More Lenders and Sellers Accepting Cryptocurrency
DECEMBER 21, 2021
By Kim Komando
Your buyer wants to go to closing using cryptocurrency? You don’t have to be a technology expert, but it helps to know the language. Here are the basics.
NEW YORK – Despite Bitcoin launching way back in 2009, it’s only recently that you can’t turn on the news or browse the web without coming across some mention of cryptocurrency.
I got so many questions from my readers and national radio show listeners that I wrote an e-book about crypto to help. I demystify digital currency, mining and how to get started trading.
Sadly, I also hear from people who got fooled by one crypto scam or another. Where there is money, criminals are waiting.
Before we get started, know this is not financial advice. The crypto world is volatile, and you should never risk money you aren’t comfortable losing. Now, let’s take a look at some of the most common lingo:
Every cryptocurrency transaction is processed, verified and recorded on a virtual ledger known as a blockchain. When someone buys or sells using cryptocurrency, another entry is made.
Think of the blockchain as a series of boxcars from a train. When a cryptocurrency transaction is made, another boxcar gets added to the train.
The blockchain is decentralized. This means it’s not stored on one machine or even across one network. Instead, the blockchain exists on computers all over the world that are accessible because of the internet.
People and companies help verify each transaction that gets added to the blockchain using their own computer’s processing power on a decentralized peer-to-peer network. Each transaction is timestamped and individually encrypted, and cannot be reversed or changed. Yes, you read that right – crypto transactions cannot be reversed.
I know what you’re thinking: “I thought a Fiat was a car.” Not in crypto-land. Fiat money is government-issued currency. If you’re in the United States, that means the U.S. dollar.
Cryptocurrency, on the other hand, is virtual money. Cryptocurrencies aren’t backed by governments or any other standard used with traditional currency. Each “token” represents the amount you own.
How much each token is worth varies based on the current market value. One day it’s up; the next day down. With cryptocurrency, the price fluctuations can happen much faster and are more extreme. A good resource to check the current prices is CoinMarketCap.
Here’s an easy one to remember. An altcoin is any digital currency that’s not Bitcoin. There are thousands of cryptocurrencies.
At the time of this writing, these are the five currencies with the highest market caps. (That is the total market value of the circulating supply.) Since crypto moves so fast, this list may have already changed by the time you’re reading:
To buy cryptocurrency, you need to start with an exchange. Think of an exchange as being like a crypto middleman. It’s an online service that allows you to exchange your fiat for crypto or change crypto into fiat.
If you’re familiar with traditional investing, a crypto exchange functions as a brokerage. You can expect to pay fees for most transactions.
You can also buy crypto through apps you already might be using, like Venmo, Robinhood or Cash App.
In basic terms, a cryptocurrency wallet is an app or physical storage device that allows you to store and retrieve your digital currency. Wallets can hold multiple cryptocurrencies, so you’re not limited to just Bitcoin, for example.
Whether you use an app or a physical wallet, it’s important to note that the currency itself isn’t stored there. Rather, wallets store the location of your currency on the blockchain.
Wallets are split into two main categories: hot and cold. A hot wallet is, by definition, connected to the internet. The most secure way to store your cryptocurrency is with a cold wallet – one that isn’t connected to the internet.
Physical wallets come in different types but are usually specially designed USB drives that directly store your cryptocurrency for later use. Physical wallets provide you the most protection from hackers.
Two popular cold wallets are the Ledger Nano X and Trezor Model One. Of the two, I prefer the Ledger Nano X because it supports 23 different cryptocurrencies and has additional features.
You have probably heard this term associated with Bitcoin, which is created by mining. Computers mine coins by solving complex math problems. The more powerful the computer, the faster it can “think.”
Now, if your computer is the fastest one to solve the problem, bingo – you win one unit of whatever cryptocurrency you’re mining.
While there are a few cryptocurrencies out there with an infinite supply, most have a limit. For Bitcoin, that limit is 21million. The last coin will be mined in 2140 or sooner.
Here’s another simple one. DeFi is a shortened version of decentralized finance. This term refers to financial transactions that happen without a “middleman,” like the government, a bank or another financial institution.
You’ve heard of them: Nonfungible tokens. That’s a fancy way of saying, “This digital item is one of a kind and irreplaceable.” It applies to anything you can imagine, from online artwork to songs, viral videos, articles, text logos and GIFs.
Some people collect vintage cars, wines, famous art and baseball cards. Now, any digital item also can be turned into a collectible. They also act as status symbols online. Check Jimmy Fallon’s Twitter profile picture for an example.
The only way to buy an NFT is by using cryptocurrency. You can buy an NFT through an auction platform or secondary marketplace, or by participating in a mint. What’s that, you ask?
Minting is how a file, such as a JPEG or GIF, is recorded to a blockchain. After an NFT is minted, it can be sold or traded. If you are participating in a mint, that means you are the first person to buy that work from its creator. You can hold it, sell it or trade it.
During the minting process, the creator specifies the royalties he or she receives from future sales. This acts as a commission if the work changes hands in the future and is a big draw for artists looking to go digital. If you sell an NFT on a secondary marketplace, it likely gets a cut of the sale too.
Here’s a term you might see on social media. HODL stands for “hold on for dear life.” Some say it originated as a typo of the word “hold” on a Bitcoin forum, but now it’s everyday slang.
The idea behind it is simple: If you believe a project or currency will gain more value, just “hodl” even through dips in the market.
Copyright 2021, USATODAY.com, USA TODAY. Learn about all the latest technology on the Kim Komando Show, the nation’s largest weekend radio talk show. Kim takes calls and dispenses advice on today’s digital lifestyle, from smartphones and tablets to online privacy and data hacks.