Other stories filed under News
Cryptocurrency becomes hot investing trend
March 5, 2018
Keep eye on price as it can rise, then fall, quickly
Let’s face it – college students are looking for some way to make some extra cash. While investing in stocks is out of the question for some, why not try something similar? Welcome to cryptocurrency, the always rising and falling exchange of today.
A good example of a cryptocurrency (by the way, crypto comes from cryptography, which is the art of writing or solving codes) is Bitcoin, which is the most widely-known and used cryptocurrency. It was created in 2008 and released in early 2009 by an anonymous person or group who went by Satoshi Nakamoto. CNBC.com said eventually, in 2016, Australian Craig Wright claimed to be the mysterious Nakamoto. He was able to prove his claim with original Bitcoin code.
Bitcoin, like other hundreds (according to coinmarketcap.com, there’s more than 1,000 types of digital cryptocurrencies that work on a blockchain network. A blockchain is something that updates every few minutes with each purchase of the currency, which adds another block to the network. For each currency, there’s a finite number of blocks, and they will someday run out.
Cryptocurrency, while it may sound like something new, dates back to 1989, when DigiCash showed up. According to moneycrashers.com, it started based on an algorithm created by David Chaum that allowed for secure and unalterable exchanges of information between parties. This algorithm is still used for current cryptocurrencies.
Years after the algorithm’s creation, Chaum created DigiCash, which initially dealt in selling to individuals. Eventually, the central bank of the Netherlands, where the company was based, decided to set rules preventing DigiCash from selling to anyone but licensed banks. Later, Microsoft approached DigiCash for a potential partnership that would allow for Windows users to make purchases in its currency, but the two couldn’t agree on terms.
DigiCash ended up failing in the late ’90s, and shortly after, an associate of Chaum’s developed and released a cryptocurrency, Bit Gold, which used the same blockchain system that is used now. Bit Gold never became popular, however, and it is no longer used for exchange.
How to invest
Cryptocurrency is a lot like stocks. Invest some money into it, and when its value rises, take it out and put it in the bank account. With currencies’ values constantly rising and dropping, it’s important to keep an eye on its value when money is invested. It is best to buy cryptocurrency when it’s at a low price; Bitcoin was about six cents a coin when it first came out — now people are becoming millionaires! However, be aware that cryptocurrency, like stocks, have risks. It could easily fall, rise, and fall again, and there is a lot of money that can be lost.
A wallet is needed. Wallets store currencies with options to do so. Coinbase.com is one way to store cryptocurrency. However, as an online exchange, there are risks. They are known to crash and could lose money. Another option is Electrum, which is a software that holds cryptocurrency, rather than an online exchange or wallet. And then there is the tried and true physical storage; whether it be on a hardware wallet or private key on paper, there’s no denying that it’s the safest way.
Coinbase follows Bitcoin, Litecoin, Ethereum and Bitcoin Cash, and is one way to start investing. On Coinbase, invest however much money and it updates how much the investment is worth, based on the currency’s value at the time. To take the money out, deposit it straight to a bank account. This is pretty much the standard for any online exchange.
Online exchanges can be risky. Not only can they crash and could lose money, they can also come under attack by hackers, whether they find a bug in the system or the wallet’s not secure.
While Bitcoin is the most recognized and is growing as a means of exchange, there are other options that are growing in popularity. Litecoin was released in 2011, shortly after Bitcoin (2009), and has the same basic structure. According to investopedia.com, instead of Bitcoin’s supply limit of 21 million, Litecoin has 84 million units to be exchanged. It also takes less time for its blockchain to update.
Ripple came out the year after Litecoin and has an even faster transaction time. Ripple is more easily converted to U.S. dollars, yen, euros and other physical currencies. Ripple is valued at just a little over $1 (U.S.) at press time, meaning it’s not comparable in value to some of the other popular currencies.
In 2015, Ethereum was released. It involves using “contracts” that ensure parties receive funds if the other side violates the agreement by backing out of the transaction.
There are over 1,000 other forms of cryptocurrency, but Bitcoin remains the top competitor. At press time, its value is more than $8,000. It reached around $20,000 in December and fell soon after. Ethereum is rising, starting to reach more than $1,000.
Some people predict Bitcoin to rise this year over its last boom in December. Predictions range from $50,000 to $100,000.
A couple of fun facts!
In 2010, when Bitcoin was still in its early stages, one person traded 10,000 Bitcoins for two pizzas. Had they kept those Bitcoins and traded them in during its last boom, that person would have had over $100 million!
A cryptocurrency introduced in 2014 by the name of Coinye West — now an abandoned exchange — that used the likeness of Kanye West and was legally challenged by the artist. Though the “West” was dropped, and a logo of a certain half-fish half-man hybrid resembling West (a take on a “South Park” episode) was used instead, West’s legal team still went after the currency and it was shut down.
WordPress was the first merchant to begin accepting Bitcoin as a form of exchange. Shortly after, places such as Expedia and Microsoft accepted as well. Now, other merchants are taking the cryptocurrency, such as OKCupid, Newegg.com, Home Depot, Sears and even some Subway stores.