What is cryptocurrency and how does it work? What you need to know
An introduction to cryptocurrency. Learn what it is, how it works, and how it could affect the future.
You’ve probably heard of Bitcoin. But what about Ethereum? Or Tether and Polkadot? What are these? They’re all examples of cryptocurrency, the digital currency you can buy with real money and then spend in online transactions.*co
It’s true that you probably can’t buy a meal at your favourite restaurant with Bitcoin or rely on Ethereum to get groceries from the nearest shop. But cryptocurrency — or digital money — is becoming more popular and valuable. Tradingview.com, which covers cryptocurrency, reported that as of March 3rd, 2021, all cryptocurrencies' total value had reached 1.615 trillion. 1 The trillion mark was crossed for the first time in January.
And new cryptocurrencies pop up frequently. Currently, there are more than 8000 cryptocurrencies in circulation.2
But what do these digital currencies mean to you? Do you need to learn how to purchase them and spend them? Probably not.
Cryptocurrencies are basically virtually existing money that most people use for investment purposes. Fans of cryptocurrency say that digital transactions closed with it are more secure than those using credit cards. If you’re interested in the most secure storage of value and virtual transactions possible, then you might consider purchasing Bitcoin, Ethereum, and the rest. Just don’t expect to be able to buy everything you want with cryptocurrency just yet.
How does cryptocurrency work?
Are you struggling to understand the basics of cryptocurrency? It might help to think of a casino.
When you’re at a casino, you can spend traditional money to purchase chips. You then use these chips to gamble. When you’re done, you take your remaining chips — if you’re fortunate! — to the cashier and cash them in for previous currency form.
Cryptocurrency operates similarly: You purchase it with a more traditional form of payment, usually a credit card, debit card, or online bank transfer. You can then use your digital money to purchase items online, usually in peer-to-peer transactions, as if you were using physical cash or your credit card.
You’ll have to purchase a crypto wallet first and then store the digital currency in there. The wallet comes either as physical devices that you plug into your device’s USB ports or software to download into your laptop, smartphone, or other devices. Popular crypto wallet providers in India include WazirX, BuyUCoin, and Zebpay.3
How does a crypto wallet work, and what’s a crypto exchange?
Once you have your crypto wallet, you can deposit cryptocurrency and transfer this digital money from it when you want to make a purchase.
A wallet isn’t enough on its own, though. You also have to buy your digital money. To purchase a cryptocurrency, you’ll have to visit an online cryptocurrency exchange. These exchanges offer a wide variety of cryptocurrency types, with their purchase prices varying by the day. Some of the better-known exchanges include coinbase, Bitbns, CoinSwitch, and CoinDCX.
What can you buy with Bitcoin, Ethereum, and other digital currencies? Fans of the currency usually use it to invest and complete online transactions from individual sellers, usually through peer-to-peer transactions. You might use Ethereum to purchase software from a seller you’ve found on Craigslist. You might use Bitcoin to buy rare books from a seller you found on Reddit. Have your eye on a retro video game system from your childhood? The seller might accept cryptocurrency.
Most traditional online retailers, though, won’t accept cryptocurrency. This includes the biggest of them all, Amazon. The online giant doesn’t accept direct cryptocurrency payments. However, you can use this currency to purchase products from at least one major online retailer, Overstock.com.
Why would you want to use cryptocurrency?
If cryptocurrency can’t be spent in most traditional stores and if you need to invest in digital wallets and find exchanges even to purchase it, why would you bother?
It might depend on how much you value privacy and security when closing online transactions.
Cryptocurrency transactions rely on something known as blockchain technology. This is a type of digital ledger book that manages and records cryptocurrency transactions. Users of digital currency consider this type of tech to be more secure than using credit cards to make online transactions. Cryptocurrency transactions are encrypted, too, which boosts security while performing the transactions.
Others use cryptocurrency because the transactions are fast and come without fees. That makes buying online a bit less expensive. Its privacy feature offers using Bitcoin, Ethereum, Tether, and the rest anonymously. You can also invest the value as many do worldwide.
What about digital currency as an investment?
Other supporters of cryptocurrency purchase Ethereum, Bitcoin, and other digital currencies as an investment. When the digital currency increases in value after buying it, you can sell your crypto for a profit.
The challenge here? Cryptocurrency is notoriously volatile. Prices rise and fall quickly. You might purchase a large amount of digital currency only to watch as the price plummets the following week. If you hold onto it for another week, the price might soar again.
Because of this, investment experts warn that if you don’t have a high tolerance for risk, you should avoid investing in cryptocurrency.
Norton Crypto
One of the best antivirus worldwide, Norton 360, has now added cryptocurrency mining to the product list. On June 3rd, 2021, an official notice was posted on the Norton website informing the customers about their latest accessibility to cryptocurrency.
This brand new feature allows customers to safely and securely mine their digital currency through the Norton 360 applied devices, meaning that users will now be able to consume a reliable service for Ethereum mining.
Norton Crypto Wallet, a cloud feature securing the consumer’s earnings in case of hard drive failures or similar damages, is also included in the new update, permitting them to track and transfer their earnings reliably and quickly.
This only goes to show how popular cryptocurrency is becoming and how the adoption of this digital currency is rapidly increasing.
How do I avoid crypto scams?
As cryptocurrency becomes more popular, so do the scams associated with them.4
Some scammers set up fake cryptocurrency exchanges. For example, you might send real money to buy Bitcoin that doesn't exist. Once you send your funds, they're gone, and your crypto wallet remains empty.
Recently, a 60-year-old man was arrested in Delhi for scamming over 45 people, which involved the looting of Rs. 2.5 crores.5
To avoid these types of scams, only buy cryptocurrency from the better-known exchanges. Don't do business with exchanges that seemingly pop up out of nowhere.
Then there's a more old-fashioned scam: Con artists send emails that supposedly come from the IRS, your bank, or another service provider saying that you owe money for back taxes or that you need to make a quick payment to keep your bank account or credit card open. The email instructs you to send Bitcoin or some other form of digital currency for payment.
This, of course, is a scam. Legitimate government authorities and representatives from credit card providers, banks, or other service providers won’t demand money from you through email. They instead send notices through regular mail. And even if you do owe money, they will never ask for your payment in the form of cryptocurrency. They’ll want a check or credit card payment.
If someone does send an email asking you to send cryptocurrency to pay an old bill, check for its legitimacy before making any further replies. It's could well be a scam. You probably won’t get your money back in case it’s a con artist.
Digital currency isn’t a necessity.
Digital currency might be generating plenty of headlines. But that doesn’t mean you must use it. Most major retailers, both online and brick-and-mortar, don’t accept Tether, Bitcoin, or Ethereum. Paying with cash, credit cards, debit cards, or checks remains a far more common option.
But if you’re interested in cryptocurrency and you think it’s the money of the future? That’s fine, too. Just remember that you’ll still need old-fashioned rupees, cards, and checks in the present.
1 https://in.tradingview.com/markets/cryptocurrencies/global-charts/
4 https://in.norton.com/internetsecurity-online-scams
Editorial note: Our articles provide educational information for you. Our offerings may not cover or protect against every type of crime, fraud, or threat we write about. Our goal is to increase awareness about Cyber Safety. Please review complete Terms during enrollment or setup. Remember that no one can prevent all identity theft or cybercrime, and that LifeLock does not monitor all transactions at all businesses. The Norton and LifeLock brands are part of Gen Digital Inc.
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