There are plenty of mixed opinions on cryptocurrency – so much that it’s tricky to really understand what it is and how it works.
According to Timothy Enneking, sentiments for cryptocurrency range from very positive (‘money of the future’) to very negative, where the currency itself is considered a risky asset.
Timothy Enneking Explains The Basics of Cryptocurrency
Cryptocurrency is basically an asset, but digital. Just like the money you hold in your hands is an asset, cryptocurrency is the same thing, but it exists within your computer networks. It’s a currency, but because every transaction that involves the use of cryptocurrency is highly encrypted, the prefix ‘crypto’ gets attached to it.
Unlike traditional currency, however, which is controlled by banks and financial institutions, cryptocurrency is decentralized.
How Cryptocurrency Works by Timothy Enneking
Cryptocurrency is made through mining on a blockchain. Mining is the process of solving very complex problems on a very powerful computer. These problems are often solved when a successful exchange takes place, which means that the more transactions and exchanges that take place, the more cryptocurrency gets added to the world.
Cryptocurrencies use blockchains for the management and recording of their transactions. The transaction records are stored by multiple entities and thus you can be sure that your investments stay secure, because the proof of it is stored in so many places.
At the moment, the total cryptocurrency market is worth more than $1.7 trillion, which is a huge amount! Even though the first cryptocurrency, Bitcoin, was only introduced in 2009, the value of the currency has shot up over time and many other currencies have been introduced. According to Timothy Enneking, there are more than 10,000 listed cryptocurrencies in existence, and this number is expected to keep rising.
Timothy Enneking explains that cryptocurrencies are so popular because of decentralization. When the parties involved can transfer their money online without the need for an intermediary (such as a bank), a lot more money can be transferred and at all times of the day. Some people even say that cryptocurrencies offer more value because there is a level of privacy and security that traditional money does not have.
According to Timothy Enneking, despite the popularity that cryptocurrencies have nowadays, opinions on them are still mixed. Some people consider cryptocurrencies to have money-like quantities, and thus consider it to be a digital equivalent of money. Others consider it to be more like stock investments, where there is the potential for high losses and high returns, depending on the market and the level of risk involved.
While crypto investments are becoming more popular, whether or not it is a good investment would depend on the investor themselves and their risk tolerance profile. For younger folks, cryptocurrencies seem like a good idea, and many people have been investing great amounts in it already.
As of yet, older folks may still be averse to the idea (likely due to how novel it still is for them, and how much risk is involved) but one thing is for sure: cryptocurrencies will soon become just as much a part of our financial systems as traditional money has been.