As the first cryptocurrency, Bitcoin introduced the revolutionary blockchain technology to the world, sparking a cryptocurrency race, with new cryptocurrencies appearing by the day.
Bitcoin and all other cryptocurrencies are digital money; you can use it as a store of value or exchange it for goods and services. But, what is Bitcoin? What is cryptocurrency? Furthermore, how can you invest in cryptocurrency?
What Is Bitcoin?
The word “bitcoin” refers to 3 different but closely related things. Bitcoin is the name and unit of account of a cryptocurrency, but it also refers to both the network and the software that supports said network as well.
So, what is Bitcoin? Bitcoin is, at its core, software. It was released in 2009 as open-source software that, after execution in a computer, turns it into a node, connecting it to all other computers running the software, thus creating the Bitcoin network.
These nodes work as validators for the network’s transactions and as a distributed ledger for its transaction history, the blockchain. For their service to the network, these nodes are then rewarded with newly minted bitcoins every time a new block of transactions is added to the blockchain. These bitcoins are not actual coins; rather, they are just balances kept on the blockchain.
There is no convention as to whether the word “bitcoin” should be capitalized or not. And, although the English Oxford Dictionary advocates for the use of lowercase, some publications use uppercase (Bitcoin) when referring to the network and lowercase (bitcoin) for the unit of account. As for the software itself, they are now calling it Bitcoin Core.
What Is Cryptocurrency?
A cryptocurrency, or “crypto,” as cryptocurrencies are often called, is a virtual currency secured by cryptography and based on decentralized blockchain technology. A cryptocurrency’s decentralized nature means that it is not issued nor controlled by a central authority, as opposed to other virtual currencies or, indeed, fiat currency.
So, what is crypto?
Simply put, cryptocurrency is binary data stored alongside individual coin ownership records in a blockchain.
How Does Cryptocurrency Work?
Most cryptocurrencies are not backed by any commodity and only have value because people trust it does. The most important difference is that cryptocurrencies don’t rely on a central authority for their issuance or validation.
Instead, cryptocurrencies rely on a network of nodes that verify transactions and individual coin ownership and then permanently record them in the blockchain through the process known as “mining.”
One exception to this is cryptocurrency stablecoins, which are usually backed at a 1:1 ratio with a tangible commodity, be that dollars, euros, gold, gems, or otherwise.
How Can You Invest in Cryptocurrency?
As Bitcoin’s price continues to climb and more cryptocurrencies appear, investors continue to throw their money at the crypto industry. If you are one of those considering investing, there are a couple of things you should consider first.
The first thing you need to do to start investing is find the right cryptocurrency exchange platform. You should look for a platform that is secure, regulated, and with low transaction fees. You should also consider a platform’s liquidity before choosing it; a lack of counter-parties ready to trade could translate into lost opportunities.
Then, you have to consider which cryptocurrency is the best to invest in. Remember that not all cryptocurrencies are the same and are not built equally; some are much more volatile than others. So it’s best to research the cryptocurrency in which you plan to invest before making any decision.
Read More: What You Need to Know About How to Invest in Cryptocurrency
But before starting to invest, remember that crypto holdings require sound security, so one must be cautious. Cryptocurrency transactions can’t be reversed after being added to the blockchain, so if your account is compromised and your funds are stolen, they could very well be gone for good.
To prevent this from happening, you should get a crypto wallet. You should not leave your cryptocurrency on an exchange awon’t won’t really be in full control of your money.
Should You Invest in Cryptocurrency?
After the launch of Bitcoin as open-source software in 2009 and the introduction of the revolutionary blockchain technology, many cryptocurrencies have followed suit. In spbitcoin’stcoin’s volatility, its value has continued to climb over the years.
Realizing the revolutionary potential of crypto, more and more people continue to invest in the cryptocurrency industry. However, if you are considering investing, you should be cautious when deciding what crypto-exchange platform to use and which cryptocurrency you wish to invest. And remember, if you ever want to be in full control of your crypto holdings, you better get a crypto wallet!
