By Harry Howard for the MailOnline
What is cryptocurrency?
A cryptocurrency is a decentralised digital currency that can be used for transactions online.
It is the internet’s version of money – unique pieces of digital property that can be transferred from one person to another.
Unlike centralised currencies such as the Pound Sterling or the U.S. dollar, there is no governmental authority that manages cryptocurrencies or how much they are worth.
All cryptocurrencies use what is known as blockchain technology – an open ledger that records transactions in code.
Explaining the blockchain, crypto expert Buchi Okoro told Forbes: ‘Imagine a book where you write down everything you spend money on each day.
‘Each page is similar to a block, and the entire book, a group of pages, is a blockchain.’
The blockchain allows all records of transactions to be recorded and checked to prevent fraud.
How do you buy them?
Cryptocurrencies can be bought on what are known as exchanges, with Coinbase and Bitfinex being among the most popular.
Exchanges allow ordinary people with little knowledge of the technical aspects of cryptos to buy them simply.
The exchanges allow traders to buy fractions of coins rather than whole ones.
It means they can spend as little as much as they like – rather than forking out what could be tens of thousands of pounds if they were to buy a whole coin.
However, most exchanges charge a fee to invest.
Generally, this is a small percentage of the amount of crypto purchased, along with a flat fee depending on the size of the transaction.
In the UK, Coinbase charges a 3.9 per cent fee for orders over £200 that are bought using a debit card.
Purchases through a UK bank transfer incur a smaller 1.4 per cent commission.
What can you use cryptocurrencies for?
Cryptocurrencies can be used to make purchases and to send money abroad.
However, at present, most retailers do not accept the likes of bitcoin as a form of currency.
One way to get around this is to exchanging cryptocurrencies for gift cards that can then be used at ordinary retailers.
Crypto debit cards can also be used to make purchases. The cards are preloaded with a cryptocurrency of your choice.
Whilst the user spends their cryptocurrency, the retailer will receive ordinary money as payment.
Cryptocurrencies are also increasingly regarded as a form of investment, although experts caution about their volatility.
Bitcoin has long been referred to as ‘digital gold’ by fans because of the fact that, like the precious metal, it is regarded by some as a good store of value.
However, given it’s extreme volatility and rapid price falls in recent months the term is now used ironically by many.
Why are cryptocurrencies popular?
Cryptocurrencies are popular in part because they …….