Bitcoin and Other Types of Cryptocurrency
If you use the internet, you’ve heard of Bitcoin. The cryptocurrency, which was started in 2009, has skyrocketed in popularity and worth, making it one of the fastest-growing consumer bases in the world. Bitcoin and other cryptocurrencies are becoming increasingly popular, not just among consumers but also merchants. Even major companies have started to accept Bitcoin as a payment gateway. However, trying to navigate the ins and outs of cryptocurrencies like Bitcoin can be challenging and confusing, especially if you’re a beginner. Here’s some basic info about Bitcoin, other cryptos, and whether investing is a good idea.
What is Cryptocurrency?
Essentially, cryptocurrency is money. However, it’s money that’s in a digital form. Cryptocurrency is a decentralized currency, meaning that it’s not controlled or managed by any significant authority figure. In fact, Bitcoin and other cryptos operate entirely independently of any “middleman,” like good old’ Uncle Sam or the fat cat banks. You can find out some more information about Bitcoin and how to safely invest in this highly valuable crypto by heading to xCoins.io, a trusted Bitcoin exchange. If you want to buy Bitcoin, you need to use a digital currency exchange like xCoins so you can safely and securely purchase it with no risks.
Should You Invest in Bitcoin?
If you’ve heard of Bitcoin, then you’ve probably read about those amazing stories where people invested in Bitcoin at the right time and are now filthy rich. When Bitcoin first started in 2009, the price was initially zero. In June 2011, it was worth $32. Now, flash-forward all the way to April 2021. What’s the current value of a single Bitcoin, you ask? Oh, just a measly $59,107. Can you understand why those mouth-watering numbers are an irresistible allure to potential investors? The price of Bitcoin can be driven up high for many reasons, but one of the most significant is that it’s not an unlimited source. There is a finite amount: only 21 million Bitcoin can ever be mined, and that’s all there will ever be. Economics 101: limited supply drives up demand, boosting the price sky-high.
How to Invest in Bitcoin
You can invest by purchasing actual Bitcoins with money or by mining. However, mining Bitcoin takes a (very, very expensive) mining rig, special mining software with the necessary algorithms, and mind-boggling amounts of electricity. Even with a top-notch mining rig, the price of electricity makes it unlikely that you would ever turn a profit mining Bitcoin, and if you did, it would take an extremely long time. There are ways around this, like mining pools, but you still need expensive equipment.
Instead of spending beaucoup amounts of dough on mining rigs, you can invest in Bitcoin (or other cryptos, for that matter) by purchasing it through a Bitcoin exchange. This makes it quite simple and straightforward to invest in cryptocurrency. However, that’s not to say you should immediately rush out, start a digital wallet, and stuff it full of Bitcoin. Weigh your options, information, and budget carefully before you decide. Many people choose to invest in Bitcoin because it can offer incredibly high rewards, but there are two sides to that coin: it can bring high risks, too, just like any other investment.
High Risk, High Reward
A perfect example of the high risks involved is the roller-coaster fluctuations in value that Bitcoin has gone through since its inception, known as a crash and recovery. However, every time it did crash, the subsequent recovery boosted the price higher than ever before. If you have the experience and ability to invest in Bitcoin, it might be a good idea to do it now before the price skyrockets even further upward.
Other Cryptocurrency Types
Bitcoin may be the most popular cryptocurrency by far, but it is by no means the only one. They may all be different, but at the core, they all rely on slightly different editions of the original blockchain technology that is the essence of Bitcoin. However, there are four main types of cryptos: proof of work, proof of stake, tokens, and stable coins.
1. Proof of Work, or PoW
Proof of work cryptocurrencies are the most common. They work with blockchain technology, which is the same type that Bitcoin relies on. PoW cryptos like Bitcoin work by using nodes to process every transaction. This type of crypto is secure because there’s verification, which keeps the ledger precise and accurate. However, the nodes required for PoW cryptos consume tremendous amounts of power.
2. Proof of Stake, or PoS
Proof of stake cryptos are perfect because they can accommodate scaling with ease. PoS cryptocurrencies work much differently than PoW cryptos in terms of security and verification. For PoS systems, nodes that are verifying or adding transactions to the ledger are required to put up their own funds as collateral to join the verification group. That way, if a node attempts to pass a fraudulent transaction in the ledger loses their stake as punishment. A significant benefit to PoS is that nodes that complete the hard work and verify the transactions correctly receive extra interest earned on their deposits.
Tokens are fundamentally different from the first two types of cryptos because they were never intended for use as general-purpose currency or money like Bitcoin and other similar cryptos. Tokens are also different because they’re not standalone systems, and they’re actually created on top of blockchains that are already in existence. An excellent example of this is casino chips. Technically, they represent money. However, they can only be used at the casino, and even then, only the specific casino that produced them.
Stablecoins are pretty neat since they’re a half and half mixture between tokens and conventional cryptocurrencies. For starters, they’re built on existing blockchains, like tokens, but you can use stable coins in trade for fiat money, like USD or EUR. Their inherent value is based on fiat currencies, so it stays relatively stable and always verifies that it does have value. Keep in mind, stable coins are not backed by any government agency. Instead, they are managed by companies that must keep actual cash in reserve to ensure and guarantee their value.
Bitcoin and Cryptos: The Digital Age is Here
No matter what you want to use Bitcoin for, there’s no denying that it’s an incredibly useful digital currency. Bitcoin is becoming more commonplace and widespread as major companies worldwide start to accept cryptocurrency as a payment method. When it comes to investing in Bitcoin, it’s essential to consider your options with care. Historically, Bitcoin has continued to rise in value and is currently worth more than $57,000 for just a single token. If you decide to invest, mining is not a practical or cost-effective option, so purchasing Bitcoin is the way to go. Use a reliable Bitcoin exchange so you can invest in crypto safely and securely, without any risk.