For many people, cryptocurrencies are still a great unknown. Many of us still don’t know how they function, how can we earn them, save them, or spend them. So we will try to explain in a simple way what a cryptocurrency is – and whether it is used for spending or saving.
What Are Actually Cryptocurrencies?
Cryptocurrencies, also called virtual currencies, are globally accepted international means of payment via the Internet – but also investments. Cryptocurrencies are connected to commercial bank accounts because of the fact that central banks do not issue cryptocurrencies. There is no fee for transactions, so international payments are simpler and cheaper – because cryptocurrencies are not tied to any country or subject to regulation. This way, anyone with an Internet connection can become part of that financial system – without using a standard banking network. Such systems are almost inflation-resistant and less dependent on countries’ monetary policies.
How Are Cryptocurrencies Stored?
Cryptocurrencies are electronic records of certain values – stored in electronic wallets on websites that provide such a service. Bitcoin, just like other cryptocurrencies, is created on computers around the world – by solving complex computer equations (so-called mining) – and can also be purchased through ATMs or online exchanges. Users keep them in an electronic wallet using the service on one of the many websites that provide this.
The Difference Between Electronic And Digital Money
Speaking of electronic money, it is considered to be money that exists exclusively within the banking system – and whose turnover is realized by computer systems and the use of computer networks, the Internet, and digital data storage systems such as credit cards. However, when we talk about the digital currency, it is considered a form of electronic money that acts as an alternative currency and can be transferred between individuals without the mediation of the traditional banking system.
Can We Spend Cryptocurrencies?
Of course, we can. This is just one of the forms of electronic money that have spending as one of the basic purposes. Digital or electronic money is one of the ways of electronic payment – and it appears and spreads consequently with the development of the Internet. Increasing the number of electronic transactions – increases the total turnover of computer networks, which directly affects customer satisfaction and simplifies the conduct of transactions. Therefore, it is also important to emphasize that the costs of online transactions are significantly lower than those incurred by performing transactions in bank branches.
Is Cryptocurrency Spending Safe For Users?
Electronic money, just like paper money, guarantees the anonymity of the person who performs the transaction – which makes it impossible to track it. In other words, the person receiving the electronic money cannot trace the identity of the person who used it. Electronic forms of money, that is, performing financial transactions by exchanging information electronically – are the basis of such a business. The flow of electronic information between two parties communicating on the Internet allows completely uninterrupted observation – but still opens up the possibility of misuse by a third party. To minimize such unwanted situations – encryption protection is used as well as authentication of participants in the transaction.
Is It Possible To Save In Cryptocurrencies?
The financial world is changing rapidly under the influence of modern technology. According to wehodl.net, many people have started using digital tools and platforms – and money itself is increasingly digital. One of the biggest innovations is the blockchain technology on which cryptocurrencies are based. Among other things, this technology has led to the emergence of savings in cryptocurrencies as an alternative path to financial prosperity. The intention is to generate significant passive income by keeping currencies long enough. In practice, there are several obstacles, such as volatility, which is characteristic for almost all cryptocurrencies – and that is why it is best to approach this topic with a healthy dose of caution.
Cryptocurrency Selection Factors
The first step is to choose the currency in which you want to save.
Bitcoin is an indispensable topic around the world and still one of the most popular cryptocurrencies. Although it has come out with a somewhat bad reputation as a very volatile option, what is not in question is the incredible growth of its value over the years. In addition to bitcoin, you can consider other established currencies as well. Despite the instability, these currencies have also seen a rise in value over the years. Another encouraging trend is that its value is stabilizing.
Saving Or Investing – What to Choose?
Investing in smaller cryptocurrencies may be cheaper – but the basic problem is unprofitability in the long run. Simply, they are subject to large variations in prices – and can suddenly disappear from the scene. Therefore, they usually do not enjoy the trust of investors and savers. True, the risk is always there – and it deters many investors and savers from cryptocurrencies. Many of them even think this market is unstable. It may look that way to some of you – however, what you need to understand is that this instability is only one side of the story. The other side is big profits.
Explore Options First
It is a good idea to explore tools for storing cryptocurrencies. They are called crypto wallets and their number is constantly growing. The two basic groups are software and hardware wallets. The first solution is more popular with active cryptocurrency traders due to its affordability – while hardware tools are recommended for savers. One of their main advantages is security – which is extremely important when keeping larger sums. When you know the basic principles of saving – you can move from words to deeds. With patience and smart choices – saving in cryptocurrencies should pay off many times over.
In principle, cryptocurrencies are worth considering, both in the case of spending and in the case of long-term savings. They are not subject to inflationary pressures and gain in value as time passes. There are certain risks, so you have to be willing to accept them. Make a savings plan, determine the amount you will save, and set realistic goals. For starters, don’t convert all your savings into cryptocurrencies. You do not want your financial health to depend solely on that. So as with paper money – always invest with caution.