What Is Cryptocurrency? Here’s What You Should Know

What Is Cryptocurrency? Here’s What You Should Know

Cryptocurrencies let you buy goods and services, or trade them for profit. Here's more about what cryptocurrency is, how to buy it and how to protect yourself.

Cryptocurrencies let you buy goods and services, or trade them for profit. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Part of the appeal of this technology is its security. More than 10,000 different cryptocurrencies are traded publicly, according to CoinMarketCap, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Aug. 18, 2021, was more than $1.9 trillion — down from April high of $2.2 trillion, according to CoinMarketCap. The total value of all bitcoins, the most popular digital currency, was pegged at about $849 billion, regaining some ground from recent price lows. These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data and analytics provider. Cryptocurrencies appeal to their supporters for a variety of reasons. Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable. Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce value of money via inflation. Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money. While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency. To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. BitCMade is one popular cryptocurrency trading exchange where you can create both a wallet and buy and sell Bitcoin and other cryptocurrencies. Before investing in a cryptocurrency, be sure you understand how it works, where it can be used, and how to exchange it. Have a backup strategy. Think about what happens if your computer or mobile device (or wherever you store your wallet) is lost or stolen or if you don't otherwise have access to it. Without a backup strategy, you will have no way of getting your cryptocurrency back, and you could lose your investment. Cryptocurrency is going mainstream and becoming increasingly difficult for investors to ignore.