After more than a decade since its inception, cryptocurrencies have steadily taken the world by storm. Each day, more investors and institutions have shown interest in cryptocurrencies, such as Bitcoin, Dogecoin, and Monero. As people left and right began investing and transacting using these cryptocurrencies, the average person may be wondering: What is cryptocurrency? And why is it so popular nowadays?
To answer these questions, here is a quick rundown of what cryptocurrency is and some of the reasons why more people are looking into it.
Cryptocurrency is a digital medium of exchange that can be described in two words: encrypted and decentralized. The former refers to how cryptocurrency is secured by cryptography. It protects users from double-spending and ensures the privacy of transactions and their participants.
Meanwhile, cryptocurrency is also decentralized because, unlike other currencies, cryptocurrency is not managed by a central authority like a government or a bank. Instead, the task of maintaining the currency is distributed among its users alongside blockchain technology.
The rise of cryptocurrency could be attributed to many things, including the volatile potential for profit, celebrity support, and user popularity. As people’s interests are piqued once more and more cryptocurrencies enter the market, it becomes clearer that these digital coins are not going anywhere soon. Here are some of the reasons why.
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In line with the global shift to digitalization, more companies are adopting cryptocurrencies. Some of them include Microsoft, Starbucks, Home Depot, and even Paypal. With so many respected organizations backing them up, people inevitably become more interested in them as well.
Consequently, as demand grows, so do the tools for using cryptocurrency, such as debit cards (albeit rare) and wallets, like the XMR wallets for Monero.
Additionally, users report that paying with cryptocurrency incurs lower fees compared with traditional payment schemes. After all, since cryptocurrency is decentralized, consumers no longer have to pay the extra charges to the bank and other financial institutions. Due to this feature, more people go into crypto thinking they could save money.
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When a country is in turmoil, the value of its currency often goes down. This event is a significant issue for investors, especially those who invest in chosen assets in that specific country. Due to cryptocurrency’s decentralized structure, however, its value does not rely on the state of a country’s government or economy. Thus, even in the event of national turmoil, users can feel a degree of assurance that their investment in that cryptocurrency will be largely unaffected.
As such, investors consider cryptocurrency as a way to safeguard their wealth, which plays into its lucrative appeal.
In 2018, Bitcoin experienced a severe crash. Two years later, however, it made a huge comeback, its value surging by roughly 800 percent. One of the primary drivers of this was the Coronavirus 2019 (COVID-19) pandemic.
As countries went into lockdown and the COVID-19 pandemic battered economies globally, investors had to rethink their investments and reconsider the types of assets they invest in. Hence, they turned to Bitcoin, a digital asset that is not associated with geopolitical uncertainties.
The event highlighted how cryptocurrency could serve as a potentially highly profitable alternative to traditional assets. Consequently, more companies and experts became more open to digital coins.
Investing in cryptocurrencies can be a high-risk, high-reward kind of strategy. Most consumers are aware that cryptocurrencies are exceedingly volatile, and their values can significantly change, even within a day. Interestingly enough, their volatility is part of what makes them so lucrative for the average investor.
Experts have compared buying cryptocurrency to going to Vegas. It is a large gamble for all parties involved. Because spikes and drops can happen in a short amount of time, investors are always kept on their toes.
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As volatile cryptocurrencies are, they remain a groundbreaking development in the history of finance. It opened the eyes of consumers and investors to another possibility—a world where mediums of exchange are not monitored or controlled by the government and financial institutions alone.
Aside from being on the radar of companies and big brand investors, cryptocurrencies also present an exciting opportunity for the younger generation of retail investors, particularly the millennials.
After all, wealth is difficult to accumulate without proper capital. Investing in a new asset such as cryptocurrency may help them build their portfolios and acquire the capital they need to forward their careers or start new enterprises.
All in all, it becomes clear why cryptocurrency has continued to rise in popularity despite its pitfalls, and it will more likely continue to do so. It is not unthinkable to imagine a world where cryptocurrency has become more widespread—wide enough for consumers to use in their daily shopping and bills payments.
While the future of cryptocurrency is still unclear, the best thing the average person can do is to learn more about it. After carefully considering the pros and cons, maybe they could even consider investing in it.
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