What is the deal with cryptocurrency?

With over 106 million users worldwide, cryptocurrency is a hugely popular asset for casual investors and entrepreneurs. If you’re new to cryptocurrency or unsure which type of “crypto” is right for you, here’s a quick overview of all you need to know.

What is cryptocurrency?

Cryptocurrency is a “virtual” or digital currency designed to be used primarily over the internet. This currency is referred to as “coins” or “tokens” and can be invested, sold, or exchanged online.  

According to statistics, one in five Americans has used or invested in some form of this cryptocurrency.

How does cryptocurrency work? 

Unlike traditional currencies, cryptocurrency does not have a central bank. Instead, it works on a decentralized system known as the “blockchain,” a ledger of every crypto transaction. The blockchain is maintained and manually updated by existing coin holders, so users can complete transactions without passing through a central authority or clearing system.   

Types of cryptocurrencies

There are various cryptocurrencies out there, but here’s a look at the three most popular ones. 

  • Bitcoin: Bitcoin is the best-known cryptocurrency. It’s the main reason blockchain technology exists and is still one of the most popular cryptocurrencies. 
  • Ethereum: First launched in 2015, Ethereum is a type of blockchain network. It has its own currency (ETH), but you can use the platform to build and launch new software applications such as payment platforms and peer-to-peer lending facilities.   
  • XRP: Designed with corporations and developers in mind, XRP is an alternative to traditional currencies for those looking to perform regular cross-border transactions quickly and efficiently. 

Other popular cryptocurrencies include Tether, Binance Coin, and Cardano — which offering you choose depends on various factors such as your investment portfolio, appetite for risk, and trading goals.

Advantages of cryptocurrency

Cryptocurrency has a few plus points — here are the three major advantages over traditional currencies. 

Decentralized systems

Since there are no intermediaries like banks or financial institutions to pass through, crypto transactions are transparent and fast.   

Protected from inflation

There are only so many of each type of cryptocurrency issued. For example, there can only ever be 21 million Bitcoins issued. As a result, traditional market volatilities, like inflation, don’t affect the value of cryptocurrency. 

Secure transactions

Every transaction is encrypted on the blockchain, which runs on a highly sophisticated source, thus making cryptocurrency a relatively secure asset to trade and share. 

Disadvantages of cryptocurrency

There’s no doubt that cryptocurrency can be cheaper, faster, and more flexible than traditional currency. However, cryptocurrency does come with some disadvantages. 

Vulnerable to hacks

Cryptocurrency users hold their coins in “wallets.” As with other types of online accounts, these wallets are vulnerable to data breaches. If someone hacks your wallet, you could lose your coins.    

Risk of data loss

If you lose the code to your wallet, there’s no way of retrieving the coins stored inside; this means you could lose your assets. In other words, one of the main benefits of cryptocurrency — its high level of security — can actually lead to someone losing their money and their data.  

No refund or cancellation policy

There’s no such thing as a refund policy on the blockchain. If coins get accidentally sent to the wrong location, you will not be able to recover them. As an example, it’s possible for someone to pay for a service they simply never received if the other party fails to honor the contract. 

Cybersecurity services from GB Tech

While cryptocurrency does offer some impressive advantages over traditional currency, it’s not without its drawbacks. To get the most from cryptocurrency and keep your financial data safe, consider partnering with an IT provider focusing primarily on security. Contact us now to learn more about GB Tech’s IT support and cybersecurity services.