Knowledge base

Cryptocurrencies come in various names. You have probably heard of Bitcoin, Litecoin, or Ethereum. They are rapidly gaining popularity as an alternative for conducting online payments. However, before converting your hard-earned dollars, euros, or rubles into cryptocurrency, it is crucial to understand what it is, how it differs from traditional currencies, and why it all matters.

What is Cryptocurrency?

Cryptocurrency is digital money, serving as an alternative payment system based on encryption algorithms. The use of encryption technology means cryptocurrencies simultaneously function as a means to pay for goods and services and as a virtual accounting system. To use them, you need a cryptocurrency wallet – software that can be a cloud service, a program on your computer, or a smartphone app. The wallet is essential for storing encryption keys that confirm your identity, thereby linking you to your cryptocurrency assets.

What are the key features of cryptocurrency?

  • Decentralization and Independence.
  • Anonymity.
  • Irreversibility of transactions.
  • Lack of physical form.

Why do we need cryptocurrency?

  • As mentioned earlier, cryptocurrency is a payment tool, much like traditional money. It can be used to pay for various goods and services. Currently, many companies support payments with Bitcoin and other popular cryptocurrencies.
  • Enables quick, anonymous financial transactions without intermediaries.
  • Ideal for trading. As cryptocurrencies are not backed by gold or government, their value fluctuates based solely on market demand and supply. This leads to their high volatility, which opens up numerous opportunities for traders.
  • Shows impressive long-term growth. For instance, Bitcoin and Ethereum have increased in value by tens of thousands of times since their release. Therefore, cryptocurrency is a risky but potentially highly profitable investment vehicle.