There are many reasons to invest in cryptocurrency, but the main reason is to fix the problems of traditional currencies. There are 5 properties and 3 functions that cryptocurrency should have if it wants to be accepted as a currency. All cryptocurrencies adhere to these requirements, but they each also attempt to solve one or more real-world problems. This blog post will go into detail about what makes cryptocurrency so great for your investment portfolio!
5 Properties of Cryptocurrency
Cryptocurrency is a Digital Currency
Cryptocurrency is a digital currency that can be used to make transactions. Cryptocurrencies are sent and received through cryptocurrency wallets (which store the public and private keys needed to sign cryptocurrency transactions). The ledger for keeping track of cryptocurrency balances, known as the blockchain, resides on computers all over the world. This means there is no central server computer where your cryptocurrency could be stolen from!
Another property-related to being digital: cryptocurrencies do not require physical money or fiat currencies like USD or GBP to complete a transaction. All you need is access to an internet connection and a cryptocurrency wallet containing enough funds!
What does this mean? Everything we know about our current financial system has been completely upended by allowing everyone equal access without third-party intermediaries.
A cryptocurrency wallet is made up of two keys: a public key, which anyone can use to send cryptocurrency into that account; and a private key, which only the owner of the cryptocurrency has access to make transactions from its wallet. Once cryptocurrency enters your cryptocurrency wallet – you are free to spend it! And because cryptocurrencies have no physical form – they cannot be counterfeited or reversed arbitrarily by the sender like with credit card charge-backs (more on this later).
Do one more way cryptocurrencies differ from traditional currencies? Cryptocurrency users choose transaction fees themselves rather than having transaction costs built into currency prices (like with banks charging for wire transfers or forex commissions).
Cryptocurrency has a Finite Supply
Cryptocurrency has a finite supply and can’t be copied or counterfeited. For example, the total number of Bitcoin that will ever exist is limited to 21 million coins. The initial reward per block was 50 BTC back in 2009 – and it gets halved every 210,000 blocks mined! With more miners joining the network each day – you can expect this process to continue for quite some time! This means cryptocurrency cannot be inflated or counterfeited at the whim of politicians looking to secure their re-election campaign funds with an extra few billion dollars created out of thin air…something we have seen before in cases like 2008’s US Housing Bubble/Crash where over $13 trillion was added into our economy by just printing money on demand under “Quantitative Easing”.
In cryptocurrency, there is a finite supply that can be verified by any user at any time. In other words? No more coins will ever exist after the total number has been mined! This means cryptocurrency cannot be increased or inflated by any one person/entity which in turn reduces risk and makes it much less volatile over time because of this guaranteed scarcity. It also ensures no central bank or politician can influence its value through excessive printing (which we have seen in cases like 2008’s US Housing Bubble).
Another way cryptocurrency prevents copying and counterfeiting: cryptocurrency wallets are encrypted with public encryption keys that only work for you! Meaning anyone who gets their hands on your private key – could use funds from your wallet just as easily as if they were the cryptocurrency owner (and as we will see later on – cryptocurrency is traceable and track-able).
Another benefit of cryptocurrency having a finite supply? It makes cryptocurrency deflationary by nature. By contrast, fiat currencies like the USD or GBP are inflationary because governments can print more whenever they want to pay for expensive wars and new infrastructure projects (which isn’t possible in cryptocurrency since there is no central authority! But that’s an entirely different conversation…)!
But I hear you thinking: “If a cryptocurrency has such great benefits – then why doesn’t everyone just use it? What could go wrong!? I mean besides the risk of losing all my money due to lack of security knowledge…” Good question – cryptocurrency has been around for almost a decade now and is still struggling to reach mainstream adoption. There might be a few valid reasons people haven’t quite jumped on the cryptocurrency bandwagon yet…
First of all, cryptocurrency isn’t anonymous as some early adopters may have thought. It can often seem more transparent than traditional currency because you are required to submit your identity with exchanges where you buy cryptocurrency from (and those identities are then tied to IP addresses which makes them track-able). This means cryptocurrency transactions could potentially be used by governments or regulators looking into money laundering activities in their jurisdictions.
Cryptocurrency security is another area that needs improvement before mass-market adoption becomes possible. Unlike credit cards that have buyer protection programs – cryptocurrency doesn’t have anything to help you recover your funds if the exchange or wallet provider suddenly goes bust, gets hacked by cybercriminals, or simply decides they don’t want cryptocurrency on their platform anymore.
This is why it can be incredibly important to choose a cryptocurrency wallet that has good security features and practices in place. This way – even if the worst-case scenario happens at some point down the line – there are measures in place for protecting user deposits.
