There’s talk of cryptocurrencies everywhere these days.
Bitcoin, Dogecoin, Litecoin, Ether, Cardano, Monero, Lumens—there are many different kinds of digital cash out there. It’s a brave new world, and that world comes with strange new terms that might leave you scratching your head and wondering what it’s all about.
So just what is digital cash? What is cryptocurrency? What is blockchain? These terms can be confusing, especially when they’re thrown around with casual indifference by “those in the know.”
Don’t worry—we’ve got you covered. Keep reading for a helpful guide to all things crypto.
What Is Cryptocurrency?
First, we should point out the obvious: a cryptocurrency is a fully digital asset, and therefore it is not a fiat currency. That means it’s not backed by the full faith and authority of any government.
Cryptocurrencies are kind of floating out there in the vagaries of the marketplace. Their value is determined by supply and demand, and other fickle intangibles. A cryptocurrency is only worth what people are willing to pay for it.
And that’s why cryptocurrencies, like Bitcoin and Ether, are so notoriously volatile in their dramatic pricing swings. If you’re interested in long-term stability, cryptocurrencies are not for you.
On the other hand, a cryptocurrency savings account might be an option for short term investments (click here to learn more).
If you know anything about cryptocurrencies, you’ve probably heard the word “blockchain” bandied about from time to time.
This is the part where people’s eyes usually begin to glaze over. But in a nutshell, a blockchain is considered to be a distributed ledger. This enables peer-to-peer transactions, which cuts out the middlemen, such as a central banking authority.
Think of a blockchain as an operating system (like Apple’s iOS), and your favorite cryptocurrency as an application (like, say, FaceTime or Safari). The purpose of the blockchain is to ensure that a financial transaction is on the up-and-up—that is to say, legitimate and transparent.
So where does that leave us in terms of digital cash?
Well, there are a great many different cryptocurrencies—up to 7,000 by some estimates. But not all of them are created equal. The heavy hitters, like Bitcoin and Ether, account for most of the market share.
And that brings us to the next issue. A digital currency is all well and good, but without a central bank and without a real-world mint, the “money” is restricted to the online world.
Still, there are means of converting digital cash into actual cash. This involves using something like a Bitcoin ATM or other cryptocurrency ATM.
These machines work just like traditional ATMs, only they’re used for converting government cash into cryptocurrencies, and vice versa.
The Intricate World of Cryptocurrency
This is just a brief and very simple breakdown of the crypto lexicon. But it should give you a serviceable understanding of things like digital cash, the blockchain, and what Bitcoin ATMs are.
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