Cryptocurrency Explained

We all have seen bitcoin in the news at some point, and that's just one of many cryptocurrencies. Cryptocurrency has been around for a while dating back to 2008. Crypto blew up during the pandemic, and new people want to get into crypto. And this paper will talk about how cryptocurrency works, where to start, what the future will look like, and explain the ins and outs of what you can do with cryptocurrency.

Crypto is virtual money which means there is no physical form or bill. Crypto isn't tied to any assets, so it is very volatile. Bitcoin, which is a type of crypto, fell 530 dollars in July of 2019 than in February of 2021, rose to a whopping $50,000 (Cryptocurrency Basics), which was it's all-time high since 2020, when it's all-time high was about $20,000. Unlike stocks, real estate, and coins, cryptocurrencies have no real value, and it gains its value purely from the demand, the news, and volume. Crypto gains value similar to stocks. The more volume that a certain stock is bought, the more value rises, and similar to crypto, the more that is being traded, bought, and sent that value rises. For example, starting in 2021, bitcoin grew almost $40,000 in a single month due to the people scared of there being another market crash as there was one last year. As you may have noticed, I've been talking about Bitcoin a lot, Bitcoin is one of the oldest cryptocurrencies, and it's like a father to all the other ones. There are currently 6,700 cryptocurrencies traded publicly (What Is Cryptocurrency?). But Bitcoin is at the very top and beats all the other cryptocurrencies by a mile.

You are probably wondering, is it safe? Cryptocurrency is able to work because of something called a blockchain. The blockchains are a sort of database for crypto, and everything that happens is stored in a blockchain. Every time a new transaction is made, a block is created, it is chained onto the old block hence the name 'blockchain.' An alternative name is a node, and without this, crypto would not be possible. The database stores everyone's balances and transactions and doesn't show any personal information, just the wallet address, which nothing can be done except for sending and accepting money. Now getting to why it is safe, the blockchain is run on computers all around the world, thus making hacking into someone's personal wallet a nearly impossible task. According to Cryptocurrency Basics, you would need to hack around 51% of network computers running blockchain to just get into one crypto wallet. To be even safer, you can get a USB stick that would store all your cryptocurrencies and is pretty much impossible to get into unless you have a secret phrase/code. There is no back door to crypto and blockchain, unlike banks which could be hacked into.

There are many ways to store crypto and get crypto. Owning a crypto wallet is the first step of starting to get into crypto. It is not a physical wallet but a virtual one. This will allow you to store, receive and send cryptocurrency to anyone in the world, and the fee would be the same for everyone no matter where you are. Some wallets let you decide how much the fee would be if you would like to send crypto faster then you would choose to pay more for the transaction, but if you are not in a rush and can wait then, you would obviously go for the lower amount fee. There are generally two types of wallets: a cold wallet and a hot wallet (Cryptocurrency Basics). Hot wallets are connected to the internet in a way, and this is usually a wallet a crypto exchange website provides you with or a crypto wallet you have on the web. If a hacker is able to get in, then he would be able to send crypto to himself unless you have a 2FA active, which is usually provided everywhere. Still, if the hacker hacks into the website/exchange itself, then he/she would be able to transfer everyone's money anywhere they choose. Cold wallets are not connected to the internet, making them much safer than hot wallets, but mostly everyone that is an average user has a hot wallet as it is free. Cold wallets can get a bit pricey, but paying the price may save you in the future. Most crypto exchange sites hold their money in a cold wallet to minimize a major security breach. Cold wallets come as a plastic device, and it protects your private key, which is the key to get into your wallet, and it can't be accessed anywhere else unless they have the device. A paper wallet is another popular cold wallet that is literally its name. It is a paper that has your password and private keys on it. If you own a hot wallet, then I would seriously recommend you activate 2FA, whether it's google authentication which shows a new code every 30 seconds, or a phone number authentication.

Earning and investing in crypto can be a pretty hard task. Earning crypto can be done through a process called "mining" (What to Know About Cryptocurrency), or you could buy it with a credit/debit card. For example, 10 minutes have gone by, and all the transactions are bundled into a transaction block. Then, the miners get a puzzle to solve from that transaction block using a computer. The miner tries to solve the puzzle, and whosoever miner solves the puzzle gets the new coin that is mined, though there is a certain amount of crypto that can be mined, and once that is reached, then mining won't be effective and only way would be buying it. The certain amount of coins that can be mined isn't a set number, but it depends on a coin like Bitcoin. Its max supply is 21 million, while Ethereum, which is another coin it does not have a max supply but increases the max supply every year. To invest in crypto, you would need an exchange account that lets you buy crypto with other cryptocurrencies or using a card. Some exchanges like Coinbase and Binance will allow you to do that., you can hold crypto long term in hopes of the price rising. According to (5 Best Places To Earn Interest On Crypto), certain apps like BlockFi. Crypto.com, Nexo, Binance, Celsius, and Gemini all

these apps pay you an APY (Annual Percentage Yield) just for holding crypto every year. That is also another way of investing in crypto. Investing in crypto cant guarantee you will make money, and it sure won't earn you money instantly.

