Did you know that Bitcoin (which is considered the top cryptocurrency) was created in 2009? If you want to start investing some money in the crypto world but are wondering “how cryptocurrency works?” we are here to help. We have put together this guide with the top questions that everyone has about cryptocurrency.
Keep reading to learn the ins and outs of the crypto world.
1. What Is Cryptocurrency?
We will start with the basics because most people do not even know what it is. Cryptocurrency is a form of digital payment that you can exchange online for services or for goods. You have to exchange your own currency (USD, EUR, etc) for crypto.
This digital money works by using a technology called blockchain. Which is a decentralized technology that is spread across many computers and manages the transactions and records them. The most attractive part of the blockchain is how secure it is.
2. How Many Cryptocurrencies Are There?
There are quite a few thousand types of cryptocurrencies at the moment. You can look on sites like CoinMarketCap.com to see their current value and the top currencies.
There are many companies that have developed their own type of currencies which are usually called tokens or Altcoins. Those tokens can be used to buy that company’s specific goods. This is comparable to buying tokens at an arcade to play their games or casino chips to gamble.
3. Where Do I Buy Cryptocurrencies?
The answer is it depends. If you are buying some of the top coins such as Bitcoin, Ethereum, Litecoin, etc you can buy them with U.S. currency with either a bank account linked to your cryptocurrency account or with your debit or credit card.
One of the easiest places to make your purchase is on the app called Coinbase. There are also sites like Robinhood and PayPal that let you buy cryptocurrency but they do not allow you to send it to a different digital wallet.
If you want to invest in a coin that people like Elon Musk and Mark Cuban have stood behind then, you might want to consider dogecoin because it is still very affordable. cryptocurrency dogecoin price that is still under $1, making this investment a little cheaper. You can buy dogecoin here if you are ready.
There are also ATMs in different cities where you can physically insert cash and it will let you buy Bitcoin that you can send to your digital wallet of choice.
4. How Do You Store This Money?
This might seem confusing at first because you can’t put the physical cryptocurrency in your pocket. The best way to store cryptocurrency is with a secure cryptocurrency wallet. This is a digital wallet that is either online or a physical one such as a Trezor wallet that is kind of like a USB drive.
If you opt to store your money in a web wallet then you can access it from any web browser (including your phone). A popular wallet that you can store your money in is called Exodus and they recently added an app as well.
5. Can I Transfer My Crypto Back to Cash?
Yes you can! All you have to do is sell your Bitcoin or crypto on an exchange. This is the easiest way to convert it to cash that you can then deposit into your bank account. If you are using an exchange like Coinbase, it is not very difficult to sell your crypto and then withdraw it.
6. What Can I Buy With Cryptocurrency?
Nowadays you can buy pretty much anything with cryptocurrency especially with Bitcoin because it is being accepted by more and more businesses around the world. For example, you can buy food, games from big names like Microsoft Xbox and Windows Store.
When shopping online for cosmetics, clothing, etc you can also pay with crypto at plenty of online stores. You can even use crypto with some travel and booking agents. Some hotels also allow you to pay online with cryptocurrency.
If you are in the market for a new house, you can even buy it with Bitcoin if the buyer is fine with this form of payment. More homeowners are seeing the value in Bitcoin and are accepting it as a form of payment.
7. How Are Bitcoins Created?
Bitcoins are created via a process called mining. This is where mining nodes also known as supercomputers work to solve complex mathematical equations. This equation is so hard to solve that the supercomputer has to guess hundreds of different numbers per second.
It usually takes about ten minutes for the network of computers to guess the correct answer to each equation. When a miner guesses the correct answer they earn Bitcoin as a reward for solving the equation.
8. How Is the Value Determined?
The value is determined by the supply and demand of the coin. Because it is still in the early stages of adoption the value of crypto fluctuates on a daily basis and it is still very volatile. There is still Bitcoin left to be mined but at some point when every coin is mined, it should reach a stable peak.
The reason Bitcoin was invented was to eventually become a reliable, stable, and decentralized global currency.
Now You Know How Cryptocurrency Works
We hope that now that we answered the top questions about how cryptocurrency works, you can make informed decisions before you make your first purchase.
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