Pulling back the curtain on cryptocurrencies

Incredible investment opportunity or just a foolhardy gamble?

Feeling a little confused about cryptocurrencies? What they are? How they work? How you can actually buy and sell them?

Trust me, you’re not alone. Every day we see reports of cryptos skyrocketing in value or crashing to unfathomable depths (often in the space of hours), so, as an investor, you need to have your wits about you if you’re going to be playing in this volatile space.

Here’s a little background:

How did it start

David Chaum is credited with developing the concept of cryptocurrency way back in 1983. Basically, it’s a form of e-money that was popularised as a decentralised crypto in 2009 by Bitcoin (arguably the most well known of the cryptos).

Today, it is speculated that more than 10,000 cryptocurrencies are in use online, but there are far fewer that you can directly invest in.

A few of the more popular include Bitcoin, Ethereum, Cardano, SHIBA INU, Dogecoin and Cronos.

How it all works

Secured with cryptography to enable trusted transactions, cryptocurrencies have a Blockchain as the underlying technology - this is used to record each transaction made.

Coins or tokens are usually generated on the basis of an algorithm announced to everyone in advance, by ‘miners’ using powerful computers. These miners can then hold on to the units or sell to others.

Popularity

Ask anyone who got in on the ground floor and they’ll gushingly sing the praises of their super stock.

But many other factions of the business world are still a little hesitant.

Despite being in the market for more than a decade now, cryptocurrency still faces strong opposition from a number of areas such as Government bodies and the banking sector due to its decentralised position (which means that no single entity can control it).

Many businesses have also been reluctant to offer the ability to pay for goods and services in crypto which has not provided mainstream access for investors to embrace the concept.

Advantages

Across the globe, we face many different currencies and fluctuating values.

With crypto, you’re not governed by central banks or financial markets that underpin traditional banking systems.

So, that guarantees that you’ll pay a specific amount for a product no matter what country it originates from.

Users also appreciate the speed of transactions (minutes, not days) as there are no waiting periods like in the banking sector.

The coins are also seen as a hedge against inflation, as there are only so many that can be mined.

Tread carefully

The bottom line is simple – if you plan to invest in cryptocurrencies then be sure to do your research.

Read up on the subject as much as you can. Speak to experts and fellow investors so you can have a broad understanding of the process of trading in crypto and, most importantly, the real risk of losing money due to the “coins” volatility.

We all can be seduced by the appeal of easy money, just be sure to understand that diving in without due diligence can come at a cost.