Digital currency is the hot buzzword of the investing world today. But what are these new currencies, and why are they so popular? Digital currency is created by private companies or individuals and can be transferred electronically from one person to another without going through banks or clearing houses. The best thing about digital currency such as cryptocurrencies is that it’s decentralized- unlike national currencies, which can be heavily influenced by governments and central banks, no single entity controls cryptocurrency markets.
What makes them such a good long-term investment option? Let’s take a look.
What are digital currencies?
The history of digital currency dates back to the 1990s when the first widely-used web browser was built. One of the major challenges faced by early internet users was finding ways to pay each other or retailers for items they were selling on websites. Digital currencies are hosted in private databases and involve a process called cryptography which makes sure that transactions remain secure and can be verified without revealing the identities of the buyers and sellers.
Digital currencies have been around for a while, but it’s only recently that they have gained traction. Major financial institutions are actively working in the digital currency space with the advent of the financial storm brought about by cryptocurrencies. Digital money can be transferred and exchanged using technologies like smartphones, credit cards, and online cryptocurrency exchanges.
Examples of Digital Currencies
The most common form of digital currency is a cryptocurrency which is a type of decentralized electronic money that is traded from one party to another. Cryptocurrency has become a popular investment option because it’s not controlled by centralized banks or governments and therefore cannot be manipulated in any way. This means the value of cryptocurrency can change drastically depending on market conditions- these changes are recorded on public ledgers known as blockchains.
Blockchain technology is at the heart of cryptocurrencies and it records every transaction that has ever occurred with a digital currency, which means transactions cannot be altered or changed in any way- making them more secure than traditional currencies. Some forms of cryptocurrency include:
Bitcoin is a household name that is synonymous with digital currency. It was developed as a means of transacting without the need for banks or other intermediaries and is widely considered to be the first decentralized cryptocurrency ever created. Bitcoin itself has been around since 2009 and has been valued much higher than its competitors.
Ethereum is the next most popular cryptocurrency after Bitcoin. Ethereum is a decentralized platform that runs smart contracts- these are applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference. The native token for the Ethereum blockchain is Ether, which is used for transactions on the network.
Started as a joke back in 2013, Dogecoin is another hot digital currency to invest in. Dogecoin is a decentralized peer-to-peer digital currency that allows users to easily send money online. The Doge meme, which came from an internet joke about how popular Shiba Inu dogs look like when they tilt their heads has become the face of this cryptocurrency and it’s one of the most well-known in the world today.
The Adoption of Cryptocurrency
The last few years have seen an explosion in interest in cryptocurrency as more and more people are beginning to adopt this type of unregulated, digital money.
One of the reasons for this sudden popularity in digital currencies is because more and more companies are beginning to use them as a type of payment option. For example, Microsoft now accepts Bitcoin payments online while Dell Computers allowed customers to pay with Bitcoins up until 2014 when it discontinued this feature.
Due to the continued rise in demand, more companies are beginning to embrace digital currencies than ever before- and their popularity is only expected to continue growing.
What’s also driving cryptocurrency prices upwards is that governments across the world have begun recognizing cryptocurrencies as money too. This means that these currencies can be held by individuals and companies, and the profits made from them are subject to taxation. The gradual acceptance of digital currencies as a legitimate form of payment is what’s giving cryptocurrency prices their current boost.
What makes digital currencies a good long-term investment option?
Digital currencies have some unique characteristics that make them a particularly attractive option for investors.
One of the biggest factors that make digital currencies desirable is their liquidity. These virtual coins can be exchanged for different national currencies, like US Dollars and Euro, very easily; transactions are fast and carry low fees. Although there isn’t a central exchange where everyone who wants to buy or sell cryptocurrencies will meet like traditional exchanges (like stocks), there are many online exchanges that exist where cryptocurrencies can be bought and sold.
Digital currencies are a good long-term investment option because they have high liquidity and can be used for all types of transactions, from buying goods to trading on exchanges.
Investors who want their assets in different digital currencies need not worry about waiting around to make purchases or having cash available when it is needed; these virtual currencies have very fast transactions. The blockchain technology behind digital currency allows for these transfers to be completed within a few seconds or minutes, depending on the network congestion and other factors. And as mentioned earlier, fees are also small because there is no third party involved in processing cryptocurrency payments- they’re sent directly from one person to another over the internet.
Diversification of your investment portfolio
These digital coins offer investors an opportunity to invest in different national and virtual currencies, so you’re not locking yourself into one specific asset or type of currency when making a decision about which ones to buy.
There is always the possibility that some types of investments will become obsolete, but investing in multiple cryptocurrencies helps ensure that at least some virtual coins will still have value even if others do drop out of use over time. For example, if most people stop using Bitcoin as a form of payment for goods or services it is unlikely that Etherium would suddenly become irrelevant; instead, these two separate tokens could continue being traded on exchanges with their current or increased values.
In addition to being a decentralized currency, digital currencies are deflationary. This means that the value of these virtual coins will increase over time as more people use them and demand for them rises. Investing in initial coin offerings (ICOs) allows investors to have access to tokens before they become valuable- which makes it possible for you to buy low and sell high at some point in the future when cryptocurrency values go up substantially.
This is why digital currencies can be considered a good long-term investment option; their potential growth is what attracts many investors today who want an alternative way to diversify their portfolios beyond traditional investments like stocks, bonds, mutual funds, or real estate.
So, should you invest in cryptocurrencies?
Investing in cryptocurrencies or digital currencies can help build wealth in the future. If you’re looking for the next big thing to make money, this is it. Digital currencies are usually not regulated by any government or organization- meaning that there is no central bank that can increase or decrease supply which impacts demand and prices. This makes them a good long-term investment option because they cannot be influenced by external factors such as inflation rates in other countries, recession cycles, etc.
It’s clear that digital currencies are the future of money. It is safe to take some time today exploring your options with cryptocurrencies!
Views expressed above are the author’s own.
END OF ARTICLE