Grade 8 Lesson 6: Types of #investments - #cryptocurrency
With the recent collapse of #FTX, #crypto #currency is once again in the news this year. In this #shortlesson, we will cover #cryptocurrencies as an #investment #class.
What is cryptocurrency? Cryptocurrency is a #digital currency. It uses digital files as #money. It has no physical presence – there are no cryptocurrency #bills or #coins. All cryptocurrency transactions happen online.
The first cryptocurrency created that gained traction was #Bitcoin. In October 2008, an individual/group known as #SatoshiNakamoto published a paper that outlined the working of a new form of currency. This currency was called Bitcoin. To date, no one knows the real identity of #Satoshi #Nakamoto.
Unlike traditional currencies, which are typically controlled by a #government, no single person or body controls cryptocurrency. Instead, it is controlled through #computer programs that help generate and distribute the currency. It is decentralized. All crypto transactions happen digitally, so there is no need for physical bills and coins. People can transfer Bitcoins directly to each other’s digital wallets without the need to go through a #bank.
New #supply for cryptocurrencies like Bitcoin is added by a process called mining. This process is complicated, but in simple terms, Bitcoin #mining is when computers solve mathematical equations, and as a reward they get Bitcoins. Since so many people are trying to mine Bitcoins, it has become very difficult to mine a sizable amount of them.
Cryptocurrencies can be used to purchase goods, items, and services as they are universal currencies. However, people usually don’t use them to pay for things. At least not yet. They use it mainly as an #investment with the intent of making a #profit. Cryptocurrencies are like trading cards, whose value increases when more people begin to use them. Furthermore, cryptocurrencies become more valuable the longer you hold on to them.
Cryptocurrencies are a very #volatile #asset #class. E.g., in just the first 2 weeks of 2021, one Bitcoin’s value ranged between $29,000 and $41,000. Thus buying, holding and trading cryptocurrencies can be very risky.
In a lot of ways, crypto is akin to #gold. As long as people trust the value of the currency, they will continue to invest in it. Additionally, no government organization can take control of your cryptocurrency assets.
Cryptocurrencies could likely be the future of #transactions. Therefore, it is quite beneficial for everyone to learn how to invest in them. The above is a simple introduction to cryptocurrencies. There is a lot more material you learn about this topic.
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