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The Ultimate Beginner’s Guide to Cryptocurrency
Cryptocurrencies are currencies that only exist virtually or online, and are used for transactions similar to any other currency. They can be used in exchange for goods and services, and have been booming in the last few years. In essence, cryptocurrencies are limited entries that exist in a database that is unique and can’t change.
One of the key issues to solve with an online currency is the prevention of double spending. This is when the same amount is spent twice and is fraudulent. Early attempts to address this used a 3rd party server to monitor all transactions, which works in practice, but means there’s a central body controlling the funds. In Bitcoin, everything is decentralized, and rather than a third party server, it uses the Blockchain to do this job. This is a public record of transactions that anyone can view.
Every time a transaction happens, a file with the recipient’s wallet address or public key and the amount of the transaction is created. This is then approved by the sender with their private key, making the deal encrypted. In this model, the transaction is confirmed by a ‘miner’ who confirms the transaction by marking them as legitimate by solving a cryptographic puzzle and adds it to the network. Each transaction is unique, meaning it can’t be duplicated.
What can you buy?
If you asked this question five years ago, the answer would be limited, but with the boom of Bitcoin, you can now use this currency to buy goods, services and even things like university degrees. You’ll now often see that as well of being able to pay with Visa, Mastercard, and PayPal, there’s a cryptocurrency option.
This is mainly online at the moment but is slowly moving offline too with some savvy companies and local businesses taking Bitcoin payments for coffee, clothes, and more. What has made this more legitimate is the inclusion of several cryptocurrencies into the Apple App Store?
Should you invest?
Many people saw the fantastic rise of Bitcoin in the last two years, with its value skyrocketing from $800 in 2016 to $7,000 in 2017. This may make Bitcoin, or other cryptocurrencies seem like an excellent investment opportunity, and they very well could be, but tread carefully – they’re highly volatile and increase and decrease more than almost any other investment.
Also, the law hasn’t completely caught up with this fast-moving industry, and there’s no guarantee that something may happen to force the outlaw or strict regulation of the currency.
In addition, while Bitcoin is relatively easy to acquire, other similar cryptocurrencies can be more difficult. Once you’ve bought it, you then need to store the currency.
You can do this in a few ways, including putting it on a hard drive and keeping the physical copy, or by adding it to the online wallet. It’s then important to keep an eye on the news for any information that may affect the value of your investment. Look to buy more or sell depending on the fluctuations of the market.
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