Cryptocurrencies are a new kind of money that runs on the internet. They can be transferred from person to person quickly and cheaply without the need for a middleman, like a bank. In this way, cryptocurrencies can help create more economic freedom around the world.
A cryptocurrency’s value is determined by supply and demand. Supply refers to how many coins are available for purchase at any given time, and demand is how much people want to own them. The more demand there is, the higher the price will be. Some cryptocurrencies, such as bitcoin, are very volatile, which can make them more speculative investments than other types of assets.
Blockchain is a technology that allows cryptocurrencies to function. It is a massively distributed digital ledger that records all transactions in a cryptocurrency, and it’s completely transparent and immutable. The ledger is managed by a group of people called a blockchain network, and it’s similar to the databases that power websites or banks. Because no one entity controls the blockchain network, it’s very secure.
In addition, cryptocurrencies can’t be censored or frozen by governments or financial institutions. This is a big part of their appeal to many people in countries with restrictive banking systems.
The best-known cryptocurrency is bitcoin, which was launched in 2009 by an unknown person or group of people under the pseudonym Satoshi Nakamoto. It was the first cryptocurrency to allow peer-to-peer transactions, and it has since grown to become a global currency with millions of users.
While some people hold crypto as an investment, others use it to shop or donate. There are now a large number of online merchants that accept cryptocurrency, and some charities also accept crypto donations. In addition, it’s possible to use a wallet to send crypto directly to friends or family members.
Another big benefit of cryptocurrencies is their portability. Unlike traditional cash, which is tied to specific physical objects or accounts at a bank or financial institution, crypto can be stored on your computer or phone, in a wallet that’s encrypted with a password. This makes it difficult for thieves to steal your coins.
Those who travel often find that using crypto helps them cut down on money exchange fees. There is even a growing community of “crypto nomads” who live primarily or exclusively on their crypto earnings while traveling the world. Despite this, the current US tax code still treats crypto as property rather than currency, so if you’re planning on selling your cryptocurrency for a profit, it’s important to understand how taxes will impact your situation. Currently, the IRS requires you to report any profits made on your cryptocurrency sales. This can be complicated, so it’s a good idea to consult a tax professional if you’re considering investing in cryptocurrency.