It is very likely that you have heard about cryptocurrency. No? Does Bitcoin ring a bell? Ethereum? Dogecoin?
I mean, what even is a blockchain!
We hope we haven’t lost you already. The truth is, the concept of cryptocurrency can sometimes feel as clear as mud to many of us. Even when we hear the definitions, it still feels foreign. Meanwhile, the debate rages on for those who claim to understand it, some believing the whole thing is too volatile and risky for consideration; while others are certain this is the currency of the future.
To begin to know where you stand on the issue and what role, if any, cryptocurrency can play in your journey to financial well-being, we have taken on the task to break it down for you.
So, what is a cryptocurrency?
In simple terms, a cryptocurrency is a type of currency that uses digital files as money. It operates as a decentralized network, which means it is not issued by any Government or central authority. Also, transactions are verified, recorded and maintained which creates trust. As a digital currency, it can be used to purchase goods and services or be traded for profit.
It uses an online ledger with strong cryptography (extremely complex code systems that encrypt sensitive data transfers) to secure online transactions. This is known as the blockchain ledger. This computer program securely records all cryptocurrency transactions, without the use of any intermediaries, and cannot be changed by anyone.
When did it start?
Cryptocurrency foundations date back to the 1980s, with the development of web-based encryption technology and the initial stages of a virtual currency architecture in the 1990s. Following the rise of other digital finance technology, such as PayPal, Bitcoin emerged publicly in 2009 as the first true cryptocurrency.
Over the years, Bitcoin would be increasingly viewed as a legitimate means of exchange. Many well-known companies and countries now accept Bitcoin transactions, although most partner with an exchange to convert Bitcoin into U.S. dollars before receiving their funds, due to the volatility.
It remains the most widely used cryptocurrency. Other major cryptocurrency options are: Ethereum, Litecoin, Ripple, and Dogecoin.
What are the benefits and risks of cryptocurrencies?
Some key benefits of cryptocurrencies include its independence from banks and Government interference; the fact that large values can be transferred instantaneously at significantly low cost; you can do transactions from anywhere in world; are allowed some degree of privacy in your transactions; and it is not subject to the economic conditions of any single company or country. The technology also provides a great level of trust.
Meanwhile, the downsides are it is an intangible currency, which suffers from high levels of volatility. There is also a lack of broad regulatory consensus and exchange platforms, and service providers are plagued by cyber criminals, as the emerging asset class is often used to launder money.
Cryptocurrency in Jamaica
There is no legislative framework in Jamaica that addresses cryptocurrency and it is still a new topic in the regulatory conversation locally. However, the Jamaica Stock Exchange (JSE) and Blockstation have partnered to enable the trading and offering of digital assets and security tokens in a regulated environment.
So, can you use cryptocurrency to supplement your investment portfolio?
Due to the volatile nature of cryptocurrencies, it would be best to do your own research before making any big moves. It is unlikely you will understand everything right away, but at least ensure you have a basic understanding of the exchanges available and how to use a digital wallet. Coinbase is one of the largest, and more trusted platforms to buy and sell Bitcoin and many other altcoins (alternative coins).
If you decide to take the step, start small and keep in mind the age-old advice to never put in what you can’t afford to lose.
And lastly, pay attention to the latest news on the performance of the cryptocurrency you are interested in. Prices may make big and sudden jumps, which could make or break your investment goals. A good source of truth to track cryptocurrency prices is Caricoin website.
We hope the cryptocurrency fog has cleared for you some after reading this article. You can find more information here. Wishing you many happy returns on your financial journey!