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What is Cryptocurrency?

We live in a digital age, and this includes money. In reality, cryptocurrencies are virtual currencies intended to be used as a medium of exchange. Here's a primer on what it is and how to utilize it.

What are Bitcoin, Litecoin, and Ripple RXP all about? They are well-known varieties of cryptocurrencies. According to a recent poll, 8% of Americans presently own some form of digital currency, with the majority admitting they don't completely comprehend the phenomena. We've broken down cryptocurrencies and what you should know about it.

What is cryptocurrency?

To put it simply, cryptocurrency is digital money that exists in the form of data units (called tokens or coins) that may be stored in an online digital wallet. The goal behind cryptocurrency is to have a way of trading a finite supply of currency that is not controlled by a central authority such as a bank or a government.

Cryptocurrency is exchanged digitally. As a result, there is no real coin or bill associated with cryptocurrencies, and no third-party entities are engaged in its creation or transmission.

On its consumer website, the Federal Trade Commission (FTC) provides the following additional cryptocurrency-related facts:

Cryptocurrencies are not insured by the government in the same way that bank deposits in the United States are.

According to the FTC, the value of cryptocurrencies can vary "by the hour." "An investment that is worth thousands of dollars today may only be worth hundreds tomorrow." If the value falls, there is no certainty that it will rise again."

In contrast to credit and debit cards, which have legal protections if something goes wrong, cryptocurrency has none. Furthermore, payments are not usually reversed. When you pay for something with bitcoin, you can only receive your money back if the seller returns it.

Where can I buy cryptocurrency?

Bitcoin is the most well-known cryptocurrency. It can be purchased directly from other individuals through internet markets, and payment methods include cash, credit cards1, and wire transfers.

The Bitcoin would then be stored in a digital wallet. Companies such as Coinbase enable you to link a bank account and simply transfer funds into and out of your wallet.

How to use cryptocurrency

The list of businesses that accept bitcoin payments is always changing. However, several well-known companies that have embraced or continue to accept Bitcoin include Microsoft, Dish Network, and Overstock.

However, rather than using Bitcoin as a currency, more people are turning to cryptocurrencies as an investment instrument (see below).

Know the cryptocurrency risks

The Securities and Exchange Commission (SEC) of the United States warns that "trendy investments are especially ideal for fraudsters, therefore be aware that there is a serious risk of fraud." Scammers take advantage of the newness of an investment opportunity when there isn't as much history about the product."

If you lose money on bitcoin, "there is a genuine risk that the SEC and other agencies will be unable to assist you in recovering your investment, even in cases of fraud."

The FTC warns customers to be wary of anyone that assures you'll make money, promises large rewards, offers free money in dollars or bitcoin, or makes ambiguous claims.

Are you still interested in cryptocurrencies? The best strategy is to invest only money that you can and are willing to lose. Conduct thorough study and proceed with extreme caution.