If you have any interest in finance, economics, or keeping up with current events in general; chances are you’ve heard of Bitcoin in the past couple of weeks. The most well known and highly valued cryptocurrency, Bitcoin has been making headlines left and right lately due to a single unit of this currency climbing up to a staggering eighteen-thousand dollars in value in less than a decade. Of course, the currency then plummeted, but it seems like it’s on the upswing once more.

While Bitcoin is still a rather risky investment that merits careful research and extreme caution when added to a portfolio, it has inspired hundreds of other cryptocurrencies and made it clear that this monetary concept is here to stay. It may take a while before this kind of currency becomes mainstream. However, it is tremendously important for consumers and businesspeople alike to learn what exactly cryptocurrency is, how they can benefit from it, and what to watch out for on both the individual and marketplace levels.

What is Cryptocurrency?

Cryptocurrency is a digital currency not regulated by any kind of governing body. Its value is solely determined by individuals, and without a nation or nations controlling the disbursement of more currency to combat trends like inflation. Basically, it’s a currency created and affected entirely by individuals in, and the effects of, a totally free market economy.

Cryptocurrency, at its inception, is digitally ‘mined’ by running software that generates a currency. Although, this process requires more time and computing power as more of a cryptocurrency enters circulation; making it virtually impossible to generate older cryptocurrencies – such as Bitcoin – in this manner. Once the mining process finishes, cryptocurrency transfers to an extremely secure digital ledger and transaction software know as blockchain. The trading of cryptocurrency occurs on various dedicated online marketplaces, and the trading of cryptocurrencies for federally endorsed currencies or other cryptocurrencies determines the value of said cryptocurrency.

What are the Benefits of Cryptocurrency?

The decentralized design of cryptocurrency essentially means that the value of cryptocurrency is determined solely by users and not affected by any third-party actors or governments. This also means that the currency is accessible to anyone with an internet connection and is universally recognized across the globe. As they tend to be hosted on secure blockchain networks, cryptocurrencies also tend to be extremely hard to steal, and it allows for individuals to make purchases using only their online profile, without their actual identity becoming involved.

Of course, cryptocurrencies are also valuable – and they big reason they are in the news now – is because of the investment opportunities that they provide. Cryptocurrencies are an emerging concept in the world, and payouts can be rather high when investing in them. While this still is an emerging investment opportunity, so long an investor follows safe practices and performs a healthy amount of research; cryptocurrency can be a higher risk addition to any investment portfolio.

What are the Risks?

Cryptocurrency is as risky to invest in as any other completely emerging industry. While some of the most famous cryptocurrencies have been on the rise as of late, it is still a very volatile field with numerous speculation bubbles. As with many emerging industries, the legality of cryptocurrency is still being determined by governments around the world, there have been a few high-profile cases of fraud, and there is a huge divide between those who are enthusiastic about crypto and those who are deeply skeptical.

Outside of investing, cryptocurrency may someday shake up and potentially harm numerous industries. There could be a lot of opportunities for exploitation if cryptocurrencies start appearing widely in the video game industry, which demonstrated with Loot Box debacles that it’s not the best at self-regulating against poor business practices. Cryptocurrency also requires physical resources – such as electricity – to be used in order to generate purely digital currency that cannot be widely used to make purchases; which isn’t the best for the environment. Lastly, there is currently a ton of poorly researched and shortsighted advice making the rounds on the internet, which can hurt both individuals and the crypto marketplace as a whole.

Basically, there is a lot of potential in cryptocurrency from both an investing standpoint and as a new means of paying for goods and services. However, it’s still well in its infancy, and there’s no telling where it could go from here. However, if you are interested in capitalizing on this growing phenomenon, this is definitely the time to do so. To learn more about cryptocurrency and how Madison is embracing the new investment opportunity, be sure to read The Cap Time’s piece, Mad About Bitcoin: The Cryptocurrency Phonomena Hits Madison featuring Hyper Innovation founder Sandra Bradley.