Chip Chick Explains: What The Heck Is Cryptocurrency?

Here at Chip Chick, my whole goal is to provide you all with real, useful information in a way that is easy to understand. We’re in the era of information overload, and it’s unfortunately hard to find things told to you straight up. I’m doing a new series called Chip Chick Explains, where I tackle some tech that’s generally told in a way that’s, well, way over our heads. You don’t need to be a brainiac to understand cryptocurrency, because I’m about to break it down for you. So, here we go with what the heck is cryptocurrency?

It’s really just digital money you can use to buy things. Yeah, that’s it! Easy to understand now, huh? Let’s break down why you need to care about it and how it actually works, next!

Why should I care about cryptocurrency?

Cryptocurrency is positioned to be the future of money. It’s current revolutionizing the system, because you can transfer money around in a way that is entirely transparent. Everyone is able to view the transfer and see that it is indeed legitimate.

Cryptocurrency is built on blockchain, and it’s decentralized, meaning you don’t need to trust a gatekeeper or third party. PayPal, or banks, are traditionally who you rely upon to exchange money. You’re trusting them to keep not only your money safe, but your data and transactions as well.

It’s far too centralized, and in turn that makes it quite vulnerable. Hacking and human error open you up to security breaches and errors. In contrast, blockchain won’t ask for your data or ruin any of your transactions.

It’s also highly useful for travelers. You can transfer funds around for free, or for much less than traditional banks would charge you.

How is cryptocurrency made?

Cryptocurrency is really just an encrypted string of data. It’s encoded to be a specific unit of digital currency. Mathematical problems have to be solved in order to create cryptocurrency. Basically, the bottom line is writing code can produce cryptocurrency.

If you can’t write code, there are a variety of solutions out there to create codes for you in order to create cryptocurrency.

What’s the downside to cryptocurrency?

The downside though is that the pricing is extremely volatile. It is also possible for hackers to steal cryptocurrency, as anyone who has access to a given token’s unique code has the ability to turn around and spend it.