This world-wide phenomenon called cryptocurrency has seen its widespread reception as a digital means of paying fees and capital repository. This virtual currency has captivated the imagination of many, instilled fear in many people, and has bamboozled the lot of us. With bankers, lawyers, consultants, developers, and researchers achieving narrow knowledgeability about how it works, we embark on demystifying the concept of cryptocurrency.
Since we have no time to waste, let’s get right onto it.
What Is Cryptocurrency?
A cryptocurrency is digital currency that is safeguarded by cryptography, a special aspect of encryption science, which makes for near counterfeit impossibility to. Bitcoin is one particular cryptocurrency which has become popular lexicon as the premier digital currency.
It is the original cryptocurrency, developed in 2008 by an anonymous group working under the pseudonym Satoshi Nakamoto.
How Does Cryptocurrency Work?
A cryptocurrency has a ledger which makes all deals go public so that there is equality and zero proneness to double-funding. Notably, no one possesses the ledger or cryptocurrency for that matter. Cryptocurrency is autonomous, self-sufficient and does not require the intervention of external players.
Characteristics Of Cryptocurrencies
- Digital: cryptocurrency leverages blockchain science to achieve decentralisation, immutableness, and transparency.
- Decentralised: cryptocurrencies are not operated or ascribed to any principal power. Thus, the decentralised characteristic of the blockchain ensures that cryptocurrencies are protected from conventional, government-controlled currency handling.
- Peer-to-peer: trading cryptocurrencies involves direct transfer between person-to-person via private and public keys with marginal facilitation charges, enabling investors dodge extortionist charges orthodox financial bodies demand. Essentially, there are NO trusted third parties when talking cryptocurrencies.
Currency of any form involves some authenticated record entered into the databank of accounts, transfers, as well as balances. In new cryptocurrency, all peers or miners possesses comprehensive timeline of each transaction and balance of every account.
A simple deal features a document which reads something like, “James sends Y Bitcoin to Alice” &this is vetoed by James’ private key. This is a publically available cryptography. Therefore, the deal is broadcast throughout the system and transmitted from one peer to another.
Blockchain And Crypto
Understanding what cryptocurrency does differently means to understand blockchain. All cryptocurrencies make utilises DLT when eliminating mediators from the equation. DLT means the database where transactional information is registered across manifold computer networks. And guess who developed the original blockchain? That’s right, Satoshi Nakamoto. Bitcoin is traded in 96 countries & counting, with more than 10,000 deals completed per hour.
Many analysts view blockchain technology as possessing great potential for applications such as online voting and crowdfunding.
Hundreds crypto currency types have emerged after Bitcoin and they all want to make a difference by outmuscling each other. Hence, a new investor in cryptocurrency would want to learn more about some other cryptos that have emanated since Bitcoin:
Ethereum: this deploys complex blockchain encryption compared to Bitcoin. Many investors have termed Ethereum Blockchain 2.0. Ethereum enables users generate their proprietary apps on its blockchain.
Ripple: today this is the cryptocurrency with the best bandwidth. The Ripple Foundation gave up mining, so they can improve the ledger in verify transactions faster.
Litecoin: similar to Bitcoin, Litecoin’s transaction processes 4 times faster than Bitcoin. Also mining is stress-free compared to Bitcoin. Hence, investors with less advanced computers can mine it.
Cryptocurrency Is A New Trading Market
Trading cryptocurrencies has become brisk business, with the total value of all the cryptocurrencies being over $350B. Every prospective cryptocurrency trader hoping to rake in millions & espouse the technology will be glad regaining control of their money and gain financial freedom.
Cryptocurrency is digitalised money that is decentralised. The system is designed to beat corrupt fiscal institutions and circumvent third parties securely via making transmutable transactions worldwide.
A new cryptocurrency investor asking “what is crypto mining?” will see that it is a digital currency and a non-centralised version Debit cards or payment gateways like PayPal, with the account representing the cryptocurrency in lieu of fiat currency like the dollar, euro, etc. It deploys peer-to-peer (P2P) tech to process fiscal transactions as opposed to a principal authority.