What You Should Know Before Investing In Crypto
Cryptocurrencies are among the most fascinating and most controversial technological innovations of the past decade, with the potential to completely disrupt centralised financial and technological systems as we know them.
However, unlike collectable crypto coins, cryptocurrencies are not tangible, and that can cause problems for people who do not do their research before investing.
Cryptocurrencies Are Very Volatile
Volatility is one of the more infamous aspects of the crypto experience, and looking at the exchange rate of Bitcoin, Etherium and Dogecoin shows that the world of crypto travels exceptionally quickly.
One day billions can be wiped off the global value of crypto and yet at the same time a sudden spike can come from nowhere, all dependent on factors far removed from the market itself.
Like with any volatile investment, make sure you know what you are getting into before investing.
The Environmental Impact
Bitcoin, and other cryptocurrencies that use a “proof of work” model, work by tracking and validating transactions and then attaching them to a gigantic chain of data blocks, which is where the term blockchain comes from.
Confirming the validity of these blocks is the processor-intensive part, as these equations are exceptionally long and impossible to solve by hand. This process is also known as mining.
And much like physical mining, it uses a lot of electricity. The Bitcoin network alone uses more energy in a single year than the entire country of Argentina, but its impact on the environment depends on where that electricity comes from.
Depending on which figures you trust, between 39 per cent and 74 per cent of crypto mining comes from renewable energy, although it is important to note that not all cryptocurrencies require mining and so have a lessened impact on the environment.
Have A Reason To Invest
Part of the issue with the discourse surrounding crypto is that people think that it is a good idea but do not quite understand why, or know what their reasons are for investing besides treating crypto as a form of gambling.
Decentralised financial instruments, as in currencies that use technology to replace central institutions like stock exchanges and banks, could help to boost access to money and allow people to manage their money better and enable transactions across borders without the need for expensive conversion.