You have undoubtedly heard of it: cryptocurrency. Or at least: the bitcoin. Is there a bell ringing? It is currently a huge hype. Invest in a digital currency. Because savings rates are getting lower and people are looking for new ways to invest money. But what is a bitcoin and what can you do with it? We explain it to you.
Investing in cryptocurrency: what is it really?
Bitcoins. Blockchain. Cryptocurrency. It seems like everyone knows something about it nowadays and has something to say about it. But what does it exactly mean? Cryptocurrency literally stands for ‘cryptographic currency’: encrypted money. You can buy this computer money online and add it to your digital wallet, just like you would keep your paper money in your wallet. A big difference with ‘normal’ money, besides the fact that you can not hold it, is that no bank is involved in (buying) digital money.
Bitcoin and other cryptocurrency
There are different types of crypto coins. The best known is the bitcoin. It is the largest coin on the market, with the largest total capital. The bitcoin is therefore also the most popular and the chances are that you have heard of this currency. Some people think that bitcoin is the capping term, but bitcoins are therefore part of cryptocurrency. After bitcoin, Ethereum is the largest crypto coin and there are a few hundred other alternatives, such as Dash, Ripple, Litecoin and Monero.
How does it work exactly?
The transactions of cryptocurrency go via blockchain technology: a database and infrastructure for carrying out encrypted transactions without intermediary. That sounds complicated, and it is. The bottom line is that in theory you can safely and anonymously pay via blockchain with your cryptocurrency. The blockchain technology is known for being an encrypted way to execute transactions. But how safe is it really?
Certainly not risk-free
In recent years, cryptocurrency has experienced explosive growth but also a sharp decline. You may know people who have either made a considerable profit or a significant loss with cryptocurrency.
Investing in cryptocurrency is therefore quite risky. In addition, there is no way of monitoring (including no supervisory body), you manage your money on your own responsibility. The AFM and European supervisors have also warned against cryptocurrency trading.
Sometimes coins are brought into the market, which turn out to be a scam. It has happened more than once that people in this way lose all the money invested in the coin at once.
Sensitive to hackers
In addition, for example, online wallets are hacked, causing someone to lose all their online money. Or people lose their digital key (for example by accidentally deleting a message) so that they no longer have access to all their money.
Would you dare to invest in cryptocurrency? Or maybe you already do it? Let us and other community members know about cryptocurrency in this topic .
Why would you want to invest in cryptocurrency?
Big profits speak to the imagination. And because you can enter online with any amount, the threshold may not be as high. In addition, you pay relatively low transaction costs because there is no intermediary via whom you have to make a transaction.
However, you pay a fee for ‘mining’, very briefly because the curve is the process by which the blockchain is maintained. Heavy calculations have to be made for this, and in exchange for this minus you pay a part of your cryptocurrency as a crypto-investor. Exactly how much that is depends on a number of things. How quickly you want to send your cryptocurrency, for example.
Do you invest?
Despite the risks, this investment way quickly gains ground. This is probably due to the fact that there are people who have earned a lot of money very quickly. These success stories are widely reported in the media, which means that other people also want to benefit from this. But at the same time there are also stories in the media about people who have lost everything. That is the other side of the coin.
If you also decide that you would like to invest in cryptocurrency, we can not give you advice. But we do have some general tips, which we want to give you at least.
Tip 1: Make sure you are aware of all the chances and risks that cryptocurrency entails. Because cryptocurrency is not traded via a bank, there is no supervision either. You are therefore responsible yourself.
Tip 2: Invest only money that you can miss for a while, just like investing . If you think you need your money in the short term, this is not a good investment for you. After all, there is still much unknown about the cryptocurrency.
Tip 3: Choose a strong password for your account and make regular backups of your wallet. There are several stories about people who lost their cryptocurrency because they forgot their passwords and people whose computer money was stolen by a hacker. So pay attention, because you are gone and you can not hold anyone liable for your loss.
Tip 4: The price of the digital coins is currently going up and down enormously. Keep that in mind, investing in bitcoins or other cryptocurrences offers no guarantees.