In the financial world, you may have heard a term that seems like it is all the buzz lately: cryptocurrency. It presents a new and hot opportunity that you, as an investor, want to get in on. But what do you actually know about cryptocurrencies?
Knowing the different types of cryptocurrencies that are out there may give you a better idea of just what it entails before you take the leap into investing in it. After all, having the most knowledge possible before making an investment is the smart route and promotes success.
So, what are cryptocurrencies? Here are the different types available today.
Simply put, cryptocurrency is digital money or digital currency. That means there is no physical version of this currency; it only exists in digital format. This can be in stark contrast to the coins and paper notes that we have become accustomed to that have presidents, queens, and ‘In God We Trust’ scrawled on them.
There are many reasons for the rise of cryptocurrency but the main is the security behind them thanks to blockchain technology. That is another piece in and of itself, but the belief is that cryptocurrency is more secure than standard forms of currency.
This is where cryptocurrencies are passed from person to person online. Cryptocurrencies have actually been used as a form of payment through various online vendors, making it a somewhat viable currency around the globe in short order.
Whereas every country has their own paper currency, that isn’t the case for cryptocurrency; it is the same in every single country. That means that they can be used freely between countries and across borders.
With the prospect of no longer having to deal with exchange rates, a new level of convenience comes into play that had not previously been there with standard currency.
Instead of using your name for an account, each user is given codes to access that currency and use it. Hence the crypto part of cryptocurrency, which is latin for hidden. Basically, it equates to hidden money.
For traditional currency, there are centralized organizations known as banks that keep all the money. With cryptocurrency, there are no banks; everyone is charge of their own money. It also means that cryptocurrencies are not managed by a central server, hence the decentralized definition of cryptocurrencies and how they work globally.