What Is Cryptocurrency?
Updated: Aug 11, 2022
Every day, there's something in the cryptocurrency news, either prices or soaring, and then other times, experts are debating what the future holds. But have you ever stopped to wonder what this new technology is and how it will change all of our lives?
Let me guide you on cryptocurrencies, some interesting facts about them, and how many different types exist.
What Is Cryptocurrency?
Cryptocurrency is "a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority." Now, if you're wondering what's cryptography, it's a super-duper secure form of communication that lets only the person receiving and sending the transaction to be able to read it.
Simply put, cryptocurrency is more like software that functions as a digital currency. This software now sends and receives transactions through the blockchain (a decentralized network of computers), making it impossible to intercept or counterfeit. What makes cryptocurrency so unique is that there's no central authority, such as a bank or government; it's self-governing and sufficient.
A Few Interesting Points
Cryptocurrency's decentralized network of computers allows it to function outside government regulations and banking policies, giving the average person a new sense of trust.
Many tech experts feel that blockchain and its different related technologies will completely transform the real estate, legal, and finance industries.
A significant advantage of cryptocurrencies is that they allow for much faster and cheaper money transfers, and with a decentralized system, there's no single point of failure.
Some disadvantages of cryptocurrencies are that their prices and value tend to be quite volatile and require a lot of energy for mining.
Mining is the process where specialized computers, called nodes or mining rigs, keep track of all transactions and receive crypto as a reward.
Some Cryptocurrency Basics
Cryptocurrencies, which are digital currencies used in a cryptographic system, can be considered more software that provides a specific function. That function ensures that online payments are secure without third parties such as banks or credit card companies.
Although a hot topic in investment and finance, paying using cryptocurrency in eCommerce stores is still far from the norm. Currently, cryptocurrencies are for long-term assets or cross-border money transfers. To "get" cryptocurrencies, you can buy them online from cryptocurrency exchanges or mine them yourself.
Types of Cryptocurrencies
At the moment, Bitcoin is the king of the cryptocurrency world and is the most valuable. In 2008, Satoshi Nakamoto invented and introduced it to the world through the white paper, a document that detailsSatoshi Nakamoto invented it and introduced it to the world through the white paper, a document that details everything related to that project.
Fast forward to the present day, and there are about 6000 different cryptocurrencies on the market right now, each with a specific function. Ethereum, for example, is a smart contract that allows people to create agreements between two people and only releases the money once the job is complete. At the same time, Ripple XRP's been designed for the banks and streamlines money transfers across borders.
Following Bitcoin's success, many cryptocurrencies were made, known as "altcoins," such as Litecoin, Solana, and Ethereum, to name a few. Currently, with 18.8 million Bitcoins in circulation worldwide, totaling $1.2 trillion, only 21 million Bitcoins will ever exist. As things continue to change, who knows what else cryptocurrency has in store, we'll have to wait and see.
Hungry for more? Join me each week, where I'll break down complex topics and dissect the latest news within the cybersecurity industry and blockchain ecosystem, simplifying the world of tech.