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The Risks And Benefits Of Investing In Cryptocurrency

 

July 31, 2017 (Investorideas.com newswire) Should you put money into cryptocurrency as opposed to traditional forms of investments? What are the risks and the benefits of this type of emerging investment tool?

There are questions that investors ask when they first hear about cryptocurrency. A fear of the unknown is one concern. Are cryptocurrencies here for the long haul? Excuse the pun, but it’s essentially asking if we can trust the new kid on the block---chain?

The best way to figure out whether or not you should add cryptocurrency to your investment portfolio is to get answers to some frequently asked questions by new investors:

What Is Cryptocurrency?

This is a digital currency, and it can also be called a virtual currency. While Bitcoin was first created by Satoshi Nakamoto (a pseudonym for a person or group) in 2009, there are now numerous types of competing cryptocurrencies like PPCoin, Litecoin, Namecoin, Ethereum, Zcash (ZEC), Dash, Ripple, and Monero. The current market value of the Bitcoin blockchain, as of July 27, 2017, was just over $41 billion. A blockchain is a digital ledger that chronologically and publicly records cryptocurrency. Meaning Bitcoin, as of late July 2017, trades at $2,500+ per unit.

How Does One Get Cryptocurrency?

The first way to obtain your cryptocurrency of choice is to head to an exchange site and buy a quantity you feel comfortable with. At which point you can spend them or you can watch exchange rates and sell them when you decide your desired level of profit has been reached.

Another way is to begin mining bitcoin by finding and verifying transactions on the web. A transparent hosted hashpower provider like Genesis Mining delivers the means through which people can find transaction blocks, which make up the blockchains and make a commission for locating them.

What are the Risks and Benefits of Cryptocurrency?

Risks:

1. Like other currencies, there is no precious metal like gold to back up cryptocurrency, just math and computers. And unlike other currencies, there are no actual physical notes or coins and no central repository. Consequently, since it is a virtual currency, a backup copy is necessary of all holdings in the event of a computer crash. Without one, a balance could be irrevocably wiped out.

2. Wild market fluctuations do occur with cryptocurrencies. So, just like any other volatile market, money can be gained or lost. For example, between July 1, 2017 and July 27, 2017 Bitcoin has traded (rounded to the nearest dollar) at a high of $2,832 and a low of $1,868.

3. Theft can occur through hacking. There is a constant battle being waged between cybersecurity experts and hackers, some call them "White Hats" and "Black Hats."

Benefits:

1. It is easy and secure to transfer funds between two people or businesses in a transaction. Public and private keys are used to keep the transaction secure. Fund transference fees are kept to a bare minimum.

2. The blockchain (as noted above) is an online ledger that can be transferred to all computers and keeps everyone honest. The ability to verify transactions this way provides a fairly good level of transparency.

The Future of Cryptocurrency

The future for cryptocurrency looks increasingly better every year. For one thing, the entire global financial system is becoming increasingly digitized; for another, minting paper and coins is an expensive process that may one day become obsolete. Also, people are using the internet more and more for retail purchasing and someone has to provide the ways of transferring the money.

In the end it all comes down to a risk/benefit analysis, like most everything else in life (even if we don't phrase it as such).

About The Author:

Jane is a online freelancer who has worked on writing projects for fun and work since college. Jane's education comes from the John Cook school of Business at Saint Louis University. Whether it is writing about online business and digital marketing which she is heavily involved, Jane also likes please pieces about history and education when she can write about more open ended topics! Reach out at janebrownwrites@gmail.com anytime!

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