According to experts at SoFi Invest, the digital systems we rely on only make cryptocurrencies more relevant.
As a result of demand, the crypto market is growing. From spending to trading, the infrastructures that enable cryptocurrencies are also evolving.
Their evolution is an opportunity for the everyday consumer and for the professional investor.
What is Cryptocurrency?
Cryptocurrencies are decentralized currencies that can be used in financial transactions. The differences between these currencies and the ones issued by a country are vast. Cryptocurrencies are encrypted.
Encryption is what gives them their name. Common currencies are sheets of paper while crypto consists of digital assets that are only accounted for via a ledger. Distributed ledger technology (DLT), also known as a blockchain, makes crypto possible.
Since there are no actual coins or currencies to physically possess, crypto needs a ledger to account for the transactions made with it. The term “decentralization,” as it applies to currencies, means that no single authority owns cryptocurrencies.
Through blockchain, these coins are operated through the collaboration of multiple computers called nodes. A network of global nodes combines to provide cryptocurrencies with the computation they need to function.
How do Cryptocurrency Exchanges Work?
On a cryptocurrency exchange, you can trade currencies in the manner you would forex or stocks. Supply and demand, as applied to any e-currency, is what makes prices rise or fall.
The algorithm of a cryptocurrency exchange measures crypto against a common currency like the dollar. As this happens, the number of dollars someone wants to pay for a currency dictates how much that currency will cost to trade.
Rise of the Cryptocurrency Market
When you think of when did bitcoin start, what might come to mind is an image of the dark web. The popularity of bitcoin grew because it proved itself ideal for black-market transactions. In many public cases, bitcoin is still funding illegal activities across the globe.
However, the rise of what is being called alternative coins or altcoins is legitimizing cryptocurrencies. Alternative coins achieve actions beyond the purchasing ability of the online consumer.
Understanding Initial Coin Offerings (ICOs)
A central force behind cryptocurrency’s rise comes from crypto investments. Initial coin offerings, which shouldn’t be confused with initial public offerings, can increase a principal investment over 60 times.
Ethereum, for example, had gained 10,000 times more value since its initial coin offering. Like a company raising money by issuing stocks, ICOs give crypto developers a way to brand themselves and urge the public to buy their coins.
The Evolving Future of Cryptocurrencies
Cryptocurrencies are so versatile that investors expect them to be adopted into society even more. The current infrastructure we have has proven a lot. According to SoFi Invest, “If Bitcoin continues to grow at even a fraction of the rate it has over the past 12 years, the gains for long-term crypto investors would outpace that of most other asset classes.
If the stock-to-flow model remains accurate, then Bitcoin would reach the $100,000 mark in the near future. Past performance does not indicate future results, however, and it’s always possible that models like these can break down.”
You must be diligent in protecting your assets. However, the actual blockchains used by crypto are relatively safe. Now it’s time to decide how you’ll evolve with crypto.