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What Is Cryptocurrency? Here’s What You Need to 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 safeguard yourself.

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A cryptocurrency (or “crypto”) is a digital currency that can be utilized to buy items and services, but uses an online ledger with strong cryptography to protect online transactions. Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices skyward.


1. What is cryptocurrency?

Cryptocurrency is a kind of payment that can be exchanged online for products and services. Numerous business have provided their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think about them as you would arcade tokens or gambling establishment chips. You’ll require to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread throughout many computer systems that manages and records deals. Part of the appeal of this innovation is its security.


More than 6,700 various cryptocurrencies are traded publicly, according to, a marketing research site. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The overall value of all cryptocurrencies on Dec. 18, 2020, was more than $645.7 billion, according to CoinMarketCap, and the total worth of all bitcoins, the most popular digital currency, was pegged at about $421.7 billion. (You can inspect the present cost to purchase Bitcoin here

3. Why are cryptocurrencies so popular?

Cryptocurrencies interest their supporters for a range of factors. Here are some of the most popular:

Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, probably before they become more valuable Some fans like the reality that cryptocurrency eliminates reserve banks from managing the money supply, considering that over time these banks tend to decrease the value of money via inflation Other advocates like the innovation behind cryptocurrencies, the blockchain, since it’s a decentralized processing and recording system and can be more safe than conventional payment systems Some speculators like cryptocurrencies due to the fact that they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move cash

4. Are cryptocurrencies a great investment?

Cryptocurrencies may increase in value, but lots of financiers see them as mere speculations, not real investments. The reason? Much like genuine currencies, cryptocurrencies create no cash flow, so for you to benefit, somebody has to pay more for the currency than you did.

That’s what’s called “the higher fool” theory of financial investment. Contrast that to a well-managed service, which increases its value in time by growing the success and capital of the operation.

For those who see cryptocurrencies such as bitcoin as the currency of the future, it needs to be noted that a currency needs stability.” As NerdWallet writers have actually noted, cryptocurrencies such as Bitcoin may not be that safe, and some noteworthy voices in the financial investment community have encouraged would-be investors to stay away from them. Of specific note, famous investor Warren Buffett compared Bitcoin to paper checks: “It’s a really reliable method of transmitting money and you can do it anonymously and all that. A check is a way of transferring money too. Are checks worth a lot of money? Just because they can send cash?” For those who see cryptocurrencies such as Bitcoin as the currency of the future, it needs to be noted that a currency needs stability so that merchants and customers can identify what a fair price is for items. Bitcoin and other cryptocurrencies have been anything but stable through much of their history. While Bitcoin traded at close to $20,000 in December 2017, its value then dropped to as low as about $3,200 a year later on. By December 2020, it was trading at record levels once again.
