on Friday, July 15, 2022
Bitcoin, Ethereum, the blockchain – you’ve probably been hearing these words a lot lately. If they don’t mean anything to you, don’t worry. You’re not alone.
Cryptocurrency, or crypto, is a method of payment, much like a Dollar or Euro. Unlike paper currency, cryptocurrency is 100% digital and isn’t managed by a government or other central authority. Bitcoin was the first cryptocurrency. Others, like Ethereum, came later.
Crypto’s value comes from transactions recorded on a blockchain – basically, a digital ledger like a checkbook, stored so everyone using cryptocurrency has access. Every transaction that uses cryptocurrency is recorded on the ledger in code.
Getting more cryptocurrency requires mining, in which computers race to verify transactions on a blockchain, receiving cryptocurrency as a reward for being the first to do so. In the early days of Bitcoin, the average internet user could mine enough to be profitable. As cryptocurrency gets more popular, this becomes much less practical as more people optimize their computers for mining.
Should you use cryptocurrency? There’s a lot to consider before you decide. First is the amount of energy it uses. Mining takes so much energy that covering electricity costs often uses up the majority of what’s earned. It’s also not an accepted form of payment for most everyday transactions. There are ways around this, but they usually involve buying gift cards or dealing with extra fees.
Some choose to invest in cryptocurrency as they would in stocks or other assets. This comes with its own set of risks, as the value of cryptocurrency can be extremely volatile. As with all investments, do your research and speak with a financial advisor first.