Introduction of Crypto-currency
Since the beginning of 2021, cryptocurrency has been over the various trending lists such as Twitter and has been a hotly debated topic throughout news outlets and stock exchanges.
And while there are already several self-made millionaires with the help of various cryptocurrencies, there are still a lot of us who are not aware of the basics related to it.
So, in this post, let’s check out some of the important questions that can help you understand the latest trending sensation, i.e., cryptocurrency. And what’s the better way than starting with asking the first most important question – What is Cryptocurrency?
A cryptocurrency is like real money but in a digital or virtual form.
It can be used to receive and send payments over carrying around and exchanging money in the real world.
The transactions here occur purely in the form of digital entries where the transferred cryptocurrency funds are recorded in a public ledger.
A public ledger is a digital record book system that stores and maintains the participant’s identity anonymously as well as their cryptocurrency balances.
The public ledger also keeps a track record happening between network participants executing transactions
The word cryptocurrency is derived from the words “encryption” and “tokens” combined. Cryptocurrencies are secured by Calligraphy and stored in a digital wallet.
What is Cryptography?
Cryptography is a secured coded technique of exchanging cryptocurrencies between the recipient and the sender that is nearly impossible to breach by any such methods as online hacking.
It is also an integral part of blockchain technology that strengthens it with the trait of immutability, enabling it to be more efficient
What is Blockchain Technology?
Blockchain technology can be defined as the decentralized, distributed form of a ledger that records everything about the digital assets taken place under a set secured network.
In other words, it creates an unalterable history of every exchange and transaction that can have transparent accessibility through cryptography hashing and the use of decentralization.
Cryptography hashing is a method that can convert any form of data into a unique text string irrespective of its size or type.
To further understand the working of blockchain, you can check the relatable analogy below. Consider creating a Google Doc and sharing it with a group of people.
Now, here you can notice that the document hasn’t been copied or transferred rather has been distributed. Now, this can be termed as a decentralized system where all the people from the group can access the document simultaneously without having to wait in any sort of queue. Also, the record of all changes is kept in real-time.
Thus, making the process completely transparent. Having explained this, yes, the process involved in the blockchain is, obviously, more complicated than this. However, the idea of its functionality remains almost the same
What is Cryptocurrency Mining?
You must have understood so far what cryptocurrency is and the few integral processes that play an important role in it. However, there is another important thing that must be known about cryptocurrency and that’s – Cryptocurrency Mining.
Cryptocurrency mining can be defined as a process involved in the transactions between users that are verified and added to a public ledger such as the blockchain.
This process enables the addition of more new coins in the already existing supply and demand of a cryptocurrency.
Thus, it helps the cryptocurrency to work as a decentralized peer-to-peer network in which there won’t be a need for any third party authority.
However, not every cryptocurrency can be mined. Also, when it comes to mineable cryptocurrencies, Bitcoin is, arguably, the most well known and established form of cryptocurrency.
How Does Cryptocurrency Mining Work?
Now, we all must be having a fair sense of understanding of how mining in the real world works, right? However, cryptocurrency mining is slightly different than that.
To understand, here, the miner is conserved as a node in the network
where all the transactions take place.
The miner arranges to collect those transactions and organizes them in a block form to ascertain their validity.
Hence, whenever any transactions occur, the miners will start assembling the details of the transactions in block forms.
These blocks are also called candidate blocks that are used to create a new cryptocurrency in the existing network.
So, the more a miner or a node validates or verifies a transaction, the more they can collect new coins as rewards that they can further use for buying and selling purposes.
What is Cryptocurrency Used For?
When it comes to the use of cryptocurrencies, there are two most important ones – As a Mode of Payment and Investment Option.
As a Mode of Payment
Initially, several merchants were unsure about using bitcoin or any other form of cryptocurrency as a mode of payment.
However, with the recent boom in the cryptocurrency markets backed by prominent figures such as the owner of Tesla, Elon Musk, merchants have started falling in line.
Today, a lot of merchants like flights, restaurants, apps, and online shopping websites have included various cryptocurrencies as a mode of payment option.
Perhaps, the biggest acceptor of cryptocurrency as a mode of payment is Apple Inc that allows ten types of cryptocurrencies as a medium of payment.
Cryptocurrencies such as Bitcoin allow for the most lucrative form of investment in today’s time. It allows for supremely dynamic values and can be considered as an excellent avenue for capital expansion.
In this case, professional cryptocurrency exchanges have been established all over the world. Some of these crypto exchanges, such as Coinbase and Nabobtrade cryptocurrency exchanges, cover most areas of the world.
Types of Cryptocurrency
When it comes to cryptocurrency variants, there is bitcoin and its forks, meaning one’s sprouted from it,
and then there are others that have been built from scratch, just like bitcoin. Let’s have a look at some of the most notable forms of cryptocurrencies.
It is the OG of cryptocurrency. The first-ever cryptocurrency and the most popular type of it.
It is popularly also regarded as the “Digital Gold” and holds the largest share in the cryptocurrency market.
2. Ethereum (ETH)
It is the first considered alternative to bitcoin and works as a decentralized software platform enabling smart contracts and decentralized applications
(DApps) to be built and used without any malpractices such as fraud and third-party interference.
3. Litecoin (LTC)
Litecoin was built in the same vein as that of Bitcoin and is commonly
referred to as “Silver to Bitcoin’s Gold.”
4. Cardano (CDA)
An “Ouroboros Proof of Stake” cryptocurrency, Cardano was built by experts from various fields such as engineering,
mathematics, and cryptography.
It involves outstanding proof of stake peer-to-peer decentralizing networks
for the transaction and is often dubbed as the “Ethereum Killer.”
5. Polkadot (POT)
It is another proof of stake cryptocurrency but uniquely designed to aim at delivering interoperability between other blockchains.
These are the most notable types of cryptocurrency. However, there are many others worth knowing about, such as the Bitcoin Cash, Binance Coin, Chainlink, Stellar, Monero, and Tether.
Also, it is worth noting that cryptocurrency is considered to be the future of money and finance because of the flexibility it offers.
More importantly, many countries and states such as Japan, the United States, the United Kingdom, Germany, and India are looking forward to incorporating it into their economies. Owning cryptocurrency will become a thing that people need to do in the future, and this kind of investment should start as soon as possible.
However, it must be noted that the cryptocurrency market is a much volatile one, and therefore, several experts have suggested never to invest more in it than you can afford to lose comfortably.