Cryptocurrency has become one of the biggest investments in the last five years. Currencies like Bitcoin, Ethereum, and dogecoin have made people millions of dollars and for some unfortunate people lost them a lot of money as well. A lot of people have invested in crypto without really understand what it is and how it works. Most people just know that it’s “the future” and that there is a lot of money to be made if you buy and hold. Some people are more risk-averse and don’t want to invest in something that they don’t understand. In this article, we’re going to go over what cryptocurrency is and why it may or may not be a safe place to put your money.
What is a cryptocurrency?
Simply put it’s a completely digital currency that can be used as a medium of exchange, simply to any other currency. The main difference is that rather than it being based on a paper or coin, it’s completely digital and records are kept using blockchain technology, which acts as a digital ledger that cannot be edited. Using blockchain technology people can keep track of transactions and ownership of a cryptocurrency. While crypto is meant to be used as a medium exchange most people use it more as an investment, where they buy it, let the price run-up and then sell it for a profit. However, many people use it as a form of payment, one group being computer hackers that preferred to be paid in cryptocurrency because it’s much more difficult for it to be tracked back to them.
Is cryptocurrency safe?
There are two parts to this question, the first is when you buy a cryptocurrency is there any chance you will lose access to that cryptocurrency. In this aspect your investment is safe, cryptocurrency’s are very reliable when it comes to the technology that supports it. If you purchase bitcoin, there’s a very good chance that bitcoin will be around for a long time and no one would be able to steal that bitcoin from you (unless you willing divulge that information to them). The only time that you may be at risk of losing crypto that you purchased is if the exchange that you go through isn’t secure or has bad business processes. That third-party relationship is the only real risk that you have in getting your cryptocurrency stolen. If this is a concern of yours, we would recommend that you either 1) Get a bitcoin wallet yourself and figure out how to import your bitcoins directly into your wallet, that you manage yourself. This option is difficult for the average person and requires a lot of configuration. Option 2) is simply to stick to reputable companies like Coinbase or bitbuy for as examples of companies that have a good track record of managing cryptocurrencies on customers behalf. If you pick a good company, you don’t have much to worry about and some of these companies will also have insurance policies where if you do lose your crypto because of their error, that you will be reimbursed.
The second aspect of this is if you buy a piece of crypto is there a chance that the price will plummet and you will lose money. You can lose money on cryptocurrency in this aspect, the prices are fair from being stable and much of the value in cryptocurrency is based on the demand of people that want to flip it as an investment. While currencies like the US dollar as in demand because people want to use it to buy goods or as a store of value in the bank, most people only buy cryptocurrency to resell it later on not to use it as a currency so if the hype around it ever dies down, then you could lose some money. That being said, it has gone up a lot and there is a lot of money to be made, but that is up to you if you want to get involved. Just be sure, never invest more than you are willing to lose and you should be fine.
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