Cryptocurrency Decentralized Currency
Bitcoin, the most popular cryptocurrency, is decentralized because there’s no central authority that controls it. This means that cryptocurrency is not controlled or regulated by any single entity.
However, cryptocurrency is only decentralized to a certain extent because it can still be affected by external factors like government regulation, security failures at cryptocurrency exchanges and wallets, the development of new technologies for mining coins, technical issues with specific cryptocurrencies (bugs), power outages affecting cryptocurrency miners or cryptocurrency itself being hacked.
All of these factors influence the price volatility of cryptocurrency so you need to consider them before deciding on whether investing in cryptocurrency is right for you!
Cryptocurrency Transactions are Irreversible
Bitcoin transactions are irreversible because when you send bitcoins to someone else once, they’re gone forever. There’s no way to reverse a cryptocurrency transaction.
This can be good because it reduces the risk of fraud, but it also means that if you accidentally send cryptocurrency to someone – they will receive your funds and there’s nothing you can do about it! That is unless the recipient decides to return these funds to you for some reason…
It pays off in cryptocurrency transactions not having any middlemen involved (like banks!). Since cryptocurrency doesn’t pass through anyone else before reaching its destination, transaction fees are minimal or non-existent. It’s just like paying with cash – only much more secure since every user has their key. So everyone knows what cryptocurrency was spent on at all times which makes cryptocurrency completely traceable and trackable.
One cryptocurrency transaction can be broken down into smaller parts. For example, a cryptocurrency transfer is divided into inputs and outputs of different values. When you send cryptocurrency from your cryptocurrency wallet to someone else’s cryptocurrency wallet – the value that was sent goes in as an input while the recipient gets all the rest of it (minus fees).
The more valuable coins are taken out first because they have greater priority when being processed on cryptocurrency networks. This means if there isn’t enough value going in to make up for what’s going out – then some or even all of it will get returned to your address!
No Need Bank Account
There’s no bank account needed for bitcoin wallet addresses – just get your private key and address from an online service like Blockchain.
The cryptocurrency wallet address is like your account number at a bank. You can give this information to people who want to pay you cryptocurrency so they know where the money should go. Once sent – cryptocurrency transactions are irreversible and there’s no way for anyone else to claim ownership of that cryptocurrency again!
Cryptocurrency exchanges require users to have an active bank account since fiat currency needs to be deposited into these accounts before being used on their platforms. However, some cryptocurrency services don’t require any traditional personal details or proof of identity documents which makes them completely anonymous! This means that if someone wants to sign up for cryptocurrency then all they need is an email address – making it incredibly easy for new users with little technical knowledge about cryptocurrencies to get started with cryptocurrency!
So cryptocurrency is all about decentralization, privacy, and security. It’s also really easy to use in the way it isn’t controlled by any central authority so no third party can control your money or freeze accounts. All cryptocurrency transactions are completely transparent so you don’t have to worry about being monitored when using cryptocurrency for business or personal purposes.
3 Functions of Cryptocurrency
Exchangeable for Goods and Services
A cryptocurrency is a form of money that can be exchanged for goods and services. The cryptocurrency community likes to refer to cryptocurrency as digital money, but this isn’t true. Cryptocurrency is more like a form of money that only exists in the electronic world (online) instead of physical notes and coins. If you think about it – every cryptocurrency transaction is like sending an email that transfers cryptocurrency value between users without any third-party involvement! This means cryptocurrency has all the properties of traditional forms of money such as being durable, portable, fungible, and divisible. Currency needs these traits for them to be useful so they can store their value over time rather than just having some monetary worth attached to them by fiat currencies or governments.
Cryptocurrencies are built on distributed ledgers known as blockchains where each transaction is recorded publicly and transparently. Traditional cryptocurrency transactions are linked together to make up the blockchain which is essentially a public record of all cryptocurrency transactions. This can be used to securely check that cryptocurrency was transferred without any third parties involved but you still need to trust that whoever’s running the cryptocurrency isn’t trying to cheat or falsify anything on the network!
Cryptocurrencies are also easy for anyone to access since they’re not controlled by banks who decide how much money should exist in circulation based on their interests. Cryptocurrency supply varies depending on what cryptocurrency community members want it to, so cryptocurrencies like Bitcoin have finite limits where no more coins can ever be created after reaching 21 million coins mined (eventually). The other main benefit of cryptocurrency is that cryptocurrency transactions are extremely fast so you don’t have to wait days for your payments to go through!
