What are cryptocurrencies good for?
Most people look into cryptocurrencies because they have heard about Bitcoin and how amazing the growth of its exchange ratio has been in the past few years. They want to know how they can participate. And, sure enough, you have the media to mix up Bitcoin with financing terrorist activities and other illegal deeds and some people lose their courage to even try and take part in it.
Full disclosure: yes, there have been and are cases where crptocurrencies were used for these purposes, but not as many as it is the case with regular money.
Cryptocurrencies and the blockchain technology that they are based will turn the world upside down. Anybody could be a part of this revolution, provided that they take their time to collect the necessary information. So, for people who live in countries where they have access to banking services, here’s the most frequent use-case scenarios for cryptocurrencies.
Long term investment
The first time people buy Bitcoin they usually do it with the aim of leaving their investment alone for a couple of years. They later realize, that no matter where the market moves, they can’t not deal with their investment, since more often than not, they put more into it than they should have. Basically, you should never put more into it than what you don’t care if you lose, without getting worked up about it. There is little chance of Bitcoin disappearing forever, but it is not zero. The most optimistic analyzers (and dreamers) hope that within a decade, 1 BTC will be worth a million dollars — but this could only happen if billions of people put their savings into digital currencies and for some economy-world politics issue, the value of the dollar would start to decrease substantially.
You can buy cryptocurrencies from different platforms, brokers and exchanges. You can store them in a specialized electronic wallets or on paper.
During mining, we invest into hardware equipment, electricity and working hours and get cryoptocurrency in return. As far as the network is concerned, the aim of mining is stabilization. The miners job is to put the transaction (like sending BTC) into blocks and find the newest element of the blockchain, and their only goal is making profit.
Mining as an investment in the long run may be more profitable than spending that amount and waiting. In 2016 and 2017, people who spent the first half of the year mining and maintained their position until the end of the year generated huge profits. As for what the following years have in store, nobody knows yet.
Using the shifting of the exchange rates, most beginners start with this area with altcoins. Due to the (seemingly) easy profit, they jump into different deals without thinking them over. Trading goes through cryptocurrency exchanges like the traditional Forex platform, but we trade with cryptocurrency instead of EUR or USD. Some exchanges allow you to trade with USD as well, like Kraken. Getting profit from the shifting of exchange ratio is an interesting question — our portfolio might shrink in dollar value, but grow in BTC.
Getting to know the technology
Those who follow the technology that is related to cryptocurrencies are convinced that the technology of blockchain will change the world and remain with us forever. Its significance is often compared to that of the internet itself — the technology, they say, will provide and endless number of second layer applications that use the network of Bitcoin. In the early days, the internet was thought to be the same as e-mail only; now, of course, we know that it was the foundation of solutions that turned our previous world and economy upside down.
As a means of payment
The basic problem of using Bitcoin as a payment is that we only have a finite amount of it, and, due to the loss of keys, it’s getting less and less. Together with the large volume of expected shifts in the exchange rates, using it for paying is not at all incentivized.
There are two cases where paying with cryptocurrencies can become a daily thing: if we get our salary in Bitcoin or other cryptocurrency, or the previously mentioned services allow the wallets to interact directly with bankcard terminals and POS machines.
A weapon of ideology
Many see Bitcoin as as revolution of sorts against the national and international commercial and central banks. A lot of the features of Bitcoin solves problems caused by “third parties” and institutes that issue money, and the most extreme supporters of Bitcoin claim that one day they will be able to take over the roles the banks — and, in essence, that of the nations that issue money as well. However, many blockchain projects, like Ripple, were created with the mindset of supporting the traditional financial institutes and are said to have better chances of succeeding than a utopia-like entity like Bitcoin, that is on the extreme side of liberty and freedom.