What Are the Benefits and Risks of Buying Crypto Coin?
Cryptocurrencies are a new kind of digital asset that some believe could transform our world, while others worry that it’s just a fad. Like any investment, it’s important to understand the benefits and risks before you start buying crypto. Here are a few things to consider:
Transparency
Every cryptocurrency transaction is recorded on a public ledger, called the blockchain, and all participants can see it. This makes it very difficult to tamper with or alter. This also eliminates the need for centralized intermediaries, such as banks or monetary authorities, which can sometimes create trust issues and cause financial crises.
Security
Cryptocurrency transactions are secure because they don’t rely on central authorities to verify and process them. Instead, they’re processed by computers that run software programmed to monitor the blockchain. When someone sends a cryptocurrency, the computer combines it with other recent transactions into a block that’s then added to the chain. Miners then compete to solve a complex cryptographic code, called a hash, to verify the block and earn a reward (usually a fraction of a cryptocurrency). This process is what keeps the blockchain secure.
Portability
Crypto holders aren’t tied to a specific country or financial institution, so their investments can be moved anywhere there’s an internet connection. This gives them more freedom than people who hold traditional assets, which must be kept in a bank account or at home.
Value
Some cryptocurrencies are designed to be a store of value, meaning they can be trusted to maintain their purchasing power over time. Cryptocurrency prices are based on supply and demand, as well as news about how companies plan to use them or the state of the world economy. Some currencies, called stablecoins, try to maintain their value by being backed by real-world assets or other coins.
Other advocates love that crypto removes the need for centralized financial institutions to manage the money supply and can therefore reduce inflation. They also like that digital payments are almost impossible to reverse, which makes them more secure than credit card transactions and can help fight identity theft.
Advocates also like that crypto can be used to pay for goods and services with lower fees than credit cards. Many merchants are beginning to accept it, and some people use it to donate to causes or to “tip” writers and other creators online who post their Bitcoin address at the end of their articles.
Concerns
Critics point out that cryptocurrencies are volatile, so their value can swing up and down dramatically in short periods of time. They also can be a target for scammers and have been linked to illegal activities, such as money laundering and the dark web marketplace known as Silk Road. And since most exchanges are unregulated, investors don’t have the same protections that investors in securities enjoy, such as those provided by the SEC. This uncertainty has made some investors wary of crypto.