Cryptocurrencies also offer their users a high level of privacy and security so cryptocurrency holders can decide who they want to send cryptocurrency to without having anyone snooping around or looking at their transaction history. This means cryptocurrency helps protect people’s identities, financial information, and other personal details from being leaked. With cryptocurrency – you can choose whether you share your private data with the world or keep it safe by only sharing parts of it when needed which makes cryptocurrency great for businesses since they won’t need as much paperwork compared with traditional money transfers. Cryptocurrency works on an honour system where everyone involved keeps track of everything that happens on the cryptocurrency network so if people don’t keep their cryptocurrency safe, everyone will know.
Eliminate Relines on Bank
Cryptocurrency eliminates the need to rely on banks, which are vulnerable to collapse in times of economic crisis. The cryptocurrency community knows that cryptocurrency is an alternative to traditional financial institutions like banks which are currently the main way people store and move their money around. Banks can be susceptible to bank runs where large groups of customers withdraw all their funds at once so cryptocurrency aims to solve this problem by providing a more secure form of banking. Cryptocurrency helps protect against inflation since no one person or group controls how much cryptocurrency exists in circulation, unlike fiat currencies where central authorities decide when new notes should be printed based on supply and demand needs. This means cryptocurrency protection from inflation, deflation, currency devaluation, etc. happens automatically without any input needed! If you want some great examples then just look into Venezuela’s economic crisis, Zimbabwe’s Hyperinflation, and Brazil’s so-called “currency crisis”.
Cryptocurrencies also aim to eliminate any potential problems with cryptocurrency transactions or cryptocurrency exchanges since cryptocurrency is decentralized and runs on a peer-to-peer network which means there’s no central body that can turn off cryptocurrency servers, freeze accounts, etc. This makes cryptocurrency very secure for both users and businesses that use cryptocurrency! All of the cryptocurrencies adhere to the five properties and three functions of money so they each solve one or more real-world problems in our societies today.
Secure & Encrypted Transactions
Cryptocurrency transactions are secure because they’re encrypted and distributed across a network of computers, making them difficult to hack or track. Cryptocurrency transactions are also very secure because cryptocurrency is encrypted and each transaction is distributed across a network of computers known as nodes. This means cryptocurrency can’t be hacked or tracked by any one person, organization, or government since there’s no central point to attack and cryptocurrency data isn’t stored in physical records like bank statements. Cryptocurrencies like Bitcoin use cryptography (encryption) which makes it almost impossible for anyone who doesn’t have the private key to access cryptocurrency funds making cryptocurrency an extremely safe way to transfer money! It will take even larger groups time to hack into cryptocurrency systems since all actions on blockchain networks require consensus from other users so if just one computer fails then that hacker will fail too. All of this explains why cryptocurrency is so secure!
If cryptocurrency transactions are distributed across a peer-to-peer network then who keeps track of everything? The cryptocurrency community does! All cryptocurrency users keep track of every transaction that’s made on the cryptocurrency network by downloading special software known as wallets. These wallets can be run from your computer, tablet, or phone and let you view all the information about cryptocurrency funds including how much money someone has in their account. Wallets also include private keys which allow people to send cryptocurrency around too so if this data gets lost or stolen it will cause huge problems for everyone involved since there’s no centralized server/government body responsible for storing this info! This makes cryptocurrency very safe compared with traditional banking options out there today which gives more power to cryptocurrency users!
Cryptocurrency aims to solve the problems of traditional currencies by putting the power and responsibility in currency holders’ hands making cryptocurrency very secure for users.
Cryptocurrencies also fix any potential problems with cryptocurrency transactions or cryptocurrency exchanges since cryptocurrency is decentralized and runs on a peer-to-peer network which makes cryptocurrency an extremely safe way to transfer money! All cryptocurrencies adhere to five properties and three functions of money so they each solve one or more real-world problems in our societies today making them very valuable assets. Cryptocurrency transactions are also very secure because cryptocurrency is encrypted, distributed across a peer-to-peer network, and difficult to hack/track. The community keeps track of every transaction that’s made on the cryptocurrency network by downloading special software known as wallets which include private keys allowing cryptocurrency users to send cryptocurrency around. Anyone who doesn’t have the cryptocurrency’s private key cannot access cryptocurrency funds making cryptocurrency very safe compared with traditional banking options out there today.
Can you think of any other reasons to invest in cryptocurrencies? Let us know!
Can you think of any other reasons why people should invest in cryptocurrencies? What are some benefits that aren’t mentioned above? Let us know in the comments below! We’d love to hear your thoughts on this topic.