Cryptocurrency…even the monetary world is evolving! Lately, you see this term everywhere. However, you may still be trying to understand what cryptocurrency is. As financial advisors who strive to stay up to date, we’ve written the following blog as an overview of what cryptocurrency is and what role it could play in the future of finance.
Cryptocurrency is basically digital cash that has purchasing power just like dollars and cents. However, it only exists in the virtual world relying on written computer-coded ledgers that secure online financial transactions. One of the most popular uses of these unregulated (the opposite of most national monetary systems) currencies is trading, resulting in speculators continually moving the value of cryptocurrency upwards. For example,Bitcoin, one of the most commonly known “cryptos,” has caused great fluctuations in the stock market. To understand this volatility click on this link current bitcoin pricing.
You probably have questions, so here’s the rundown:
Let’s start with the basics – what exactly is cryptocurrency? Broadly defined, it is used in trade for online monetary transactions. Due to the popularity of crypto, more and more businesses have created their own currencies for their specific goods or services. Keep in mind that traditional money is still necessary for exchange of coins in the world of digital purchasing.
Cryptocurrency relies on blockchains, technology that is found on numerous computer systems that control and track transactions. It is formed through mining the reliance on computers to solve complex mathematical problems in order to prospect for bitcoins or other cryptocurrencies.
The newness and increasing popularity of digital currencies has resulted in the “birth” of thousands of cryptocurrencies and they continue to multiply and increase in value. For example, the current value of the ever-popular Bitcoin hovers in the trillion dollar range. There are brokers who sell currencies to individuals who in turn can save and spend them via virtual wallets.
What does the future look like in the ever-expanding world of virtual spending? As a result of the growing number of investors seeking to profit, the market will rise in value, especially as people start to use cryptocurrencies as a means of economic consumption. The value of cryptocurrencies will also rise simply because more people are using them, causing scarcity, (ie. supply and demand).
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