Simply put, cryptocurrency is digital money designed for use over the internet. You can use crypto to send money online instantly without the need for a bank or middleman. Cryptos work using open-source software on computer networks anyone can participate in. But what is cryptocurrency, really, if it’s just software on a computer? And how does it work?
How does cryptocurrency work?
Crypto isn’t controlled by any bank or government. Instead, it works using a new technology called a blockchain. A crypto blockchain is like a digital bank ledger or balance sheet. Each crypto transaction is vetted and verified by computers across the entire peer-to-peer network. A blockchain constantly verifies old and new transactions to ensure the network stays secure.
What are the pros and cons of crypto?
Crypto has only been possible in recent history because of new computer technology and many kids’ most dreaded school subject—math. With new tech, there are always pros and cons.
- Anyone with a smartphone or internet access can buy and use crypto.
- Cryptos offer faster and cheaper money transfers that don’t require a bank since they’re not regulated.
- The volatile crypto market can be a great opportunity to invest or make money buying and selling.
- No bank or authority is responsible for your money.
- Volatility also means risk. There’s no guarantee your investments will go up in value.
- Crypto money can be transferred and moved anonymously.
Types of cryptocurrency
The first and most known cryptocurrency, Bitcoin, started in 2008. Since then, new cryptocurrencies have been created that serve all sorts of purposes. Crypto varies in price from fractions of a penny to thousands of dollars per token. People use crypto as a digital way to pay for things online and also buy crypto to hold as part of an investment strategy. Some of the most popular types of crypto are:
What is cryptocurrency investing?
You invest when you buy crypto assets to keep if you believe they will go up in value over time. If you had bought Bitcoin back in 2008, you’d be looking at quite a large amount of money, as Bitcoin has soared in value over the past decade. The value of any token can change for better or worse, and cryptos can be risky investments. Many people buy and sell crypto to make money in the volatility. While investing can be a great opportunity, remember crypto value can go down just as quickly as it goes up.
Read more articles about explaining crypto to kids here.