Technology has changed the way people work, communicate, shop and even pay for goods. Companies and consumers don't always prefer cash anymore, and this behavior is giving way to contactless payments like Apple Pay. With the quick wave of a Smartphone, consumers can pay for items at digital registers. Now, a new payment system is emerging: crypto currency.
Probably
everyone heard about Bitcoin by now. It was the first crypto currency to go
mainstream, but others are growing in popularity. There are more than 2,000 different types of crypto
currencies, and more are developed every day.
Research
suggests most people have heard of crypto currency but don't fully understand
what it is. So, what is it, is it secure and how do you invest in it? To help,
we'll answer those questions. Think of this as Crypto currency Investing 101.
What Is Cryptocurrency?
Crypto
currency is a digital payment system that doesn't rely on banks to verify
transactions. It's a
peer-to-peer system that can enable anyone anywhere to send and receive
payments. Instead of being physical money that is carried around and
exchanged in the real world, crypto currency payments exist purely as digital
entries to an online database that describe specific transactions. When you
transfer cryptocurrency funds, the transactions are recorded in a public
ledger. You store your crypto currency in a digital wallet.
Crypto
currency got its name because it uses encryption to verify transactions. This
means advanced coding is involved in storing and transmitting cryptocurrency
data between wallets and to public ledgers. The aim of the encryption is to
provide security and safety.
How Secure Is
Cryptocurrency?
Cryptocurrencies
are usually built using blockchain technology. Blockchain describes the way transactions
are recorded into "blocks" and time stamped. It's a fairly complex,
technical process, but the result is a digital ledger of cryptocurrency
transactions that's hard for hackers to tamper with.
In
addition, transactions require a two-factor authentication process. For
instance, you might be asked to enter a username and password to start a
transaction. Then, you might have to enter an authentication code that's sent
via text to your personal cell phone.
While
securities are in place, that doesn't mean cryptocurrencies are un-hackable. In
fact, several high-dollar hacks have cost cryptocurrency startups heavily.
Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million
in 2018. That made them two of the biggest cryptocurrency hacks of 2018, according
to Investopedia.
4 Tips to Invest in
Cryptocurrency Safely
Investments
are always risky, but some experts say cryptocurrency is one of the riskier
investment choices out there, according to Consumer
Reports. However, digital currencies are also some of the hottest
commodities. Earlier this year, CNBC
forecasted that the cryptocurrency market is expected to reach
a value of $1 trillion by the end of 2018. If you're planning to invest in
cryptocurrencies, these tips can help you make educated choices.
Research Exchanges
Before
you invest one dollar, learn about cryptocurrency exchanges. These platforms
provide the means to buy and sell digital currencies, but there are 500
exchanges to choose from, according
to Bitcoin.com. Do your research, read reviews and talk with more
experienced investors before moving forward.
Know How to Store Your
Digital Currency
If
you buy cryptocurrency, you have to store it. You can store it on an exchange
or in a digital "wallet," for example one of the crypto wallets
described in our Blog post Which cryptocurrency wallet to choose. While
there are many different kinds of wallets, each has its own benefits, technical
requirements and security. As with exchanges, you should investigate your
storage choices before investing.
Diversify Your
Investments
Diversification
is a key to any good investment strategy, and it holds true when you're
investing in cryptocurrency too. Don't put all of your money in Bitcoin, for
example, just because that's the name you know. There are thousands of options,
and it's best to spread your investment around to several currencies.
Prepare for Volatility
The
cryptocurrency market is a volatile one, so be prepared for ups and downs.
You'll see dramatic swings in prices. If your investment portfolio or mental
wellbeing can't handle that, cryptocurrency might not be a wise choice for you.
Cryptocurrency
is all the rage right now, but remember, it's still in its infancy. Investing
in something that's new comes with challenges, so be prepared. If you plan to
participate, do your research and invest conservatively to start.
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