What is Cryptocurrency? We Take a Deep Dive Into This Mysterious Way to Pay…
If you’ve been curious about cryptocurrency, here’s everything you need to know.
With the future of cryptocurrency evolving by the second, it’s hard to keep up!
If you’re like me, every time you hear about cryptocurrency, you think of Bitcoin, but you don’t know exactly what it is. I’ve come up with a great guide for beginners who are interested in learning about the currency of tomorrow!
Simply put, cryptocurrency is a digital currency, or form of payment, used to buy goods and services. The only difference is it uses a tracking system known as an online ledger, or blockchain, that helps with security purposes. Although Bitcoin is the most popular, there are over 10,000 cryptocurrencies, and each company has its own “tokens”, similar to the concept of arcade tokens. 🪙
Cryptocurrency may sound too advanced or hard to grasp because there is literally no physical money, but, if you think about it, every physical dollar has a serial number that tracks where it was distributed. Cryptocurrency has that same aspect, except there’s no physical dollar, and instead only a “serial number”. This means that many cryptos can be tracked due to their coding.
As mentioned earlier, blockchain is important to know when dealing with crypto. When dealing with the bank, it will record all your transactions and be the middle man. Blockchain is similar to this where it manages and records transactions.
According to Forbes, “Blocks” are the recorded transactions, and they are connected to a “chain” of previous transactions. It’s nearly impossible to hack and isn’t limited to the world of crypto. Medical records at some hospitals have been using blockchain, and it’s even been rumored that this kind of technology may be used for online voting purposes in the future!
The cryptocurrency industry is worth $1.4 trillion but you may be wondering… why is it so popular?
It’s the currency of the future!
With the rising popularity of contactless payment, it’s not too far off that one day we may be using crypto as an everyday currency. There are a bunch of people in today’s society that don’t even carry cash, so I think cryptocurrency will only evolve further over time. In fact, El Salvador became the first country this year to allow Bitcoin to be an acceptable payment throughout the country.
There is no inflation from banks.
This is a big advantage and a bigger responsibility. There’s no one to report to other than keeping track of your own personal record. Even the government has no way to affect your money. There’s no manipulation of funds from any authority, and there’s a minimal way of hacking.
It’s easy to transfer cryptocurrency.
There’s no waiting on the bank to approve a certain amount of money before sending it. Between two people both using cryptocurrency, there is no third-party involvement. It is straightforward and efficient.
So, how do I get involved with cryptocurrency?
When it comes to how to get involved, there are thousands of Cryptocurrencies such as Tether, USD Coin, Uniswap, and Dai. It’s important when choosing which crypto you’d like to invest in to research extensively, as there are many scam cryptos out there.
To avoid this, see if they have a notable founder or investors. This is a good sign if they do. Anywhere in the top 200 currencies, according to Coin Bureau, is usually a good place to find an established, legit cryptocurrency.
Joining an app such as Robinhood allows you to buy and sell different cryptocurrencies commission-free. Although it’s not available in every state, it’s a great tool for beginners who want guidance and an easy platform to navigate and transfer trades and real money to crypto!
When you sign up for Robinhood and link your bank account, you can score a FREE stock with a potential worth of up to $177.15! You have a 1 in 150 chance of receiving a share of stock from big name companies such as JPMorgan Chase ($158.57), Apple ($149.43), or Johnson & Johnson ($177.15). Pretty sweet considering all you need to do is simply get yourself started on this highly talked about app!
Now that you know why many people are using cryptocurrency and how to get involved, you should know the risks.
It’s important to be informed and do your own individual research to make sure you’re prepared for potential investments within the world of cryptocurrency.
Making a profit is risky.
Like the origin of any currency, someone has to pay more than you to make a profit. It’ll never go up in value automatically with time; it all depends on other investors. Because of this, there will be times when you lose money, make money, or have no change.
Bitcoin is currently worth around $630 billion, but with more people investing due to stimulus payments and other factors, it reached its all-time high last April where it was worth $1.2 trillion. 😱The fluctuation will always occur depending on when people invest. Patience is important when dealing with cryptocurrency, but there’s always a risk of losing money before cashing out.
There’s no backup storage.
No bank involvement is a great benefit of cryptocurrency for the right people, but this makes you in charge of your own records. Arguably, the biggest risk of crypto is if your hard drive gets destroyed or lost, you’ll lose your money with no way of getting it back. You have ten guesses on Bitcoin, for example, before it locks you out permanently.
A man from San Francisco lost the password to access his 7,002 Bitcoin, equivalent to $250 million. 🤯 With this in mind, be sure to ALWAYS keep your passwords on file when investing!
It’s not available in every country.
Cryptocurrency is primarily used between individuals locally/within the same country, but, in case you were unaware, countries such as China, Russia, and Bolivia do not allow the use of crypto. The majority of developed countries, however, including the US, Canada, EU countries, and Australia allow it.
