Cryptocurrencies are gaining traction as a way to transact online outside the established financial systems. This rise in popularity means that cryptocurrency is now accessible to anyone who wants to explore its advantages. If you want to learn more, this brief overview outlines the basics of cryptocurrency and its main features.
Cryptocurrency, also known as digital currency or just “crypto”, essentially offers a way to transact online with an added layer of security and anonymity. Instead of authorising a payment by typing in a PIN number or sharing personal details, transactions with crypto are securely carried out and verified on a system called a “blockchain”. In simple terms, this is a publicly accessible online ledger that records all transactions in a transparent and permanent way.
There are a staggering 20,000+ cryptocurrencies in circulation. However, there are only a few that you are likely to come across. The main one is Bitcoin but you might also find reference to Ethereum (or Ether), Litecoin, Solana (or SOL) and Binance Coin.
There are two main things to understand about cryptocurrencies. Firstly, they are decentralised, which means they are not under the control of a central bank (such as the Bank of England). As such, they fall outside the scope of financial regulatory frameworks (although there are moves to regulate crypto). This decentralisation has both advantages and disadvantages.
Another feature of crypto is its extreme price volatility. For example, in 2010, shortly after its launch, Bitcoin was worth $0.09. Its record high to date, reached back in 2021, was over $60,000, before it later halved in value.
Cryptocurrencies are increasingly being adopted by online businesses, allowing consumers to pay for goods and services using one of the main digital currencies. To do so requires setting up a digital wallet through which crypto transactions can be carried out.
When it comes to online gambling crypto has also become popular, offering users a secure way of funding their accounts and cashing out any winnings. On the downside, the nature of the cryptocurrency market means it can be vulnerable to criminal activity, such as scams and money laundering, though these issues are being addressed at the present time.
If you would like to explore cryptocurrency, getting started is relatively straightforward. There are various platforms (such as PayPal and BitPay) where you can purchase cryptocurrency using traditional or “fiat” currency (UK pounds, US dollars, etc.) and store it in a wallet for buying goods and services online. Cryptocurrencies are divided into much smaller units (called coins or tokens), in a similar way to pounds and pence, so you don’t have to commit to buying a large amount. There are also trading platforms where people invest in crypto with the aim of making money. However, this requires good knowledge of the market and a real appetite for risk.
Hopefully, this article has provided a useful introduction to digital currencies so you can decide if you want to get involved – or stick to the more conventional payment methods!