Cryptocurrency is a digital alternative to traditional money. It’s built on a blockchain, a database that records and verifies transactions. It’s decentralized, meaning no central authority governs it. This makes it more secure than conventional banking systems. It’s also fast and inexpensive to transfer internationally. However, it’s not without risks. The technology behind crypto is changing how we invest, bank and use money.
The most famous cryptocurrency is Bitcoin, launched in 2009. It was the first of many to use blockchain technology to enable peer-to-peer transfers of value over the internet. Bitcoin and other cryptocurrencies are often described as Money 2.0, a new kind of cash that’s native to the internet.
They are not backed by banks or companies, and they don’t have the same legal protections as registered securities like stocks. In addition, they are highly volatile and can lose value quickly. As a result, you should only invest money you can afford to lose.
You can buy and sell cryptocurrencies on crypto exchanges, apps, websites or at some ATMs. You can also earn some by mining, which involves using advanced computer equipment to solve complex math problems. Crypto prices are largely driven by supply and demand, speculation about how companies will use them, and world events. They can also be influenced by investor perceptions about how governments will regulate and legislate them.
While some cryptocurrencies are used to make purchases, others are held as investments. They can be a way to diversify your portfolio or hedge against inflation. Many people think they’ll increase in value over time, but there’s no guarantee of that.
Privacy
When you pay for goods or services with cryptocurrency, you togel don’t have to provide any personal information to the merchant. This means you’re less likely to be a victim of identity theft or fraud. In addition, most cryptocurrencies are not created by a single company or government and are governed by a network of computers using free, open-source software. This makes them secure against hacking and other security risks.
Taxes
In the US, if you buy and sell cryptocurrencies for profit, you must report them as capital gains on your taxes. You’re also taxable if you hold them as long-term investments. In other countries, laws and regulations vary.
The blockchain-based technologies that power cryptocurrencies have the potential to transform our economy and society. But they’re still in their infancy, and much remains to be seen.