When we first hear of cryptocurrency, it sounds like something right out of a video game,
specifically something from one of the Crash Bandicoot games. It sounded foreign, exotic,
almost as if I needed to complete a quest to obtain it. That is not what cryptocurrency is,
however. As technology adds flexibility to many areas of our lives – i.e., working from home,
perusing Facebook at the hair salon, Googling recipes at the grocery store –
it may come as no surprise that technology has now added flexibility to currency.
Some of the more well-known currencies in the world include the US Dollar, the Japanese Yen,
and the Euro. While these currencies have physical units as part of their system – coins,
bills, etc. – cryptocurrency is a bit different. Cryptocurrency is a digital form of
payment that – much like the US Dollar has the Dollar Bill – consumers can use to purchase
goods or services online. NerdWallet likens it to arcade tokens or casino chips, especially
if the cryptocurrency is with a specific company. While Bitcoin is the more well-known
cryptocurrency, there are thousands more, including Ethereum, Binance Coin, and Tether.
Understanding how cryptocurrencies work can be difficult: I recall asking a friend once who
explained, in very simple terms, that Bitcoin was put together by creating blockchains.
Blockchains are a common way for cryptocurrencies to be created. Basically, data is used to
fill a block, and once filled, it chains to the previously filled block, creating a blockchain.
Blockchains can be created in a centralized or decentralized way: centralized would be where
the cryptocurrency’s computers are all owned by one entity, whereas decentralized is the exact
opposite. As decentralized models require multiple computers to validate information, this can
cut down on corruption within that cryptocurrency. Bitcoin operates on a decentralized model
whereas XRP operates on a centralized model.
Many people have concerns about cryptocurrencies: are they legal? Are they safe?
With any type of financial transaction, there are risks and it helps to be well informed.
First, are they legal: it depends on the country, but many are currently legal in the United States;
there are certain rules that cryptocurrencies have to complete in order to be viable in each country,
like being approved for sale or approved for exchange.
Second, are they safe? Just like any investment or other financial transaction, there are risks.
Software development companies can help you create
secure platforms for all these concerns and keep your mind at ease when it comes to implementing these technologies.
For one, there are scammers that will try to take your money, so just like any solicitor or offer,
it is smart to research the offer you have been presented. For another, cryptocurrencies are very similar to
stocks in the stock market: many stocks have their rises and their falls, some are more volatile than others,
etc.; investing in stocks have risks, and so do cryptocurrencies.
Just like anything, there are benefits and disadvantages to using cryptocurrencies. Wall-street.com
has listed some of the benefits are: being accessible 24/7, in that you can use it wherever you are,
and it does not even require a computer; it is anonymous; and it is pretty transparent in that,
while it is anonymous, the transactions specifically are stored in a public ledger (the blockchains
themselves) that anyone and everyone can access. For some, these benefits could outweigh the costs,
especially if they are looking for a flexible form of currency. It also lists the disadvantages as:
market fluctuations can be very volatile, as recently shown by Elon Musk’s comments; it can be
confusing to understand, per our brief explanation of blockchains above; and there is no security
against any losses as it in is just like using real money. While these disadvantages can be turn
offs for some, having the right mindset can help: being well informed, being aware of potential
losses that can happen, and only taking the risks you are prepared to take can be helpful.
Cryptocurrency is a new form of currency, brought along by our advances in technology.
While the benefits may not outweigh the disadvantages for all of us, understanding what
cryptocurrency is, how it works, and what the risks are, can help us determine if it is a
currency we want to use. It may not have anything to do with Crash Bandicoot games, but it’s
flexibility may lead to exciting possibilities for us all.