Cryptocurrency is a type of digital money that is designed to , as its name suggests, be secure and anonymous in most cases. It’s often associated with the online underworld – as you’ll see from our list of notable cryptocurrency millionaires – but there are plenty of legitimate reasons to starting using it. For one thing, it can cut out the middleman for international sales and purchases which can reduce the overall cost of such transactions.
Cryptocurrency uses cryptography to process and verify transactions, and this ensures that users have secure transactions that cannot be faked or reversed. Cryptocurrencies operate independently of a central bank meaning that it’s not possible for someone else to just print more units whenever they feel like it.
Cryptocurrencies all work using a blockchain, which is where the whole concept came from in the first place as many of the technologies that underpin this type of currency were first developed as part of wider decentralized systems such as Bitcoin. The main difference between these and traditional currencies is that, instead of having a central authority who secures and controls the money supply, it’s spread across a global network of users who all work to secure the system.
Finally, there is no central bank that issues or controls cryptocurrencies which can lead to volatility as their value is based upon demand and they aren’t backed by any physical assets. This means that the value of currencies such as Bitcoin can fluctuate greatly, relatively speaking.
There are several ways of getting hold of cryptocurrencies, but the main one is exchanging them for fiat currencies such as US or British dollars. This process requires a person or company having already set up an exchange which allows users to trade between crypto and fiat. For example, Coinbase is a popular and easy to use wallet and exchange that allows users to buy and store Bitcoin as well as other cryptocurrencies such as Ether and Litecoin.
Once you have your currency, it’s stored in an account known as a crypto-wallet which works like other online wallets but for cryptocurrency rather than traditional currencies. You can access these wallets using special software that is designed to handle the encryption keys that are associated with coins and tokens.
There are also offline wallets which can be stored on your PC and work in a similar way, and these come as either physical devices or separate accounts. It’s important to remember that you’ll only be able to spend the cryptocurrency if it’s stored in your wallet and not on the exchanges.
As of right now, there isn’t a great deal that you can actually buy with cryptocurrency. Some online retailers such as Expedia do accept Bitcoin payments, but it’s still a relatively niche market. There are more options available when it comes to converting your coins into a fiat currency and using that to buy things directly
The most popular method of spending cryptocurrency is via debit cards which work just like any other card but allow you to spend your money as if it was in the form of digital tokens. These can be loaded up with funds from your wallet and used almost anywhere on the high street as well as online.
Another option is to use an online wallet like PayPal which can allow you to receive payments in the form of digital tokens instead of traditional currency. The good news for companies that are looking at accepting these types of payments is that there are no chargebacks, meaning that should someone buy something with cryptocurrency then they cannot reverse the payment.
Cryptocurrencies use a variety of technologies to enable secure transactions between users and, as mentioned earlier, the basis for this is blockchain. This is a complex distributed ledger which records all transactions that have ever taken place and stores it across a peer-to-peer network of users. In fact, most cryptocurrencies are built on their own versions of blockchain which adds an extra layer to the security.