with the basics of cryptocurrency
Cryptocurrency receives quite a bit of
attention these days. This mainstream attention came as a surprise to many
people who were previously familiar with it. The popular press seldom delves
very deeply into complex technologies. And to be sure, cryptocurrency can be
complex. But the reason why people are paying attention to it is the fact that
it’s become both important and surprisingly easy to use. But one does need to
learn a few basics before jumping into the world of cryptocurrency trades.
The core of cryptocurrency
People new tocryptocurrency
often ask what it is. However, the most meaningful answer involves complex math
and engineering concepts. It’s often easier to simply think of cryptocurrency
as a digital version of a metal coin. The value of a coin comes from scarcity
of material and overall control through closed political and economic systems.
The value of a coin comes from encrypted algorithms and complex systems to work
with that data. But the central idea of cryptocurrency as a valuable coin made
of digital information serves as a valuable metaphor.
The scope of the cryptocurrency ecosystem
Just as there are multiple types of currency
in the world one can find multiple types of currency online. Different forms of
cryptocurrency can be thought of as analogous to any given country’s form of
currency. The US dollar and the Canadian dollar are different forms of monetary
exchange which are still convertible from one system to another. Likewise,
market fluctuations cause the value of any cryptocurrency to change in relation
to the others. But they’re fundamentally similar and can be exchanged fairly
easily as well.
Cryptocurrency has been around for a while
Cryptocurrency has only been in the public eye
for a short time. One shouldn’t make the mistake of thinking that this means
cryptocurrency is a new technology though. The first real success in
cryptocurrency, bitcoin, has been around since 2009. It’s been around long
enough now that even long running charities have caught up with it toaccept donations.
Cryptocurrency is real money with similar issues
People new to cryptocurrency often assume that
it has the benefits of standard cash without all the associated headaches. But
again, one needs to consider the fact that they’ve been around since 2009. It’s
often said that the only certainties in life are death and taxes. And yes,
taxes have proven their inevitability by working into the way most countries
relate to cryptocurrency. For example, capital gaintax applies to cryptocurrency if held for over
However, there are similar ways to get around
some of the headaches we face with our personal accounting. Just as one can
find standard tax software, there are also options for crypto tax software.
And just as cryptocurrency has become easier to use so has software designed to
account for its impact on our taxes. The most important point there is to
simply keep the necessity of doing so in mind. There’s countless reminders out
there that we need to do our taxes. But it’s probably going to be some time
before we see public reminders that we need to account for cryptocurrency as
Getting an early start
One of the last things to keep in mind about
cryptocurrency is the fact that it’s still growing. The oldest form of
cryptocurrency is still relatively young in the greater scope of things. And
mainstream attention is even more recent. This places it in an unusual position
as far as currency goes.
It can be seen as both currency and
investment. There’s some issues to this as well. New investors are typically
concerned about the level of volatility in the market. But in general one
simply needs to spend time noticing that rises and falls tend to even out to
slow growth in the long term.
Bringing it all together
Finally, it’s important to keep in mind that
while this is a new technology it’s not a new concept. It’s a new iteration on
established economic certainties. This means that aspects of cryptocurrency
might seem intimidating at first. But one will usually find that working with
it becomes second nature fairly quickly.