In layman’s terms, cryptocurrency is decentralized digital money designed for virtual use, yet the concept may seem daunting if you’re new to the crypto landscape.
“Crypto encompasses a wide swath of projects,” said engineer, economist and CEO of Barefoot Mining Bob Burnett. “Bitcoin is not a company — it’s an entire alternative monetary network.”
The concept isn’t new, but the trend has surfaced within the last several years. Bitcoin, the first established cryptocurrency, became publicly available in 2009. Since then, cryptocurrencies such as Ethereum and Litecoin have emerged to compete with Bitcoin.
“Bitcoin and many other cryptocurrencies are supported by a technology known as blockchain, which maintains a tamper-resistant record of transactions and keeps track of who owns what,” according to a blog from the personal finance company NerdWallet. “The creation of blockchains addressed a problem faced by previous efforts to create purely digital currencies: preventing people from making copies of their holdings and attempting to spend it twice.
“Individual units of cryptocurrencies can be referred to as coins or tokens, depending on how they are used. Some are intended to be units of exchange for goods and services, others are stores of value, and some can be used to participate in specific software programs, such as games and financial products.”
Yet now that what crypto is has been explained, the bigger question may be how do you use it? Payments are made by using a wallet installed on a computer or mobile device. The wallet acts as an interface with the crypto and is used to send or receive payments, according to Investopedia.
“Most cryptocurrency exchanges provide a wallet for their users that lets them transfer funds to other exchange users or make payments using services that are compatible with the exchange’s services,” Investopedia wrote. “Many wallets can use your device’s camera to scan QR codes to create unique addresses for sending and receiving crypto. Some even have near-field communication capabilities that let you make touchless payments in cryptocurrency.”
Like anything else there are pros and cons to crypto. Pros include fewer fees, peer-to-peer capabilities and the anonymity that comes with it. Under the cons list, the price volatility associated with it, the unregulated nature of crypto and the risk of loss need to be considered. However, more businesses are accepting crypto as payment, including Microsoft, PayPal, Starbucks and AT&T — and some brick-and-mortar retailers are beginning to jump on the bandwagon as well.