Real-World Usage of Cryptocurrencies
So, after learning about the world of cryptocurrencies, you might be asking yourself, how can I use it?
Before we discuss the usage, let’s discuss how you acquire cryptocurrency. Now, before we dig deeper into the world of mining, it is important to note that there are a lot of exchanges out there that provide you with the ability to purchase cryptocurrencies with real money.
A cryptocurrency exchange or a digital currency exchange is essentially a business that allows customers to trade cryptocurrencies or digital currencies for other assets, including conventional FIAT money or other digital currencies known as altcoins.
An altcoin is an alternative digital currency to Bitcoin. The word itself refers to a group of cryptocurrencies, specifically all cryptocurrencies other than Bitcoin itself.
Miners are one of the most important parts of a cryptocurrency network. Mining itself can be an investment as well.
What are Cryptocurrency miners?
In simple terms, the miners are the bookkeepers.
The main way a miner contributes to the networks it though providing power, in the form of computing power, mostly through the use of Graphic Processing Units or GPUs in order to solve complicated cryptographic puzzles that are necessary in order for the transactions to be confirmed and recorded in a distributed public ledger known as the Blockchain.
Now, what truly makes mining unique, and difficult, is the fact that the puzzles evolve, increase in difficulty, and all of this is influenced by the number of people that attempt to solve it.
Think of it this way:
- You have a cryptocurrency that becomes popular.
- You have a lot of people solve it.
- The mining process becomes more difficult as a result.
There is this stereotype that just about anyone can pick up their home computer and start mining bitcoin. While that could prove to be a useful side-income in the past, in today’s crypto-economy you need to make a sizable investment in industrial-grade hardware to mine efficiently and end up with a profit.
To mine bitcoin, you need expensive hardware, and the will to pay the racked-up electricity bills.
When a miner manages to acquire a lot of hardware, the higher the chances are of solving a cryptographic puzzle. When a miner solves a puzzle, they get a reward and a transaction fee.
You have probably seen it online, but investing in cryptocurrency is, and for the foreseeable future will be one of the internet’s hottest way of investing. There are countless stories out there of people acquiring genuine fortune through their Bitcoin and Altcoin investments.
Most of this news is however mostly tailored towards Bitcoin due to the fact that it is the world’s largest cryptocurrency.
- From February of 2011 up to April of 2011, a single bitcoin is worth $1.00.
- In 2014, it was worth $340.
- In March of 2017, it rose to $1.290.
- On the 30th of November, 2020, a single bitcoin is worth $19,850.
- As of the 8th of February 2021, it is worth $44,200.
- As of this writing (Feb 12th), it’s $47,820.
Now, let this sink in for a second. Ethereum is the world’s second most valued cryptocurrency.
However, as you might have noticed by now, cryptocurrencies are an extremely high-risk, high-reward investment. The market fluctuates tremendously.
In other sections of this site, you will learn more about Cryptocurrency trading.
It is partly regulated, and there are always risks associated with it getting outlawed in certain jurisdictions. Keep in mind that a cryptocurrency exchange always has a chance of getting hacked.
Let us for a second assume that you would want to invest in Bitcoin. Once you purchase or mine your bitcoin, you will need somewhere to save it. Many exchanges offer crypto-wallets.
A crypto-wallet is a device, physical medium, or program, and in some cases even a service, that can store the public and private keys for cryptocurrency transactions.
The best thing you as a cryptocurrency owner can do is store your assets in an offline wallet on a hard drive or hardware wallet. This way you essentially gain full control over your assets.
Now, if you get lucky, you will make a profit on your investment. If you have a miscalculation, you could have a loss. In any case, in certain jurisdictions, you might need to include it in your tax report.
Purchasing Goods or Services
Throughout history, finding a merchant that was willing to accept cryptocurrency was difficult to say the least. Like trying to find a needle in a haystack. This is no longer the case.
Many online merchants, and even some offline ones, do indeed accept Bitcoin as a form of payment. This can range from massive corporations to even local shops.
People have used Bitcoin to book flights, buy jewelry, technology, and even more mining hardware. Some even decided to spend their bitcoin on signing up for a college degree which is notable.
Keep in mind that altcoins do exist, and they are accepted, but not as much as Bitcoin. Now, owners of altcoins always have the ability to change their coins for Bitcoin.
Ok so now, let’s talk about the legality of Cryptocurrencies…