There are some downsides to crypto since it is very privacy-based. Scamming comes into play a lot. There are sites promising to double your crypto if you pay them. Ponzi schemes and pyramid schemes are very popular. There is no way of getting your crypto back once it's sent, it's sent, refunds aren't possible, and there is no one that will help get your money back. Watch out for people saying that they will guarantee you will make money. Read the fine print on a website as most of us don't really read the terms of service companies involving crypto may get away with it. Cryptojacking involves silent mining on your personal computer. These are installed in a way that you may not know they are mining crypto. According to (What to Know About Cryptocurrency), If you are experiencing slower speeds, try closing sites or apps that drain your battery, use antivirus software, do not click a link that you don't know where they lead. Smart contracts are a contract that cannot be altered in any way once it is made then it stays. Most Ponzi scheme websites use smart contracts to show that they will earn a daily percentage on their investment up to doubling your money, these smart contracts show that it is possible to double your money, but the money is only coming from other people that invest. Smart contracts can be used in a good way. For example, if I wanted five pictures to be made by the end of the week from whomever I wanted, I would post that contract, and once I receive those five pictures, it would automatically pay the user, but if I don't receive the pictures, then the contract would expire and become void.

There has been a lot of talk over the past few years if crypto is legal or illegal and it is regulated. Crypto is legal in the United States, while in some other countries, it might be banned, and states in the US might have stricter policies on buying and selling crypto due to it being a very privacy-based currency. Crypto isn't backed by any government, which opens up space for huge amounts of money losses. Financial markets like public stock trading are heavily regulated to avoid massive losses (Cryptocurrency Basics). Crypto isn't regulated, so the government has been focused on being able to control taxes on crypto as you used to be able to avoid taxes through crypto, but since its huge popularity, the government has been able to start controlling taxing crypto due to sites requiring KYC (Know Your Customer) by asking for your identification there still is a lot of ways to get around taxes but that all will start being controlled in the near future. Crypto needs to be regulated because people can get away with money laundering, purchasing illegal items/substances, and even sites that may scam you for your crypto so it can be tracked.

The future of crypto may be foggy or clear. It is unpredictable, but since crypto has been out, all it has been doing is going up and creating new opportunities to become financially successful. How crypto works, it can allow you to create your own currency, create passive income and invest in a stable cryptocurrency coin. Stable coins aim to be 1 to 1 with the dollar USDT, which is a crypto coin it usually stays between $1, which is very useful if you want to invest in crypto without worrying about losing money. Crypto has a possibility to float over to Nasdaq (The Future Of Cryptocurrency). Nasdaq is an index fund that has the top-performing stocks and combines them all to have more stability if crypto is added, especially Bitcoin that may increase the price and make crypto more and more interesting to invest in. You may be thinking it's too late to invest, but I'm here to tell you it is not at all new companies are being made just for crypto, and existing companies are adapting to accepting crypto, which would make the prices rise, and as I said, crypto opens up a lot of opportunities, and those are being made every day new ways to implement crypto into anything is becoming more known, and even Tesla the biggest electronic car producing company has decided to accept crypto in the near future. Same as Paypal and Revolt, which would allow you to send crypto to people in the world, and it would be exchanged for real-world cash.

Cryptocurrency is an exciting digital currency that you should look into. There are many new opportunities opening, and it still isn't too late. As time goes on, crypto will always be discussed in the news, by celebrities, and even possibly your friends and family. The future of crypto will be growing and growing. It is up to you to think about investing an amount that you can afford. Crypto is controlled basically by the people, and there aren't any laws unless they are made, and it can't be controlled by the government, so the price is really up to the popularity and how volatile it can become. I don't know about you, but I'm definitely looking forward to seeing crypto grow and even open opportunities for me to make me/you financially free. I'm making a move, will you?

Sources:

Barone, Adam. “The Future Of Cryptocurrency.” Investopedia, Investopedia, 28 Aug. 2020, www.investopedia.com/articles/forex/091013/future-cryptocurrency.asp.

Facebook.com/hedgewithcrypto. “5 Best Places To Earn Interest On Crypto.” Hedgewithcrypto, 3 Mar. 2021, www.hedgewithcrypto.com/earn-interest-crypto/.

James Royal, Ph.D. “What Is Cryptocurrency? Beginners Guide to Digital Cash.” NerdWallet, 25 Feb. 2021, www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know.

Lambert, Cash. “Cryptocurrency Basics: A Beginner's Guide (2021 Update) - WealthFit.” Https://Wealthfit.com, Wealthfit, 5 Mar. 2021, wealthfit.com/articles/cryptocurrency-basics/.

“What to Know About Cryptocurrency.” Consumer Information, 29 Oct. 2018, www.consumer.ftc.gov/articles/what-know-about-cryptocurrency.