Unlike cash, you can’t hold cryptocurrency in your hand and it isn’t backed by any government. It only exists in bits and bytes on computers. Nonetheless, cryptocurrency is a hot topic and it is drawing a lot of investors. Bitcoin is perhaps the best known of many types of crypto. Others include Ethereum, Tether, Polkadot, and, the newest and “hottest” one, Dogecoin.
Before investing in cryptocurrency, there are some things you should know about it. Cryptocurrency accounts are not backed by any government and payments made with crypto do not come with the legal protections you get when using a credit card. Payments are not reversible, so if you want your money back you are dependent upon the person you paid to send it back. The value of cryptocurrency is constantly fluctuating.
You can buy cryptocurrency online or you can mine it by using your computer to perform complicated math functions, an energy-intensive process that uses vast amounts of electricity.
Cryptocurrency is stored in a digital wallet, which may be on your computer, online or on a hard drive. The wallet is protected by a password and if you lose access to the wallet it is unlikely that you will be able to recover your crypto.
There is a belief that cryptocurrency transactions are anonymous and, while there is some truth to that, it is not always true. Some transaction details are recorded in a public ledger called a blockchain. The specifics of what is contained in the blockchain vary by crypto type and the nature of the transaction; however, elements such as a shipping address could be used to identify you.
Because there is some anonymity to the use of cryptocurrency, it is a favorite of scammers. Ransomware scams often demand payment in Bitcoin. Although cryptocurrency is used for legitimate transactions, anyone who says that you must pay with crypto is probably scamming you.
Although crypto is not accepted as widely as other payment methods, some major companies accepting Bitcoin include Overstock, Microsoft, AT&T and others. Tesla accepted Bitcoin for a time but elected to stop because of the environmental impact of mining and using the cryptocurrency. According to a statement by Elon Musk, “Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”
