Cryptocurrencies are a new way to store wealth, but they function in much the same way as other currencies and in some new ways.
What is cryptocurrency?
A cryptocurrency is a digital asset that can be exchanged for goods and services. No central bank or government controls it. Cryptocurrencies are often described as “a decentralized digital currency” because they are based on a public ledger (blockchain) that records all transactions and prevents double-spending.
Cryptocurrencies aren’t physical money; they don’t exist in your hand like dollar bills or coins do, but they act like them in many ways:
- They have value because people believe they do—just like other currencies
- You can buy things with them (though some businesses only accept cash)
- They fluctuate in price, just like stocks do
A wallet is a place where you can store your cryptocurrency and make transactions. A wallet is also sometimes referred to as an account or address.
There are different types of wallets that you can use to store cryptocurrencies, including:
- Desktop wallets
- Web wallets (online)
- Mobile wallets (mobile apps for iOS and Android)
Buying and selling
To buy and sell cryptocurrencies, you need an exchange. Exchanges are online platforms where you can buy and sell cryptocurrencies: they’re like stock markets, but they trade cryptocurrencies instead of stocks.
Exchanges are the most common way to buy and sell cryptocurrencies; however, other options are also available. For example, some exchanges let users create their marketplaces for buying and selling certain coins in large quantities.
There are four main types of exchanges that we’ll discuss here: “centralized,” “decentralized,” semi-decentralized,” and decentralized peer-to-peer (P2P).
Cryptocurrencies are a new way to store wealth, but they function in much the same way as other currencies
So, what exactly is cryptocurrency? It’s a digital currency that exists in the form of encrypted transactions on a shared database called a blockchain. You can exchange cryptocurrency for goods and services with anyone who has an internet connection or from person to person by using solutions like LocalBitcoins.
Cryptocurrencies are not controlled by any government or central bank, but are created through “mining” computers that solve complex math problems. The more miners there are, the harder it becomes to mine cryptocurrency because the math problems get more challenging too.
Only those with specialized hardware can mine cryptocurrencies at low cost and make profits doing so. However, if you have even just one computer, you can participate in mining efforts by downloading free software and helping with a tiny piece of solving these math puzzles!
Cryptocurrencies are a very different and much-needed form of money and wealth. They operate very differently from traditional money, products, and services. However, they also incur some risk due to their volatility.
None of the information on this website is investment or financial advice and does not necessarily reflect the views of CryptoMode or the author. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website by its authors or clients. Always conduct your research before making financial commitments, especially with third-party reviews, presales, and other opportunities.