You have to understand currency itself before you can understand crypto currency. Understanding what makes a numeric value in your bank account valuable, and how you can spend it, is the first step to understanding what makes crypto currency valuable as a means of exchange. Crypto then adds new and advanced concepts to the handling of currency that sets it apart from traditional currencies that came before it.
A Brief History Of Money
Money itself is an interesting subject. Having a fundamental understanding of how money has evolved over the years helps one understand the creation of new currencies like crypto. It also helps you wrap your head around how currency actually works, and how it is defined.
What Exactly Is Crypto?
Crypto is just a type of currency – plain and simple. It is a fully digital currency used to buy and sell goods. While it can’t be used everywhere (yet), crypto currency has a large group of people and companies who accept it as payment, just like how people trust a paper dollar. You simply go into the crypto app of your choice, buy some of the crypto using another currency, and then you can use that crypto to buy things where it’s accepted.
What Gives Crypto Value?
Let’s say that you decide to buy some crypto using another form of money, such as the US dollar. The exchange rate for this transaction is determined by the market, just like any other currencies. The dollar’s currency value depends on the economy, and the same rule applies to crypto currency. Another important measurement of value is whether the crypto is accepted as payment or not. Bitcoin, for example, is widely accepted around the world to the point where it’s competing with the other traditional currencies more each year.
What Makes Crypto Different From Other Currencies?
As a newcomer, you might be wondering what makes crypto different from other digital money, such as a credit card or online payment methods like PayPal. The main difference is that crypto doesn’t use third party entities, like banks, to handle transactions and record them. Instead, all transaction data is recorded on what’s called a block chain.
Block chains replace the need for human interference such as banks and corporate entities. Instead, large databases control the block chain by themselves in a way that is more secure and reliable. They use advanced math to encrypt the block chain so that it’s nearly impossible to mess with. Once set up, the block chain runs itself without the need for banks or companies to control and monitor it.
Is Crypto Anonymous?
Crypto has a bad reputation for being a criminal tool. This mostly stems from the fact that crypto doesn’t record your private information, such as name and address, like a regular bank would. Only basic transaction details, like wallet ID and amount spent, are shared with the block chain. Private info, like name and address, are not included.
However, this does not mean that crypto is completely anonymous. Many popular crypto currencies, like Bitcoin, make their block chain ledgers public so that anyone can view them. While they don’t provide specific private info, they still provide enough transaction details to easily trace the exchange and profile the user with enough investigation.
Some crypto currencies are more concerned about privacy than others, such as Monero. These are the cryptos that criminals like to use because they can move their currency under the radar with ease. That’s why when hackers and other criminals get paid in a more open currency like Bitcoin, they trade it for a more private currency like Monero.
Is Crypto a Safe Investment?
Crypto is perfectly safe to use in and of itself. It’s the people and companies that use and market the crypto that are the real problem. This is why it’s important to do research and choose a crypto brand that you can trust. Bitcoin is a good example of a safe to use crypto with lower risk when compared to other crypto currencies, but it’s not perfect.
The only real risk with crypto itself, that even Bitcoin has trouble with, is the volatile market. While most stocks are more stable and predictable to some extent, crypto is harder to control. This is because crypto is still a revolutionary idea that is finding its place in the world, and investors are skittish.
For example, one bad rumor online can send a crypto currency crashing in a matter of hours before rising again the next day after things calm down. This makes investing your hard earned money into crypto a bit worrying no matter which brand you choose. You should always consult with a fiduciary before making any rash decisions with your money.
Conclusion: Crypto Is Just Money
I hope that by now you have a better understanding of the basics of crypto. It’s basically just a new type of money that may soon replace fiat currency in the long run. For more information on understanding crypto, I recommend checking out CoinBureau on YouTube. It’s a channel that focuses on crypto while providing safe and reliable information. Good luck, and be safe out there!
The American Centrist 