Document Preview
  • Full Text
  • Scholarly Journals

Cryptocurrency

Full text preview

Headnote

How risky is it to buy

Cryptocurrency is a form of digital currency that lets you make online payments to other people or businesses without having to go through a third party, such as a bank. Records of these online transactions are logged on a public ledger called a blockchain, which is stored and duplicated on thousands of computers around the world. This is how the system remains relatively accountable and transparent.

There currently are about 1,500 types of cryptocurrency, including Bitcoin, Ethereum, Ripple, and Zcash. You can buy the "coins" in a variety f of ways, including paying cash for them on an exchange like Coinbase; providing goods or services in exchange for the currency; or purchasing them from a Bitcoin ATM. After you've bought cryptocurrency, you store it in an "online wallet." You also may have heard of Initial Coin Offerings (or ICOs), which involve an investor purchasing cryptocurrency coins that aren't part of a registered offering, but that promise a future stake in a startup venture. In these cases, the startups create their own "coins" to sell to investors.

Digital currency has actually been around for years in one form or another. Loyalty programs like airline frequentflyer miles, as well as hotel and credit card rewards, are all forms of digital currency. The benefits you receive from these programs are not in dollars, but in each company's self-created currency. So this is something many of us are familiar with already, just in a slightly different form.

The risks are real

I've heard about people making staggering sums off of cryptocurrency. Let's take Bitcoin as an example. When Bitcoin launched in 2010, the price of one coin was equal to 1 cent. In December 2017, that same coin was worth around $20,000. The value of Bitcoin rose more...