What is cryptocurrency?

Cryptocurrency is digital currency that can be used to buy goods or services.

Cryptocurrency is a type of virtual currency that uses cryptography to secure transactions that are digitally recorded on a distributed ledger, such as a blockchain. Blockchain is a specific type of database that relies on a network of computers to keep track of transactions rather than on a centralized authority like a bank. Cryptocurrencies do not have a physical form and exist only on the internet.

Interested in learning more about the basics of cryptocurrency? Read this helpful guide or tap on the section you're interested in learning more about. 

Table of Contents 

  1. Why was cryptocurrency created?
  2. What determines cryptocurrency value?
  3. How is cryptocurrency stored?
  4. What can I buy with cryptocurrency?
  5. How can I convert cryptocurrency to cash?
  6. What are the advantages of cryptocurrency?
  7. What are the disadvantages of cryptocurrency?
  8. Are cryptocurrency transactions anonymous?
  9. How can I get started with cryptocurrency?

Why was cryptocurrency created?

To engage in financial transactions without exclusively relying on banks or governments. The very first cryptocurrency created was Bitcoin. Bitcoin was created as a way for people to engage in financial transactions without exclusively relying on banks or governments. It's a digital currency that allows you to make transactions at any time and with anyone, anywhere around the world with limited restrictions.

What determines cryptocurrency value?

Much like anything that holds value, supply and demand play a big factor in market price. Digital currencies are no exception. The supply of many cryptocurrencies is limited and as demand increases, so does the value.

How is cryptocurrency stored?

Generally, cryptocurrency is stored using a digital “wallet” that you can connect to from a mobile device or computer. To send cryptocurrency to another user, you would scan or copy an address from the user’s wallet and fill in the amount you want to send. Your request would then get sent to the selected cryptocurrency network to be verified and validated. 

What can I buy with cryptocurrency?

Cryptocurrencies are often perceived as investments, much like stock. However, there is an increasing number of goods and services that accept cryptocurrency as a form of payment. One way to use your cryptocurrency is to connect it to a debit card. This lets you spend it much like cash. The cards are issued by major credit card companies, including Visa and MasterCard. So wherever a Visa is accepted, you can spend your cryptocurrency.

How can I convert cryptocurrency to cash?

There are several ways to convert cryptocurrency to cash and ultimately move it to a bank account. One of the most accessible ways to sell cryptocurrency is on a cryptocurrency exchange like Coinbase. Vast Bank is a Coinbase partner and provides you with one of the easiest methods to buy and sell cryptocurrency as well as deposit converted cash directly to a bank account.

What are the advantages of cryptocurrency?

The primary benefits of cryptocurrency include autonomy, discretion, and accessibility. In theory, digital currency gives you more control over your own money than fiat (or government-issued) currency. Crypto-owners have the option to spend money without directly dealing with a bank or government. Because of the peer-to-peer nature of cryptocurrency, you can send and receive payments to or from anyone, anywhere with little to no transaction fees. Much like cash-only purchases, cryptocurrency purchases can be made without exchanging personally identifying information (unless you voluntarily provide it).

What are the disadvantages of cryptocurrency?

The main disadvantages of cryptocurrency include cybersecurity, price volatility, and irreversible transactions. Because cryptocurrency relies on digital technology, it's subject to cybersecurity breaches by hackers. There is no fraud protection with cryptocurrency, so if it is hacked or lost, it's gone for good.

Another drawback is price volatility. Typical factors that influence the value of currency do not apply to cryptocurrency (e.g., monetary policy, inflation rates, etc.). However, there are some key drivers of price, including: the supply of cryptocurrency and market demand for it, the number of competing cryptocurrencies, and the exchanges it trades on. Increased adoption should also increase consumer confidence and decrease this volatility.

Finally, cryptocurrency transactions are irreversible. Once a cryptocurrency transfer has been authorized, it can’t be reversed. This is a hedge against fraud which requires a specific agreement to be made between a buyer and seller regarding refunds in the event of a mistake, fraudulent activity or returns policy.

Are cryptocurrency transactions anonymous?

Cryptocurrency was originally meant to operate much like cash, giving you the ability to buy and sell products on digital platforms without financial details and records being exchanged. However, it doesn't quite work that way for most people. In reality, the average person must provide personal details to buy and sell cryptocurrency, including an email address, name, and the ability to link to a bank account.

How can I get started with cryptocurrency?

Opening an account at Vast Bank enables you to have your traditional money and cryptocurrency side-by-side in one location with the full services of a national bank. There are many cryptocurrencies available, including Bitcoin, Ethereum, or Litecoin. 

Download the Vast Crypto Banking App to get started today. Available in the Android and App Store.