Cryptocurrency and Bitcoin
Is it the Future of Finance?
By Nick Cavenas
Looking for the next big investment opportunity? Cryptocurrency and bitcoin mining might be a step in the right direction.
Cryptocurrency is a new kind of money that uses cryptography — or computer encoding — to secure transactions, control creation of additional units, and to verify the transfer of assets, according to Wikipedia. Most cryptocurrencies — also called altcoins — are decentralized. This means that unlike the Federal Reserve system of the United States, corporate boards or government agencies cannot control the supply of currency. Instead, it relies on peer-to-peer technology without any third-party oversight, according to Investopedia.
Bitcoin, founded in 2009, was the first form of cryptocurrency. Since then more than 1,000 altcoins exist. The top six, according to Investopedia, are Litecoin, Ethereum, Zcash, Dash, Ripple, and Monero. These specifications are similar and have derived from the original form created in 2009.
Some believe cryptocurrency has the potential to make billions of dollars for investors, but others are skeptical. For the average person, investing in cryptocurrency through sources like Coinbase show potential for financial growth. Coinbase is a website that allows people to create an account and then continue buying and selling cryptocurrency. The speculative risk involves whether or not the currency you invest in will do well or fail.
According to the website BitConnect, utility is a major factor in determining how much the currency you invest in is worth. In simpler terms, the more places that accept the currency, the more valuable it is.
A New Kind of Miner
For those willing to make a major investment in equipment, “mining” bitcoin is an option with a much higher rate of return. Mining, according to Investopedia, is the process by which transactions are verified and added to the block chain, which is a public ledger. Mining is also the means through which new currency is released. Anyone with a descent computer and internet access can participate, but high financial results are not likely with such a low level of equipment.
The mining process, says Investopedia, involves “compiling recent transactions into blocks and trying to solve a computationally difficult puzzle. The participant who solves the puzzle first gets to place the next block on the block chain and claim the rewards” such as transaction fees and newly released bitcoin.
Investing in cryptocurrency or mining for bitcoin have potential to be very rewarding. In late November 2017, for example, the exchange rate of one bitcoin reached $10,000, which is up from a value of $0 when it was first introduced in 2009.
While investing is speculative, cryptocurrency has come a long way since the creation of bitcoin, and it continues to grow.
Whether you are a financial risk taker with considerable resources or an average person looking for investment opportunities, cryptocurrency may be the next big thing.