Man selecting bitcoin as his payment method

An Introduction to Cryptocurrency

Cryptocurrency is a type of currency that exists only in the digital world and can be accrued by the selling of either products or services to others. No bank accounts are necessary for cryptocurrency transactions. Instead, online accounts referred to as "wallets" hold these digital funds. A wallet is a wallet however, and just as in the physical world, a misplaced or stolen wallet will mean your currency is no longer there.

History of Cryptocurrency

The DigiCash system was created for the purpose of anonymous transactions in 1990, and this marks the beginning of cryptocurrency. In 1998, the DigiCash system went bankrupt. The Bitcoin system emerged in 2008 and was the first to employ the term "cryptocurrency;" the system has grown rapidly ever since. The most widely used cryptographic payment methods today are Bitcoin, Litecoin, and Dogecoin.

How Cryptocurrency Works

Cryptocurrency operates in much the same way that you would use traditional currency. Purchases of merchandise or services can be made to any seller who accepts cryptocurrency, and funds can be transferred without the addition of extraneous systems. Donations and investments can be made, gifts can be given, and cryptocurrency can be traded for either traditional or other electronic currency.

Users can participate in a process referred to as "mining" to gain more digital currency. For instance, Bitcoin mining involves completing complicated mathematical equations with a computer to facilitate transactions on the overall payment network. People who complete Bitcoin mining procedures are rewarded with the currency.

Benefits of Cryptocurrency

Benefits abound for buyers using cryptocurrency. In payment transactions, less information is required than if you were to pay using a credit card. Payments take only a short amount of time and can be accomplished with just one click. Purchases are also confidential and anonymous to others.

Cryptocurrency offers multiple advantages to sellers too. Payment processing time is brief, taking a maximum of one hour. These transactions eliminate any dependency on banks or other financial service centers. Direct payments can be accepted worldwide, allowing room for future growth and opportunity.

Advantages over Traditional Currency

Certain benefits become apparent when comparing the growing popularity of cryptocurrency with traditional currency. The necessity of currency exchange between countries disappears, because cryptocurrency can be used in any country around the world. Forgery is impossible, leading to a system secure from the threat of fraud. Unlike cash or precious metals, the possession of cryptocurrency cannot potentially be regarded as illegal.

Drawbacks of Cryptocurrency

Though risks are few in the cryptocurrency system, negatives do exist. If the system you've entered does not reach the height of popularity, it is possible the cryptocurrency value may be greatly reduced. Prohibition of cryptocurrency circulation in any given country is possible at a government level, and though it is not likely, that scenario should still be given consideration.

Conclusion

Cryptocurrency has an ease of use and protection level superior to any other monetary system. The advantages are significant and the risks are slight, making cryptocurrency beneficial to our digitally connected society.

Last Updated: November 17, 2014