Cryptocurrency is a form of money that’s used entirely online, without the need for banks or an exchange of physical cash. It may sound difficult to understand at first, but it’s real, and it’s here.
Cryptocurrencies are named as such because they are secured using cryptography, a method of encrypting data such that it can be accessed only by those it was intended for. The very first cryptocurrency, Bitcoin, was founded in 2009 by one Satoshi Nakamoto.
Bitcoin was originally intended as a “peer-to-peer electronic cash system” where currency gets traded between two entities without having to use a middleman such as a financial institution. Unlike traditional currencies, cryptocurrencies are entirely digital, residing only in the Internet. They are not regulated, nor are they secured in a bank or backed by precious metals. They also can’t be printed or minted. Instead, they are mined on computers, which entails solving highly-complex cryptographic puzzles that become only more difficult and expensive as a particular cryptocurrency grows more popular.
How Do They Work?
Cryptocurrencies exist thanks to a technology called a blockchain. You may think of blockchains as enormous online ledgers that contain all the transactions ever made with that particular cryptocurrency. So if you were to give X amount of coins to your friend Alice, that transaction gets validated on the blockchain and broadcasted across the network through peer-to-peer sharing. Once confirmed, this anonymous transaction becomes set in stone—it cannot be changed, forged, or removed. It also means that cryptocurrencies are decentralized and unregulated by any authority (at least for now).
Nowadays, people equate cryptocurrencies to Bitcoin, but many other types exist and the list keeps growing. Among the most popular are:
- Ethereum – launched in 2015. Aside from being a cryptocurrency, Ethereum is an open-sourced software platform that enables developers to build applications. By using programs called Smart Contracts, Ethereum facilitates the exchange of value, such as money and content.
- Litecoin – created in 2011 by former Google engineer Charlie Lee. Resembles Bitcoin, but features quicker block generation for faster confirmation of transactions.
- Ripple – Launched in 2012, Ripple differs from Bitcoin in that its consensus ledger doesn’t need mining. This makes it attractive for businesses and banks in that it uses less electricity and computing power.
Why Invest in Them?
The digital nature of cryptocurrencies makes them useful in various ways.
- Global Reach – it doesn’t matter where you are; you may send cryptocurrencies to anyone in the world.
- Security – True to their name, cryptocurrencies are highly secure and anonymous. They are not kept in a file which can be hacked or stolen. To trade with them, you use two addresses—a public one which you can use to accept cryptocurrencies, and a private one by which you can send cryptocurrencies.
- Growing Acceptance – In the past, it was difficult to find any merchant who would accept cryptocurrencies. Now, however, you may use them to pay for a variety of things. Bitcoin remains the most widely accepted, but others like Ethereum and Ripple are catching up. Click here for a list of businesses that accept cryptocurrencies.
Of course, the main reason why cryptocurrencies are a hot topic right now is because they’ve made a lot of money for a lot of people.
To illustrate, Bitcoin prices peaked at $1,165.89 in November 2013 before taking a nose dive. But in late December 2017, it hovered around a mind-blowing $14,000. Which means if you mined 50 Bitcoins in 2009, they were worth a whopping $700,000 or above Php 35M at the tail end of 2017.
Bitcoin is not alone in this. Ethereum, while only second to Bitcoin, recorded a meteoric rise of 2700% from May 2016. As a new form of money, cryptocurrencies have attracted worldwide attention and—given how the market has pushed their prices to dizzying heights—are considered among the hottest investments to date.
Before you rush online to grab some coins, however, take heed: as previously illustrated, the one thing you can count on with cryptocurrencies is volatility. If you go in right when the bubble bursts—and that can happen at any time—you stand to lose it all. Cryptocurrencies aren’t backed by anything. There is no safety net.
One viable strategy is to use any realized gains from cryptocurrency investing to purchase tangible or hard assets—assets that gain more value over time. So if you won big in Bitcoin, for example, know when to quit. Remember, the only time you make money from investing in cryptocurrencies is when you cash in any gains.
You can use your winnings to purchase government bonds, or even better, high-end real estate currently available on the market. These go up in value over time, are not as volatile as cryptocurrencies, and are backed by actual value. Alveo Land, in particular, is a top real estate developer in the Philippines that offers a multitude of residential, office, and leisure investment choices all over the country. You can learn more about their portfolio, particularly their condominiums for sale in the Philippines, here.
Regardless of these caveats, it seems that cryptocurrencies are here to stay. Even if the cryptocurrency bubble does burst, it’s a good bet that once prices stabilize and start climbing again, it will become a good investment in the short or medium term.
Getting into the Game
The first step is to study the cryptocurrency market. Ask yourself: which currencies will you invest in? When will you buy? At what point will you sell?
Then to actually trade with cryptocurrencies, you need a cryptocurrency wallet, an application that lets you interface with a cryptocurrency network much like an e-banking application lets you interface with a bank. Wallets do not actually physically store any currency you own. Instead, it contains your public and private keys, which you need to perform transactions.
There are many kinds of wallets depending on the cryptocurrency you want to use, so choose one according to your strategy. From there, you can purchase currencies from cryptocurrency exchanges such as Bittrex.com or Quionex.com. However, bitcoins are so popular you can buy them from Unionbank, participating 7-11 branches, and withdraw them into Philippine pesos at Cebuana Lhuiller branches, among other places.
Once you do buy bitcoin or invest in any other cryptocurrency, you could look towards investing in real estate. If you’re looking for the right property for sale in the Philippines, check out properties developed by one of the top developers in the Philippines. Click here to know more about Alveo Land’s condominiums for sale.