For a few months the world of cryptocurrency has been going downhill steadily. This is due to several restrictions or bans of them on different countries. The biggest impact happened this month, after China announced some interesting news regarding about how they will treat cryptocurrency from now on.
In this blog post, which has been over half a year from my last one, I will explain what is cryptocurrency and what to expect of them. It will include easy definitions and examples to help you understand everything. Nonetheless, I am in no way a professional about this topic but I do know how it works.
Crytocurrency is a virtual (non-physical) coin
A virtual coin would be what is present on almost any video game that has any kind of economy. It is a currency that allows the users to buy items within the video game but has no physical form. If you are one of the people that enjoys to have materialistic things then cryptocurrency might not be for you.
It allows you to buy specific real products
Unlike the currency in most video games, with cryptocurrency there are some instances where you can actually buy real things. However, this completely depends on your country laws and the establishments you decide to buy on. Overall though, very few places allow payments with cryptocurrency, so keep that in mind.
Cryptocurrency is illegal on certain countries
The list is quite large and changes quite often, so it is better if you check it up for yourself. Search on the Internet if the country you live on, does allow cryptocurrency. Read properly whether your country completely forbids the use of those coins or it does not let you make purchases. There is a big difference between the two.
Cryptocurrency exists in very different forms
A cryptocurrency is basically the virtual currency that appears in a video game. Lots of multiple video games exists with their currency so this does also apply to cryptocurrency. Anybody can create their own one so there are technically infinite cryptocurrencies available. The most common ones are Bitcoin, Ethereum and Dogecoin, and you should stick with those.
Cryptocurrency own value depends on their users
As you might know, any currency needs to have a value to let everybody know how valuable it is. This happens with any real currency like Euro or USD and also with cryptocurrency. A key difference is that a real currency has a strict environment to maintain its value and try to keep it stable as much as possible. While for a cryptocurrency, the users can control if a virtual coin is more valuable or not by buying more of it or selling it. It works very similar to the stock market in this regard.
Each coin's value can be manipulated
This is a negative aspect that has become quite the problem lately, but it relates to the last point explained. The users can determine the value of a cryptocurrency. So it is quite easy to manipulate its value by making other people buy the same coin as you. This is a tactic that Elon Musk uses to make the value of Dogecoin increase by a lot in a very short amount of time. By simply advertising it on Twitter, since he has lots of followers, a few portion of them, will buy Dogecoins.
Cryptocurrency transactions are very safe
Unlike real currency where the transactions are handled by a central authority or a bank, this is not the case with cryptocurrency. Those virtual coins use a technology called blockchain which makes their transactions safe and anonymous. Blockchain is a very powerful tool that has large growth potential for the future. It has lots of advantages over some of the systems we have. However, by granting anonymous transactions, hackers and scammers mainly use cryptocurrency.
Cryptocurrency market is quite volatile
Volatile markets are characterized by wide price fluctuations and heavy trading. They often result from an imbalance of trade orders in one direction like all buys and no sells. For example, after buying a specific cryptocurrency its value might get dropped by half in a single day. Indeed this does happen and here it is a video (with some comedy in it) proving this. It also explanins and shows how the prices of each virtual coin changed in a period of 1 week.
If you enjoyed the video, there is a part two which can be seen here.
Summary
To sum up, cryptocurrency is currently in quite a bad state and will probably keep getting worse in the future. The same day that I wrote this post, I saw that in the United Kingdom they banned Binance, the largest and most popular cryptocurrency buying website.
If you do not mind that and your country allows the use of cryptocurrency. Be aware that this is a more volatile version of the stock market where users can greatly influence the price of any virtual coin. That is why I really suggest avoiding cryptocurrency at all since it is very akin to gambling. However, if you want to immerse anyways in this world or simply experience it for once. Keep it in moderation and always try to buy the most popular coins which are Bitcoin, Ethereum and Dogecoin. Other less popular coins might get you scammed.
Also remember that in the majority of places buying products or services with cryptocurrency is not supported. When you think about it, isn’t it kind of ironic that a virtual coin cannot be used to buy things? The only action that you will likely be able to do with those coins are to simply own them or convert them back to real money.
In a few years, 50 years or more in my opinion. Cryptocurrency may start becoming more useful and popular once again. It might end up being the only currency used worldwide but there is quite the long road ahead.