Cryptocurrency is an exciting yet risky investment.
If you’re unsure whether investing in crypto is the right decision for you, look into investing within an established company or financial advisor. It’s less risky and will give you a great introduction to the world of investment, and you can later bring that experience to your future with the world of cryptocurrency!
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I was surprised to learn cryptocurrency has a negative impact on the environment. If you are concerned with climate change you may want to research it more before investing.
Actually much LESS of a negative impact on the environment than the manufacturing of electric and hybrid cars. Do your research.
I was only advising anyone anyone that is thinking about investing to look further into it. Iām not sure what electric and hybrid cars have to do with cryptocurrency but I have done my research and am comfortable with my decision. Thanks for your advice.š
You referenced cryptocurrencyās ānegativeā impact on the environment, so I referenced the negative impact the manufacture of hybrid and electric cars have on the environment, which is far greater yet no one really looks into. Best of luck!
You seem very passionate and knowledgeable about cryptocurrency. Best of luck to you!
Technically anything we do has an impact on the environment. Road paving and homesteading being a couple of the biggest.
The supposedly negative impact of electric cars is absolutely not accurate, it has been repeatedly disproven by several peer reviewed engineering journals and papers.
If people were really concerned about the environment they would stop eating meat. That is the biggest contributor towards our environmental ruin.
I agree and do not eat meat personally but I was specifically referencing cryptocurrency because that is what this post was about and wanted people to be aware that it may have a negative impact on the environment. It may not have as much of an impact as meat production or the automotive industry but I try to be conscious of my decisions and any negative impact to the environment not necessarily just the big stuff. Everyone is different and it may or may not effect your decision. Just putting the info out there for people to do their own research make their own choice.š
Yes. Was looking into it as well. Negative impact on the environment
Actually not as much as you might think. Hybrid and electric car manufacturing far more harming to the environment.
Only the ones that have to be mined. Not all do. If you get in in the beginning and cash out, you can make money. Otherwise, fake to me.
Crypto is much more complexā¦ this is a simplified overview do your research.
Indeed!
I am surprised you are recommending robinhood as a trading platform after all the people who lost money with them when they wouldn’t allow people to buy or even sell their shares during the “gamestop craze” they also have or had many lawsuits as a result. I would just recommend doing some heavy research on them before transferring them your hard earned money. Maybe considering using a reputable trading platform such as td ameritrade…
I am sure this whole post is sponsored somehow and thatās why they reference it.
Hi there! This is not a sponsored post. You can find the link to our full disclosure policy in the very top of the post. Hoping that helps!
It is an old way of doing business. When mudlarking along the Thames in London people are finding tokens from pubs. they were only good at the pub but they were money just the same. They even cut them in half for change. When Grandma says things come back she really meant it even though this is just digital. LOL
Money laundering and funding of terrorists is an issue with this form of payment as it is with all forms of currency. I know some cryptocurrencies are regulated now but not all!
Thatās a lie. Infact the block chain allows them to track the launderer.
Not true. Do your own research.
I’ve been in crypto since 2016 and can tell you that it is vital that you research everything. Never allow someone else’s opinion or investment strategy to dictate what you do. If you want to get into it and are worried about the fluctuations in the crypto market, I would suggest dollar cost averaging and sticking with the big players (Bitcoin..Ethereum). But again, don’t take my word for it…. research it yourself. Good luck!
There is no reason for a honest person to use cryptocurrency. Drugs cartels, human traffickers use it and promote it.
You do realize that cash is used in those same things. In fact, cash is used most often in illegal activity, at a rate much much higher then crypto. Crypto can actually be tracked, but cash cannot. It’s surprising how people seem to think they are educated on crypto, but they really aren’t.
Helen, you need to do your own research as this is simply false and misleading information!
WARNING WARNING WARNING – Tax CPA here. This is way more complicated and dangerous than is being spelled out here. One HUGE risk, responsibility, and head ache that is missing here (shame on Hip2Save) is that if you are a US tax filer this is considered to be property NOT currency like cash by the IRS and all transactions (other than just a cash purchase) is reportable AND TAXABLE on your return each year. So you must track every transaction you make – buying, selling, trading, mining, gifting, exchanging. So before you decide to dabble DO YOUR RESEARCH. I canāt stress this enough. The IRS is going after this big time. The current spending bill in Congress is targeting crypto audits as a tax revenue raiser. The IRS has issued John Doe warrants to the various trading platforms to obtain the names of any US account holders. So if you do decide to get into this, know exactly what it entails. And for goodness sake DONT pay for a latte with crypto. You will give yourself a bigger pain come tax return time than itās worth ( yes the latte is a taxable transaction).
