What is Cryptocurrency and How Does It Work?

As Bitcoin prices keep rising, a lot of people are more interested than ever in cryptocurrencies. Some people who had no interest in cryptocurrencies are now wondering if now is the time to invest. Even so, cryptocurrencies can be confusing, especially to those who have just started looking into them. So, what exactly is a cryptocurrency, and how does it work?

What is Cryptocurrency?

Think of cryptocurrencies as digital money. Just like the money at your bank, cryptocurrencies can be exchanged for goods and services. At the bank, though, you can find physical money and assets to back up the money you see in your account. Cryptocurrencies only exist in a computerized format. People store cryptocurrencies in digital "wallets," and from those wallets, they can either sell their cryptocurrencies or exchange them for products.

How Does Cryptocurrency Work?

To understand how cryptocurrency works, you'll need to know a little bit about blockchain. People obtain cryptocurrency by "mining" for digital coins. Mining is a complex process, but the most important thing to understand is that mining adds a set of information to the blockchain. The blockchain is a digital ledger. When someone makes a purchase with a cryptocurrency, that ledger records the purchase.

Why Do People Use Cryptocurrency?

People invest in cryptocurrency for a lot of reasons. Some get involved because they see cryptocurrency as a good investment. They hope to sell their digital assets at a higher price than what they paid for them.

Others buy cryptocurrency because they like the fact that it's a decentralized form of money that's not controlled by any government. It gives power to individual people instead.

Some see cryptocurrency as the future of digital transactions, and they want to be among the first people to own some of that currency.

Finding a Bank That Works with Cryptocurrency

Unlike regular currency, cryptocurrency isn't stored in a bank. However, because a lot of banks have investment programs, many banks can help people get started in cryptocurrency. By working with a bank, you'll have the advantage of working closely with an expert instead of figuring out a bunch of confusing terms on your own. You can also gain insights on which cryptocurrencies make the best investments, the best time to make those investments, and more.

However, it's important that you work with a community bank instead of a megabank. Megabanks are concerned with making as much money as they can off their clients. They're less focused on the needs of the individual. You'll need a bank that fosters one-on-one conversations, and you'll want a customer service team that legitimately cares about your financial wellbeing.

If you're looking for a way to get started in cryptocurrency, take a look at Bundlefi's database of community banks. We can help you connect to a bank that will focus on your success.