Cryptocurrencies are digital currencies that we can use to buy goods and services that accept that currency as a form of payment. For example, if someone says they accept digital currency as payment then you use this currency to buy whatever you want.
Since the real-world currencies themselves are of various types such as rupees, dollars, yen, etc, digital currencies are also of various types, some of the popular ones are Bitcoin, Ethereum, Binance Coin, Dogecoin, USDC Coin, etc.
Now that you understand what they are, let’s talk about why should we use them? Can’t we use our normal “Rupee” or “Dollar” Currency, well normal money transactions say via cards and bank to bank payments are all recorded with your name and certain details so everything payment can be traced back to who made the payment and where, but in case of digital currency, I can make the payment to anybody in the world without anybody knowing what my name is or where I am from?
For example, my name is Rishika and I want to give money to someone say, Bob.
In this scenario, cryptocurrency assigns Rishika a ten-digit number and Bob the recipient a ten-digit number, and now Rishika can give money to Bob. Now if someone looks at this transaction, they will only see that 1234567890 gave money to 1989873938., there will no mention of Rishika or Bob in the whole transaction. This form of currency lets people give or take the money being anonymous. It is this reason why they are so popular.
One more popular reason is that
- Some people enjoy the fact that the banks don’t do any of these transactions, as banks tend to reduce the value of money via inflation.
So, should I buy some? you ask!
Cryptocurrencies are very volatile, they are not the most stable option for investors and that has also been talked about by notable investors such as Warren Buffet. He on one incident compared Bitcoins to paper checks “It’s a very effective way of transmitting money and you can do it anonymously and all that. A check is a way of transmitting money too. Are checks worth a whole lot of money? Just because they can transmit money?”
Though risky it certainly does give good profits as many of us have heard.
While some currencies such as Bitcoin can be bought using US dollars, others require that you pay using digital currency only, be it the same or some other. If you have to buy a digital currency using a digital currency, then you will need a wallet, an online app that can hold your digital currency. Then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Coinbase is one popular cryptocurrency trading exchange app where you can create a wallet and buy and sell digital cryptocurrencies.
Cryptocurrency is making a lot of noise in the media today. Carisma solutions had started working towards our accounting readiness for Cryptocurrency and Bitcoin in the year 2017. We have executed client accounting work in cryptocurrency. We will delve more into this in Jun.
Rishika Gupta is a passionate digital marketer. She loves 80’s music and is a hardcore anime fan. If you like what she writes about, send your feedback at rishika.gupta@purplequay.com.au. PurpleQuay builds Enterprise software products and Learning management products for the education industry, screening, and testing software for Non-Communicable diseases and rare diseases in the Health care industry, and productivity solutions for the accounting industry.
