What is cryptocurrency?
Cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009.
Bitcoin
Bitcoin is a cryptocurrency, a form of electronic cash. It is a decentralized digital currency without a central bank or single administrator that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto and released as open-source software in 2009.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. Bitcoin can also be held as an investment. According to research produced by Cambridge University there were between 2.9 million and 5.8 million unique users using a cryptocurrency wallet, as of 2017, most of them using bitcoin
Ethereum
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference.
Ethereum is a public blockchain-based platform that runs smart contracts and allows developers to create and deploy decentralized applications. Ethereum is unique in that it allows developers to create their own digital tokens, which can be used to represent virtual assets or commodities.
Tokens can be traded on decentralized exchanges, and can also be used to raise funds for blockchain-based projects. Ethereum’s native token, ether (ETH), is used to pay transaction fees and fuel transactions on the network.
Ethereum was launched in 2015 and has since become one of the most popular blockchain platforms in the world, with a market capitalization of over $25 billion as of June 2018.
Litecoin
Litecoin is a cryptocurrency and an open-source project released in 2017. Its main purpose is to be a faster and lighter alternative to Bitcoin. Think of it like the silver to Bitcoin’s gold.
Litecoin is similar to Bitcoin in many ways, but it has a faster block generation rate and hence offers a faster transaction confirmation. It also uses a different proof of work algorithm – Scrypt, which is believed to be ASIC resistant. This allows anyone with a CPU or GPU to mine for Litecoin.
How do people acquire cryptocurrency?
There are a few ways to acquire cryptocurrency. You can buy it with fiat currency, or you can earn it through a process called mining. You can also receive it as a gift, or in exchange for goods or services. Let’s take a closer look at each of these methods.
Buying on an exchange
One common method for buying cryptocurrency is through an online exchange. Websites like Coinbase and Kraken are designed to give users an easy way to buy, sell, and trade digital coins and tokens. These exchanges work like traditional stock exchanges, with buyers and sellers coming together to trade at a mutually agreed-upon price.
To use an exchange, you will need to create an account and verify your identity. Once your account is verified, you can link it to your bank account or credit card so you can buy and sell crypto coins. Some exchanges also allow you to trade in fiat currencies, such as US dollars or Euros.
Cryptocurrency mining
Cryptocurrency mining is the process by which new cryptocurrencies are created. The first cryptocurrency, Bitcoin, was created in 2009 by an anonymous person or group of people under the name Satoshi Nakamoto. Cryptocurrencies are created through a process called mining. Miners are rewarded with cryptocurrency for verifying and committing transactions to the blockchain, a public ledger of all cryptocurrency transactions. Ethereum, the second-largest cryptocurrency by market capitalization, is also mined.
Mining is a resource-intensive process that requires specialized hardware and software. A miner’s computer must be able to solve complex mathematical problems in order to verify transactions on the Ethereum blockchain. When a transaction is verified, it is added to the blockchain and the miner is rewarded with a small amount of Ethereum. Ethereum miners can choose to be paid in ether, the cryptocurrency platform’s native token, or in another currency such as Bitcoin or U.S. dollars.
The process of mining cryptocurrencies requires a significant amount of computer power and electricity. Cryptocurrency mining operations have been set up in countries with cheap electricity, such as Iceland and Venezuela, to take advantage of low-cost energy sources. In China, where most Bitcoin mining takes place, coal-fired power plants provide much of the country’s electricity. The high energy consumption of cryptocurrency mining has led to concerns about its environmental impact.
How do people use cryptocurrency?
Cryptocurrency is a type of digital asset that uses cryptography to secure its transactions and to control the creation of new units of the currency. Cryptocurrency is decentralized, which means it is not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrency is often bought and sold on decentralized exchanges and can also be used to purchase goods and services.
Online purchases
Cryptocurrency is digital money. That means there’s no physical coin or bill — it’s all online. You can use cryptocurrency to buy things from some businesses, although not many. Some people speculate that the price of a coin will go up or down, and they buy or sell accordingly. Cryptocurrency is decentralized, meaning it isn’t controlled by any one company or government. The network that keeps track of all these transactions is called a blockchain, and each transaction is a “block” in the chain.