Hi there ToriSC. Thank you for sharing your concerns. We acknowledge that cryptocurrency is a risky investment option and highly encourage anyone to work with a financial advisor when considering this route. I have bolded the text we have in the post just so that this element does not get missed by any other readers.
A financial advisor is NOT a tax professional (no more than a podiatrist and a neurosurgeon are the same kind of doctor and I really wish people would stop with this assumption) and may not be aware of all of the taxation requirements. Please please donāt assume that they know what they are doing just because they deal with money. You need to talk to both kinds of professionals.
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Well this certainly got me curious about the environment. The answer I think is it depends on the cryptocurrency. The following paragraphs are from the Sierra Club.
. However, you may not have thought of the possible environmental impacts of these digital currencies. This is due to the vast amount of energy that is necessary for mining, which requires solving complex mathematical problems and is accomplished by specialized computer software called Application Specific Integrated Circuits (ASIC). In fact, Bitcoinās annual energy consumption is comparable to some entire countries, such as Argentina and Ukraine. Bitcoin produces 36.95 megatons of carbon dioxide (CO2) annually (comparable to New Zealand) and it is estimated that in 30 years Bitcoin could alone increase global temperatures 2 degrees Celsius. About 65 percent of cryptocurrency mining occurs in China, where electricity is cheaper. Other countries with major mining operations include the United States, Russia, and Kazakhstan.
It is unclear exactly what sources that energy comes from. A study done by Coinshares, claims that Bitcoin gets 74.1 percent of its energy from renewable sources, however, many people are skeptical of this finding and say it does not match other calculations that have been done. Using renewables for mining can also be complicated. For example, hydropower has become more popular for cryptocurrencies since it is cheap, however, it often has to be backed up by fossil fuels because of large regional and seasonal differences in its availability.
If digital currencies were considered true currencies, companies could be taxed or charged based on their energy consumption. However, whether digital currencies are considered true currencies is a sticky point with lawmakers and regulators. Complicating this further, not all cryptocurrencies are the same or require the same amount of energy. Some digital currencies like SolarCoin may even benefit the environment by rewarding investments in solar energy.
I donāt think the evidence is that supportive of BitCoin. Google this article from Fortune magazine. The investor report that Fortune cited from Bank of America about Bitcoin made me sit up.
āElon Musk is right: Bitcoin mining is bad for the planet. Hereās how badā
Personally if I were young and had money I would buy farmland in the northern states right along with Bill Gates. I grew up in the country. One of my classmates said often that the day would come when those who had land and could farm would eat and those that didnāt would be hungry. I thought he was a little bit pessimistic but now Iām thinking he might be right.
If you’re gonna get into crypto, don’t use RobinHood (use Coinbase, Binance to name a few). You don’t own the actual crypto in Robinhood (you’re only buying the right) so use a better exchange. Look into buying Cardano (ADA). They’ll be releasing their smart contracts next month. Stake your coins in Daedalus or Yoroi for interest. Crypto is volatile so you gotta have a strong stomach for it. Only play with what you can afford to lose.
Coinbase is good they have a program where you learn about different cryptocurrency and you earn a little. It is a good way to test water
I agree with this. If you want to get into crypto – use a wallet that has its own address.
Trading platforms like Robinhood are weird in that you don’t own your crypto but rather are paying for access to the trading platform’s crypto. (example: Robinhood holds a lot of dogecoin in their wallet, but if you “buy” dogecoin on robinhood they do not give you your coins and instead you’d have to swap them over to USD to withdraw and use).
Being able to transact with crypto currencies is part of what will lead to mass adoption. I have been using Abra as my main wallet, but also have accounts with Coinbase and Binance.
Robinhood is easy if you’re interested in crypto only as a “make money” thing rather than the actually utility of cryptocurrency. But cryptocurrency is so much more than just “making money” by flipping coins.
The world is already complicated as it is. š
Love me some Bitcoin ā„ļø Iāve owned it since 2015. It has a long way to go before mass adoption happens because itās not a quick form of payment. Bitcoin can be used for more than currency. The blockchain is a sophisticated verifiable technology. ā„ļø
Thanks Hip2Save for sharing your understanding of cryptocurrency, how to invest in it, and what SOME of the risks are. I understood the post as a small teaching moment and I can appreciate you also suggesting…do your research. Lots of passion on this subject here, but your intent was well recieved by me.
Trollers please stay away from the post and leave hip2save team alone!! If itās non related post, go and do something else coz people like me are investors and love this post. When I see recipes post, I always skip it….I would say the same thing to all of you…mind your own business….hip2save team is doing great job and I love this site!!
As far as concern on taxes, ask your accountant…hip2save is not an accounting firm…seriously canāt believe some of you criticizing hip2save for their hard work on cryptocurrency!!