What is Cryptocurrency?

Digital currency is arguably the biggest thing to hit financial markets since the 2008 financial crisis. What is more, yes, cryptocurrency like Bitcoin, Litecoin, and Ethereum is just as controversial. The only question is, what is digital currency really?

What is Cryptocurrency?

If you are planning to buy Bitcoin (or any other kind of digital currency) in 2018, it is imperative that you understand what cryptocurrency is, how digital currency needs to be stored, and how to transact safely using digital cash.

Put simply, digital currency coins which people might buy at a Bitcoin exchange, are nothing more than long strings of numbers.

Of course, this is a very oversimplified explanation of what Bitcoin and other forms of digital currency are. Anyone who invests in cryptocurrency, however, needs to understand that actual coins are made up of two strings of numbers called public and private keys. Much more importantly, private keys need to be kept safe and 100% confidential. This is because if they’re not, any and all funds will become irrecoverable the minute such details are lost.

How Does Digital Currency Actually Work

When someone is in possession of a digital currency public and private key, what they essentially own is a space on a virtual ledger called a blockchain.

Fully decentralized, blockchain software itself is public and runs on millions of different computers around the world. When transacting cryptocurrency, transactions themselves subsequently take the form of transfers of funds from one private wallet address to another. What is more, unlike transfers of funds from one bank account to another, transactions aren’t processed by any central authority. Instead, all transactions are processed by people who are running blockchain software and are completely irreversible.

Why Does Digital Currency Have Value?

At present, people looking to buy Bitcoin at a Bitcoin exchange like Coinbase can expect to pay between $15,000 and $17,000 per token. The intrinsic value of the digital currency, however, lies with the fact that there are only limited numbers of coins available and no coin can be duplicated, hacked, or used by anyone other than a person who controls the private keys associated with funds.

Of course, people already expect cash which they own to be both secure and private. In reality, however, any bank, government, or financial institution can confiscate funds at will. What is more, the world watched this happen in Cyprus in 2013, when banks forcibly confiscated consumer deposits in order to recapitalize.

Should You Invest in Cryptocurrency in 2018?

People who buy digital currency from Bitcoin exchanges usually do so to trade (and hopefully make considerable profits) or hold in the hope that tokens will appreciate in value in future. In the latter case, then, there is a strong argument to be made that investing in digital currency in 2018 is a good idea.

At present, Bitcoin and other leading coins are on track to eventually reach $100,000 (and possibly more in value) in just a few short years. Trading digital currency, however, is much more high-risk. This is because the cryptocurrency market is highly volatile. Only buy to trade in this case, if you are prepared to accept greater risk and fully research things like trading fees, transaction times, and how to read complex financial charts.