What You Need To Know About Cryptocurrency Before You Buy
It seems like the whole world is investing in cryptocurrency, but what should you explore before you send your money? Learn more here.
The marriage of traditional finance and the internet has always been rocky. Early websites offered rudimentary payment gateways reliant on credit and debit cards. This included obvious security issues surrounding data transfer and customer information storage. PayPal’s reputation was badly damaged by endless phishing scams. Consumers are rightly cautions about handing over bank account details in the age of high-profile data thefts.
Cryptocurrency To The Rescue
In theory, cryptocurrency represents a perfect solution. This is the term for any digital currency that doesn’t have a paper form and can’t be traced back to a central bank. Cryptocurrencies are specifically designed for online transactions and secure payment gateways. The potential for fraud is hugely reduced since each transaction is recorded in a permanent and undeletable online ledger known as a blockchain.
Holding virtual money in a digital wallet seems far removed from the pounds and pence we’re used to. Although, it makes perfect sense in today’s digital age. Imagine a currency that can be used anywhere in the world without exchange rates or commission fees for conversion into a local currency. An app or program on your computer can provide secure payment for goods and services, without laboriously entering card details and Verified by Visa passcodes. Funds are transferred instantly, with no bouncing checks or exceeded credit limits. These are just some of the benefits cryptocurrency promises – but does reality live up to expectations?
The best-known cryptocurrency is Bitcoin, whose troubled history and wild fluctuations in value reflect the challenges of creating a new finance model. Its value doubled from $1,100 at the end of March to $2,200 at the end of May, as Asian speculators responded to Japan’s formal recognition of its legitimacy. However, the hacking of digital currency exchange Bitfinex last summer triggered a collapse in its worth. This theft of 120,000 Bitcoin followed a similar incident three years ago, which suggests the blockchain used to anonymously record transactions isn’t as secure as its proponents claim. As the favored currency of dark web criminals, Bitcoin is also synonymous with illicit activities. Using one of the UK’s 68 Bitcoin-compatible ATMs to add funds will earn you suspicious glances from some passers-by.
Cryptocurrency – Worth The Risk? Many Say YES!
Nonetheless, Bitcoin’s reputation has endured because conventional financial models are even more prone to theft and malpractice. Financial fraud in the UK cost almost £770 million last year, setting a new annual record. While banks and card companies prevented two thirds of attempted fraud from taking place, impersonation and deception scams continue to rise. Despite the occasional high-profile hack, Bitcoin looks robust by comparison. The biggest risks come from fraudulent providers of the digital wallets used to store Bitcoin (which are often nothing more than phishing scams), or cut-price “exchanges” promising improbably low exchange rates. Common sense will usually steer you past these fraudsters.
Investing In Cryptocurrency
Following in Bitcoin’s pioneering footsteps, other cryptocurrencies are breaking cover. Chat application Kik announced last month that it will launch a proprietary currency in the form of tokens, while application platform Ethereum debuted its Ether currency in 2015 to critical acclaim. People earn a small fee when their computers use dormant processing power to automatically propagate the blockchain of currency transactions. This reflects one of cryptocurrency’s biggest challenges – demystifying a technical and IT-intensive industry. Digital currency is bound to remain a fringe platform until the general public understand how the blockchain records transactions, and why currency values are so volatile compared to ‘old money’ like sterling and the dollar.
So, supposing you want to invest your funds into cryptocurrency, how do you do so?
Step 1: Find a cryptocurrency wallet.
There are apps, software and companies to choose from, but most buyers download an app to their phone or tablet. Make sure that you do you due diligence and research the company before sending your money to them. The world of digital currency is fraught with scams, so be careful and trust your gut.
Step 2: Register for trading.
This step is more intensive than you would imagine, with some of the verification steps taking a few days or more. It may seem strange to have to authenticate so many forms of identification, but cryptocurrency wallets know how easily scammed the industry is. Once you’ve got your account created, you are ready for step 3.
Step 3: Purchase your currency.
If you are looking to invest in Bitcoin, then this part is easy. Just simply buy the coin. If you are unsure as to which currency you would like to invest in, this step can be a little tough. The best advice we can give you is to do your homework. Check out blogs and currency histories. Try to see how many variables exist that could change the value of your coin. Once you have decided, purchase your currency, and voila! you now own cryptocurrency!