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There’s a lot of buzz out there right now surrounding the topic of cryptocurrency. Whether you’re a technology enthusiast or a diehard investor, you’ve probably seen a lot of talk about the potential of cryptocurrency standards like Bitcoin and Ethereum. Maybe you’ve seen some positive coverage and now you’re wondering whether crypto is a good investment.
Let’s take a closer look at this unusual new form of currency to see whether it’s worth investing in.
Cryptocurrency is, in short, a digital standard that is an agreed-upon store of value. Most crypto derives this value from a system called “proof of work,” where an automated cipher has to be cracked by a “miner,” a person with a computer. Once your computer starts working on a cipher, it begins to draw considerable power, as the cipher that holds the code for the crypto is extremely complicated. Even the world’s strongest supercomputers struggle to quickly and efficiently mine for cryptocurrency.
Once a computer solves this cipher, it is said to have mined a unit of the cryptocurrency. The computer in question is awarded a unique digital code, a one-of-a-kind receipt, that is added to a shared ledger called the blockchain. This unique code is a unit of cryptocurrency, a crypto coin, and it represents a considerable investment of time and energy. This is what gives crypto its value.
Some enthusiasts consider crypto more than just a good investment: they see it as the future of currency. Crypto skeptics, meanwhile, take issue with the standard for a variety of reasons. Indeed, crypto isn’t without its drawbacks: there is a significant impact on the environment due to how much energy crypto requires to function properly.
Some regulators have taken issue with crypto because transactions with the currency can be difficult to trace. This makes it a favorite of organized criminals and hackers. Others still simply resent the new standard for allowing investors to sidestep central banking regulations, allowing for a decentralized form of finance that is currently unregulated.
Crypto is a solid investment, even if it is often volatile. Like gold, it could be used as a hedge against inflation, and a good portfolio should likely include some Bitcoin and some Ethereum. These new standards have the potential to become massive assets in the future, but there is always the chance that regulation and shifting technology could push them out of favor. So, as always, the wise investor makes sure to diversify.
