary personal information to the merchant. Which means your financial information is protected from being shared with third parties like banks, payment services, advertisers, and credit-rating agencies. Due to this, no sensitive information needs to be sent over the internet, there is very little risk of your financial information being compromised, or your identity being stolen.
Security
Cryptocurrencies are secured using technology called a blockchain, which is a chain-link of constantly checked and verified security ledger or blocks. If an infiltrator attempts to break in, the link shuts down, securing your assets. All of which are powered by a huge amount of computing power by the blockchain manufacturer eg: Bitcoin, Ethereum etc...
Safety
The network powering Bitcoin has never been hacked. And the fundamental ideas behind cryptocurrencies help make them safe. The systems are permissionless and the core software is open-source, meaning countless computer scientists and cryptographers have been able to examine all aspects of the networks and their security.
Portability
Seen as your cryptocurrency holdings aren’t tied to a financial institution or government, they are available to you no matter where you are in the world or what happens to any of the global finance system’s major intermediaries.
Transparency
Every transaction is published publicly, without exception. This means there’s no room for manipulation of transactions, changing the money supply, or adjusting the rules mid-game.
Why is cryptocurrency the future of finance?
Cryptocurrencies are the first alternative to the traditional banking system and have powerful advantages over previous payment methods and traditional asset classes. Think of them as Money 2.0. - a new kind of money that is native to the internet, which gives it the potential to be the fastest, easiest, cheapest, safest, and most universal way to exchange value that the world has ever seen.
Cryptocurrencies can be used to buy goods or services or held as part of an investment strategy, but they can’t be manipulated by any central authority, simply because there isn’t one. No matter what happens to a government, your cryptocurrency will remain secure.
Digital cryptocurrencies provide equality of opportunity, regardless of where you were born or where you live. As long as you have a smartphone or another internet-connected device, you have the same crypto access as everyone else.
Cryptocurrencies create unique opportunities for expanding people’s economic freedom around the world. Digital currencies’ essential borderlessness facilitates free trade, even in countries with tight government controls over citizens’ finances. In places where inflation is a key problem, cryptocurrencies can provide an alternative to dysfunctional FIAT currencies for savings and payments.
As part of a broader investment strategy, crypto can be approached in a wide variety of ways. One approach is to buy and hold something like bitcoin, which has gone from virtually worthless in 2008 to tens of thousands of dollars a coin today. Another would be a more active strategy, buying and selling cryptocurrencies that experience volatility.
Key concept
Cryptocurrencies use a technology called public-private key cryptography to transfer coin ownership on a secure and distributed ledger. A private key is an ultra secure password that never needs to be shared with anyone, with which you can send value on the network. An associated public key can be freely and safely shared with others to receive value on the network. From the public key, it is impossible for anyone to hack or guess your private key.
What is a Stablecoin?
USD Coin and Tether are examples of a cryptocurrency called Stablecoins. You can think of these as crypto dollars - they’re designed to minimise volatility and maximise utility. Stablecoins offer some of the best attributes of cryptocurrency (seamless global transactions, security, and privacy) with the valuation stability of FIAT currencies.
Stablecoins do this by pegging their value to an external factor, typically a FIAT currency like the U.S. dollar or a commodity like gold.
As a result, their valuations are less likely to shift dramatically from day to day. That stability can increase their utility for everyday use as money, because both buyers and merchants can be confident that the value of their transaction will remain relatively consistent over a longer timeframe.
They can also work as a safe and stable way to save money, like a traditional savings account.
Disclaimer - None of what is written on this website is financial advice and only descriptions of how the author trades and for entertainment purposes.
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