News about how Bitcoin “breaks records” is published daily by the world and domestic media, especially since the beginning of the year.
According to some estimates, the value of this cryptocurrency could grow up to several hundred thousand dollars. But what does all this actually mean and how can you invest in “digital money”?
Cryptocurrencies have come a long way from initial skepticism, to recognizing importance and regulation in an increasing number of countries.
How do cryptocurrencies work and what sets Bitcoin apart?
Cryptocurrencies are money that is independent of central banks or any other institutions. It exists exclusively in digital form and that money is mostly managed by the users themselves, not their creator.
Bitcoin distinguishes price, infrastructure strength, popularity, as well as the fact that its creator is unknown from other cryptocurrencies. By the way, as far as the way it works is concerned, there is nothing that sets Bitcoin apart from the others.
These are decentralized systems in which users process transactions, as well as check their validity.
There is an algorithm that ensures that no one can “cheat” the system and thus prevent abuse even though there is no central institution that controls the functioning of the system.
“Mining” or trading?
While in centralized systems it is usually an institution or company in charge of maintaining the technical infrastructure necessary for the system to function, in cryptocurrencies this technical infrastructure is provided by “miners”.
They make their hardware available to the network and for that they are rewarded with newly generated cryptocurrency units.
So, instead of the hardware infrastructure being centralized, as is the case in most systems, with cryptocurrencies, the infrastructure is made up of thousands of networked computers around the world participating in the “mining” process.
Mining however requires certain knowledge and effort.
Anyone who wants to invest in cryptocurrencies should know that it, like any other investment, is something where they can both earn and lose.
Before investing a slightly larger amount, I would recommend that a person get acquainted with Bitcoin and eventually buy a smaller amount and thus test how it works first hand without much risk.
The history of cryptocurrencies is full of ups and downs and this will inevitably continue in the future.
Also, I believe that most of the new financial products and services in the future will come from this area, because due to its specifics it is extremely suitable for innovation.