The term “cryptocurrency” seems to appear much more frequently within local and national news media outlets, magazines, and globally popular blogs. While the rise of cryptocurrency is fascinating, many still find the entire concept of a digital currency utterly confusing and nonsensical.
The Basics of Cryptocurrency
A cryptocurrency is defined as a virtual currency that has real, legitimate value in the marketplace. Virtual currencies often include a limited number of digital “coins” or “dollars” for the coin they have created, allowing individuals from across the globe the ability to acquire them, increasing value as more coins are distributed.
Newly created cryptocurrencies do not inherently have value upon being released. Instead, the number of individuals who are involved with the cryptocurrency and the amount of real money that has been invested in the virtual currency helps determine its overall long-term value. Cryptocurrency has recently garnered national headlines as various coins have skyrocketed in value, causing a flock of millions of new investors to get onboard the cryptocurrency train.
How Does a Virtual Cryptocurrency Gain Value?
While it seems outlandish to those who are unfamiliar with technology and the advances in tech in just the past 20 years, a cryptocurrency world does not seem too far off for individuals who are heavily involved in technology on a daily basis.
Virtual cryptocurrencies gain value based on the number of individuals who choose to invest other forms of money into the digital currency itself over an extended period of time. When millions of individuals place a large value on the cryptocurrency and have invested hundreds, if not thousands of dollar on their own, the currency itself becomes valuable as its stock begins to rise.
Additionally, cryptocurrencies gain value as the number of available coins begins to decrease and it becomes difficult to mine, causing the marketplace value to spike. Buying and selling cryptocurrency when it is no longer possible to mine the coin is one of the quickest ways to monitor price spikes and changes with popular currencies on the market.
Virtual wallets are used by both individuals and businesses working with cryptocurrency or storing cryptocurrency of their own. A virtual wallet is a piece of software that allows you to digitally access your account information and the virtual funds you have linked to it.
Mining cryptocurrency is a method to obtain a virtual cryptocurrency without purchasing it from another investor or individual who already has cryptocurrency in their virtual wallets. When a coin is first released it is much easier to virtually “mine” coins using a computer with a high-end graphics card and top of the line processor. Coins are mined by computers as the computers work to crack various codes and algorithms set into place by the creator of the coin within the “blockchain”.
The blockchain is essentially the central location of all virtual coins created in the cryptocurrency market. “Mining” cryptocurrency is done when a computer, or “mining rig” has properly cracked various codes and algorithms to continue on its path through the blockchain. As coins dwindle in availability and become scarcer with a higher value, it becomes increasingly difficult for computers and even the best mining rigs to crack blockchain codes.
Coin exchanges are available to swap various types of cryptocurrencies for competing coins as well as real fiat currencies that are used throughout the world. Whether you are interested in buying, selling, or even bidding on an available coin, always be sure to find a trusted and legitimate coin exchange that is used by millions. As cryptocurrency continues to become more popular, the number of scams and hacking attempts are likely to increase.
Benefits for the Financial Market
There are plenty of benefits of using cryptocurrency with the traditional financial market. Cryptocurrency allows for seamless transactions and increased transparency, helping to reduce and cut back on white-collar crimes such as embezzlement and wire fraud. With the increased ability to track financial transactions, keeping trails of expenses and investments is much easier and decreases the amount of crime that can be committed without detected.
Understanding cryptocurrency is becoming increasingly important for professionals working in careers ranging from financial advisors to small business owners, as virtual currencies continue to drastically shape the financial marketplace. Whether you are looking to mine your own cryptocurrency or want to invest real cash for coin of your own, having a clear understanding of how digital currencies work and how to leverage them for your benefit is essential for optimal success.
Jessica Versteeg is the CEO of Paragon Coin