Decentralized digital money has its base in the ever-changing blockchain technology – Cryptocurrency. You might be familiar with some popular cryptocurrencies like Ethereum and Bitcoin.
However, according to CoinLore, there are more than 6000 various types of cryptocurrency presently in circulation.
Cryptocurrency can be used in multiple ways, like buying regular services and goods. However, most people use it as a form of investment.
Even though cryptocurrency is a newer and more exciting type of asset, it can be a risky purchase if you do not know its ins and outs. Therefore, a lot of research is needed to understand the system of cryptocurrency.
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Working Of Cryptocurrency
Like other currencies, a cryptocurrency is a medium of exchange. However, it is encrypted, digital, and decentralized. Moreover, unlike the Euro or the US Dollar, no central body maintains and manages the cryptocurrency value. Instead, all these tasks are widely distributed among the users of cryptocurrency through the internet.
The first-ever cryptocurrency was Bitcoin, and it was first outlined in 2008 by Satoshi Nakamoto in a paper titled 'Bitcoin: A Peer-to-Peer Electronic Cash System.'
He described this project as an electronic payment system based on cryptographic proof instead of trust.
The cryptographic proof is monitored, recorded, and verified transactions in a programmed format known as the blockchain.
One thing that sets cryptocurrency apart from other means is the technology behind it. You might think: 'who cares what technology is running behind my money? The only thing I care about is how much I have in my wallet!' However, there are multiple issues with the current systems in place:
Let us look at some examples of those:
- The existing methods of payment like wire transfers and credit cards are outdated
- In many cases, various middlemen like brokers and banks take some cut in the process, making your transactions slow and expensive
- Financial inequality is globally growing
- More than three billion underbanked or unbanked people do not have access to financial services. That is around half of the planet's population!
The use of cryptocurrency aims to solve most of these problems. Learn the basics of cryptocurrency by enrolling in popular cryptocurrency courses in New York City or elsewhere in the States.
You may be familiar with the concept of how your everyday use, government-issued currency, is reserved in the banks. You might also know that you might need some form of a connection to the bank or an ATM to get access to your money or transfer it to different people.
Cryptocurrency changes the whole game; with it, you can get rid of centralized intermediaries and banks entirely. This is because cryptocurrency relies on blockchain technology, which is decentralized (meaning that no single entity controls it). Instead, computers within the network can confirm transactions.
However, before getting into the nitty-gritty of cryptocurrency, you must first understand the concept of money in the present era itself.
The current philosophy behind money is similar to the riddle; 'what came first: the egg or the chicken?' For money to carry some value, it must have specific characteristics, like:
- An adequate number of people must possess it
- Merchants should accept it as a form of payment
- Society must have trust in its value and that it will retain its value in the future
Of course, in the days of yore, when people traded their chicken for shirts, the exchanged materials' value relied on their nature. However, when cash, coins, and credit cards jumped into the fray, the definition of money essentially changed, and more importantly, the money trust model changed.
Another critical change in money we have observed over the years is the ease of transaction. For example, carrying a lot of gold bars from one place to another was an incredible hassle, making the invention of cash necessary.
Due to increasing awareness about how governmental authorities store information, people are getting more concerned about using credit cards. However, cryptocurrency provides a valuable alternative.
Want to hear a fun fact? The standard, government-controlled currency you carry, like the US dollar, goes by its own fancy name now that the cryptocurrency USA has arrived – fiat currency. Fiat is commonly defined as a legal tender such as banknotes and coins that carry value because the government says so.
So how did cryptocurrency come to be what it is today? Let's go through a quick history lesson on the first-ever cryptocurrency. Alternatively, you can consider checking out cryptocurrency courses in Houston, Austin, etc., and learn about how cryptocurrency came into being.
History Of Cryptocurrency
The first cryptocurrency? Bitcoin, of course! You must have heard of Bitcoin more than any other cryptocurrency. It was the first-ever product of blockchain technology developed by an anonymous person using the alias Satoshi Nakamoto.
Nakamoto introduced the Bitcoin idea in 2008 and defined it as an entirely peer-to-peer electronic money vision. Most cryptocurrencies, like Bitcoin, are formed through a process known as mining. Please do not confuse it with mining ore, as that is an entirely different process. Crypto mining makes use of a powerful computer to solve complicated problems.
Bitcoin has been very popular, and it was the only cryptocurrency till the year 2011. However, in that year, Bitcoin enthusiasts noticed flaws in that design, so they started to create various alternative coins, called altcoins.
These were designed to improve the design of Bitcoin for factors like security, speed, anonymity, and more. Among these first-ever altcoins was the famous Litecoin.
To date, more than five thousand cryptocurrencies are operational, and the number is constantly increasing.
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Benefits Of Cryptocurrency
If you are still not entirely convinced about the prospect of decentralized currency, then take a look at the multiple solutions cryptocurrency provides:
We all are aware of the famous quote from Spiderman, 'with great power comes great responsibility.' Though when you dump a ton of power to only a single entity or person, the chances of abusing it also increases.
Power tends to corrupt, and having absolute power corrupts undeniably. So, cryptocurrency resolves the issue by distributing power among multiple people; or, better yet, amongst all network members. That is the basic idea behind blockchain technology.
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Eliminates Printing Of Extra Money
All governments have central banks under them, and these entities can print more money when faced with a severe economic crisis. This process is commonly known as quantitative easing.
By printing more money, a government can bail out its debt or devalue its currency. Nevertheless, this approach is analogous to putting a bandage on a broken arm. It doesn't solve the problem and has adverse side effects more significant than the original problem.
When countries like Venezuela or Zimbabwe print excess money, their currency value drops so much that inflation consequentially skyrockets. This results in people not being able to afford everyday services and goods.
On the contrary, most cryptocurrencies contain limited and set amounts of coins. Therefore, when all the coins come into circulation, the company behind blockchain or the central entity does not have a more accessible way to create extra coins or increase its supply.
Charge Of Your Money
With conventional cash, you naturally give all the control to the government and central bank. If you have absolute trust in your government, that is great, but know that at any point, they can deny you access to your funds by freezing your account.
Like, here in the US, if you do not have a legal will or own a business, the government has complete authority over your assets after you pass away. Some banks can also abolish the banknotes, like how India demonetized its currency in 2016.
With cryptocurrency, only you have access to your funds, and no one else can touch it. Get cryptocurrency courses in Los Angles or other cities in the US to understand how you can start!
Cutting The Middleman
With conventional money systems, whenever you make a transfer, a middleman is present in the form of a bank or digital payment service, who takes a cut for the service.
However, with cryptocurrency, all the network members in the blockchain assume the role of a middleman. Therefore, the compensation plan is formulated differently from that of fiat money middleman's, comparatively minimal.
Serving The Unbanked
Many citizens worldwide have no or limited access to various payment systems, such as banks. Cryptocurrency solves this problem by enabling anyone with access to a mobile phone to make payments.
Research states that more people have access to mobile phones than banks or even toilets; however, blockchain technology might not solve the latter problem.
Cryptocurrency Courses In the USA
Cryptocurrency took the world by storm. Even though it was initially met with resistance, many organizations have accepted it 14 years since the first cryptocurrency was launched.
It is even a legal form of payment in the United States of America, with big multinationals accepting payments via Bitcoin. Cryptocurrency in New York City has become quite popular now as well.
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