People can send cryptocurrency to each other using mobile apps or their computers. It’s similar to sending cash digitally, and you can use it to buy products and services just like you would with regular money. Some companies have helpful uses for cryptocurrency being built into their systems. For example, Ethereum is working on a system where people can vote online securely, without worrying about fraud
Store of value
Cryptocurrencies are often compared to gold. Gold is a very old store of value and medium of exchange. It has been used for this purpose for thousands of years. Like gold, cryptocurrencies are also scarce resources. They are difficult or impossible to counterfeiting/duplicating. Bitcoin, for example, has a set supply of 21 million BTC that will ever be mined.
Cryptocurrencies are also often compared to stocks/shares because people can invest in them and make a profit if they go up in value. Unlike stocks/shares, which represent a partial ownership stake in a company, cryptocurrencies give you full ownership of the asset.
What are the benefits of cryptocurrency?
One of the benefits of cryptocurrency is that it can be used to anonymously send and receive payments. Transactions made with cryptocurrency are also irreversible, which means that there is no risk of chargebacks. Cryptocurrency is also not subject to inflation, which means that it can be a good store of value. Let’s take a look at some more benefits of cryptocurrency.
Decentralized
Cryptocurrencies are digital or virtual tokens that use cryptography for security purposes. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.
Secure
A cryptocurrency is a digital or virtual asset designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.
Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. The prices of cryptocurrencies are volatile, which has made investors both wary and intrigued. Despite the fact that it is not backed by any physical commodity, many experts believe cryptocurrencies have intrinsic value. Some experts also believe that investing in cryptocurrency is a good way to hedge against other investments that may not do well in an economic downturn.
Cryptocurrency transactions are immutable, meaning they cannot be reverse once completed. This is due to the fact that blockchain technology, which most cryptocurrencies utilize, records and verifies transactions transparently and permanently on a decentralized ledger. This makes cryptocurrency an attractive option for businesses and individuals who want to conduct transactions without having to go through a third party such as a bank or credit card company.
Private
With traditional fiat currencies, governments and financial institutions have sole control over the money supply and can manipulate it at will, often causing inflation and devaluation of the currency. Cryptocurrencies are decentralized, meaning their supply is not controlled by any one entity. Instead, cryptocurrencies are produced through a process called “mining.”
Miners use powerful computers to solve complex math problems, and in exchange they are awarded cryptocurrency. Because there is a limited supply of most cryptocurrencies, and because more tokens are mined as time goes on, they are considered deflationary assets. Many believe that this quality gives them long-term value and makes them good investments.
What are the risks of cryptocurrency?
Cryptocurrency is a digital or virtual asset designed to work as a medium of exchange. Cryptocurrencies are decentralized, which means they are not subject to government or financial institution control. One of the risks of cryptocurrency is that it is highly volatile, meaning its value can fluctuate greatly in a short period of time. Another risk is that it is not backed by any physical asset, so there is no intrinsic value.
Volatile
Cryptocurrencies are digital or virtual tokens that use cryptography for security. They are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods or services.
Cryptocurrencies are volatile, meaning their prices can fluctuate widely. This is due in part to their decentralization, as there is no central authority regulating them. Additionally, cryptocurrencies are not backed by assets or fiat currency, so their value is entirely based on supply and demand. When there is high demand for a particular cryptocurrency, its price will increase. However, if there is not enough demand, the price will drop.
Hackable
Cryptocurrencies like Bitcoin, Ethereum, and Litecoin are all based on blockchain technology. That means they’re digital records of transactions that are maintained by a decentralized network of computers. Cryptocurrencies are incredibly secure because they’re incredibly difficult to hack. In fact, the only way to really hack a cryptocurrency is to hack the computer network that maintains the blockchain. And that’s incredibly difficult to do.
Not yet mainstream
Cryptocurrency is a digital or virtual asset designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.
Cryptocurrencies are decentralized – they are not subject to government or financial institution control. Bitcoin, the best-known and first major cryptocurrency, was created in 2009 by an anonymous person or group known as Satoshi Nakamoto.
Since then, numerous other cryptocurrencies have been created. These are often called altcoins, as a blend of alternative coin. Bitcoin and its derivatives use decentralized control as opposed to centralized electronic money/centralized banking systems. The decentralized control is related to the use of Bitcoin’s blockchain transaction database in the role of a distributed ledger.
Decentralized cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known. In centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers.
In case of decentralized cryptocurrency, companies or governments cannot produce new units, and have not so far provided backing for other firms, banks or corporate entities which hold asset value measured in it. The underlying technical system upon which decentralized cryptocurrencies are based was created by the group or individual known as Satoshi Nakamoto.