Definition
Cryptocurrency is a type of digital asset that uses blockchain technology to record transactions securely and transparently. Unlike traditional currencies, cryptocurrencies typically operate without a central authority such as a bank or government.
🤔 Understanding cryptocurrency
Cryptocurrency exists entirely in digital form. Instead of physical cash, ownership is recorded on a distributed ledger called a blockchain. When you send or receive cryptocurrency, the transaction is verified by a network of computers and permanently recorded.
Some people use cryptocurrency for payments, while others view it as a digital asset that may store value or provide exposure to blockchain-based innovation.
Like any asset, cryptocurrencies can rise or fall in value. Where there is potential for return, there is also risk.
Example
Imagine you purchase Bitcoin because you believe digital assets may become more widely adopted in the future. If demand increases over time, the price may rise. If demand falls, the price may decline.
The outcome depends on many factors, including market conditions, adoption rates and regulatory developments.
Takeaway
Cryptocurrency is a digital asset built on blockchain technology. It offers new ways to transfer value globally, but it also carries market risk and price volatility.
Understanding how it works before investing is essential.
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