What You Must Know About Cryptocurrency Going Into 2018
By now, you’ve heard of bitcoin, but most haven’t used it, don’t really understand it, and aren’t sure if it’s relevant to their lives.
In fact, bitcoin and other cryptocurrencies are poised to disrupt global finance markets and payment systems that have, until now, been controlled by banks or major players like PayPal acting as the middleman.
It’s time to educate yourself on how cryptocurrency is changing the world and how you can get involved as we head into the New Year.
Here’s a look at three of the most common cryptocurrencies, how they work, and why you need to get savvy on this emerging trend in the coming year, particularly when it comes to your investment portfolio.
What is cryptocurrency?
Cryptocurrency is digital (i.e., virtual) currency that doesn’t exist in the real world in a tangible form but can be used as a medium of exchange for buying goods or services.
The base word “crypto” refers to the cryptography that’s used to verify transactions and keep the virtual asset secure.
Bitcoin was the first successful cryptocurrency after it came online in 2009 as a “peer-to-peer electronic cash system.”
By allowing people to transact with one another directly, without a middleman, cryptocurrency is highly disruptive and anticipated to grow leaps and bounds in coming years.
As it stands, when you buy something or pay someone for a service, you might use a check, a credit card, or PayPal and that introduces a middleman that acts as a gatekeeper and charges a fee to facilitate your transaction.
With cryptocurrency, parties to an exchange swap virtual cash for goods and services without incurring delays, costly transaction fees, and with fewer complications associated with allowing a third party into your transaction.
Blockchain technology is the backbone of cryptocurrency.
What is blockchain?
Blockchain technology was created by the inventor of Bitcoin and evolved into something greater.
Blockchain allows digital information to be sent but not copied, so it’s extremely secure. Don and Alex Tapscott, who wrote Blockchain Revolution, said it’s an “incorruptible digital ledger of economic transactions.”
But it’s not just transactions that can be recorded by blockchain tech. It’s a way to save and maintain a database that is secure, private, and decentralized.
A database built on blockchain isn’t owned by a business. Instead, it’s recorded across a vast array of computers that store identical copies of the database.
This extensive duplication of data makes it incorruptible because it would be virtually impossible to manipulate every single copy of the database.
Your data is safe and secure, stored on computers (called a block) which are linked on a network (called a chain), thus the word “blockchain.”
These databases record cryptocurrency transactions which means that the virtual cash given and received is safe, secure, and can’t be stolen.
What is Bitcoin?
Bitcoin was the first decentralized cryptocurrency and was created in 2009 to allow transactions without a bank.
Over the past few years, bitcoin was increasingly accepted as transactional currency and continues to grow.
Expedia, Overstock.com, NewEgg, Shopify, Dish Network, and Roadway Moving accept bitcoin and more companies are embracing cryptocurrency every day.
In addition to using bitcoin as a payment medium, you can add investing in bitcoin to your portfolio without going through the complex steps required to set up a bitcoin wallet. Exchanges like Coinbasefacilitate investing.
What is Ethereum?
Ethereum was created in 2014 and differs significantly from bitcoin in its purpose.
Bitcoin is intended to be a cash alternative while Ethereum and its token Ether are aimed at financing peer-to-peer contracts and applications development.
Bitcoin and Ether are both digital currencies but operate differently as the latter isn’t well-suited for everyday consumer usage.
However, Ether can be traded on the digital currency market and may be something to consider for a potential investment and is also available via Coinbase.
What is Litecoin?
Litecoin has been called the “little brother” to bitcoin and was created in 2011.
Litecoin differs from bitcoin in the size of transactions it’s intended to support. Bitcoin can support very large transactions while litecoin, invented by a Google employee, is aimed at microtransactions.
It’s a cheaper form of cryptocurrency than bitcoin and transactions process much more rapidly.
Several online stores now accept litecoin as well as online travel agencies CheapAir and Btctrip, Re/Max Realty, Overstock, and Uber.
Litecoin is currently valued around $275 and can be obtained via Coinbase and other exchanges.
The perks of investing in cryptocurrency
Cryptocurrency is a new class of asset for personal investing expected to grow significantly in 2018.
Bitcoin, ethereum, and litecoin are global currencies growing in acceptance which may offer some stability as an investment.
The price of cryptocurrencies fluctuates, but have seen significant growth over the past year in particular.
Digital currency must be stored in an online wallet or exchange account, and it’s critical that the storage is secure.
Services such as Coinbase offer secure storage to protect your investment and allow individuals easier access to cryptocurrency for investments.
Investing in bitcoin, Ethereum, and litecoin has been equated to commodities investments such as art, oil, or gold because there’s a limited amount of the asset available and its value is entirely driven by market value which can be volatile.
However, it can also be greatly rewarding. Cryptocurrency investing is best-suited for those that can tolerate risk in their portfolio and are looking to diversify into emerging markets and tech.
Consider cryptocurrency investment in 2018
As new investors enter the market, both individual and institutional, including hedge funds, the value of cryptocurrency is predicted to rise.
Blockchain technology is, according to experts, the future of software development and the next evolution of the internet.
By investing in cryptocurrency, you’re on the cutting edge of what’s next. When you’re ready to invest in cryptocurrency, do your homework before you buy so that you can feel confident that your digital dollars are secure.
There are many cryptocurrency exchanges, and it’s critical to choose carefully.
Coinbase stores investors’ digital currency securely, investments are insured, and the exchange facilitates recurring buy orders so you can build a cryptocurrency portfolio over time.
Using a digital currency wallet, you can finance your cryptocurrency investment using funds from your bank account, credit card, or debit card.
Coinbase currently stores roughly 10% of all bitcoin in circulation. Whatever exchange you choose for investing in cryptocurrency, be sure it’s secured, insured, and stable.