Cryptocurrency for Dummies

Is all the talk about bitcoins and other cybercurrencies making you feel like a dummy? Most people have some inkling of its existence, but beyond that, cryptocurrency might as well be called cryptic currency.
Here are some basics of cryptocurrency to help you understand what it is, how it’s being used, and some of its risks and rewards. To keep it simple, we’ll use Bitcoin as an example, but the principles apply to other cryptocurrencies, as well.
 
 
Cryptocurrency is Both Tangible and Fragile
But then, so are most other forms of wealth. Paper money and stock certificates can be lost, burned, or stolen. Gold and jewels can be lost or stolen, too. A unit of value for a cryptocurrency is represented by an encrypted bit of computer data. That data bit can be kept on your computer (like money under a mattress) or it can be stored in “wallets” and depositories, just like a bank or stock trading account. You can even get an actual coin with the data stored on a microchip. And just like dollars or gold, it can be lost or stolen, although some would argue it’s less likely.
Cryptocurrency is Money, Sort Of
Cryptocurrencies can be acquired, saved, and spent just like dollars or euros. They are not as widely accepted as government currencies, but a rapidly growing number of businesses accept them, from NBA teams to Expedia and online merchants. There are even a few ATMs that will convert bitcoins to cash money. While acceptance is growing, a handful of countries (Iceland, Russia, and China, in particular) make it difficult or impossible to use cybercurrency for various reasons, generally political. Merchants are increasingly fond of cryptocurrencies, though, especially bitcoin, because transactions are much cheaper and nearly instantaneous, unlike other payment processors.
What’s the Big Attraction?
People like cybercurrencies for a number of reasons, some more noble than others. Because they’re not government-issued, they’re harder to track (but not impossible, as some drug and arms dealers found out). This appeals to both people with Libertarian and anti-government leanings and people who don’t want their financial transactions traceable for one reason or another.
Because they are not issued by a government, cryptocurrencies aren’t subject to many of the regulatory attempts made by bodies like the Federal Reserve to manipulate their value to suit political and economic agendas. That makes many feel that cybercurrency is a “people’s currency” and a safe haven in the event of hyperinflation or a currency collapse. Kind of like digital gold.
What are the Risks of Cybercurrencies?
Because it’s relatively new and largely unregulated, cybercurrency is subject to both mismanagement (the Mt. Gox collapse, for example) and outright fraud by unethical dealers. That’s why it’s important to know who you’re dealing with at all times. You should give at least as much scrutiny to the reputation of a depository as you would to a bank or brokerage firm, and that’s not so easy since most cybercurrency “banks” are new and don’t have track records.
Volatility is another concern with cryptocurrencies. Because they are traded on an open market like gold or stocks, their value changes hourly. Speculators have pushed the price of a bitcoin to nearly $1,200 US in a matter of a few days, and it has fallen below $400 almost as quickly. While it’s likely that wider acceptance will lead to less volatility, having large amounts invested in cryptocurrency isn’t for the faint of heart.
How Do I Get My Hands on Some?
There are two ways to acquire cyber-coins – mine them or buy them. Coins are “mined” by using computers to solve math problems. The reward for solving the problem is a “coin.” Each time a problem is solved, the next one becomes more difficult. Today, mining a single bitcoin involves such a huge amount of computing power that the equipment needed and its power consumption are threatening to make mining prohibitively expensive. It’s much simpler to just buy cryptocurrency from one of several trusted exchanges. CoinDesk has a simple, understandable guide to buying bitcoins as a place to start.
There are a number of sources for information about cryptocurrency on the internet. A good place to start is at the Amagi Metals Knowledge Center and the blog posts about cryptocurrency. Amagi was one of the earliest adopters of bitcoin and has handled over $10 million in transactions to date. Forbes Magazine also has a series of informative articles about bitcoin and other cryptocurrencies.
If you’re ready to test the cryptocurrency waters, Amagi Metals is ready to help you. You can buy and sell both cryptocurrency and precious metals from or to us with little fuss or bother.
We’re a world leader in global e-commerce among precious metals dealers and members of the American Numismatic Association, the Industry Council for Tangible Assets, and an affiliate of the American Open Currency Standard. Amagi Metals accepts payment in all common forms: checks, money orders, bank wires, credit cards, and PayPal. We’re also one of the world’s largest traders in bitcoins with transactions in the “virtual currency” exceeding $11 million.
Our web site, AmagiMetals.com, is available for information and orders 24/7, and expert advisors are here to help you in person at 800.882.8496, 8am-5pm Mountain Time.

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