"The cryptocurrency community hasn't decided whether they want to be anarchist rebels or to replace the establishment." -Adi Shamir
In the past few years, old-fashioned paper currency that changes from one nation to the next has been challenged. Some tech-savvy individuals want to let individuals store and use money electronically without the need for structured banks and their specific regulations.
But how does it work, and what is this electronic currency called? Firstly, it's called cryptocurrency; you've probably heard talk of it in the last few months! In today's article, we shall further discuss the ins and outs of cryptocurrency and how it's supposed to work for everyday people like you and me.
What Exactly is Cryptocurrency?
Since its expansion and rapid rise in popularity during today's digital age, cryptocurrency has become the talk of the town, especially in 2020 during the COVID-19 pandemic. Nonetheless, it's important to mention that most individuals still do not know what exactly cryptocurrency is.
For example, even though COVID-19 and election results were the top Google searches, million of people Googled cryptocurrency to know more about its nature and how it will shape the 21st century.
So, what is cryptocurrency? In short, cryptocurrency or crypto, as most people call it, is a digital or virtual currency that ingenious creators designed to work as a medium of exchange between the buyer and the seller. Cryptocurrency is much different from standardised currency since it is secured and protected by cryptography.
What is cryptography? Cryptography is a method of protecting information and communications through the use of code. Only those supposed to read it can access the code and understand how it is written, making it very safe and nearly impossible to hack.
Fun fact: the word "crypt" means vault or hidden and the word "-graphy" has to do with writing.
Therefore, it's worth mentioning that cryptocurrency is praised by many for its ability to make it nearly impossible to counterfeit and double-spend, which are some flaws of traditional currency.
Another essential detail to know about cryptocurrencies is that they are not issued or produced by any centralised community such as a bank. They cannot be manipulated by government interference or manipulation, which causes many heads of state and persons of authority to scoff at the idea of cryptocurrency and view it as anarchist behaviour.
Also, cryptocurrencies are decentralised networks based on blockchain technology. What is blockchain technology? If you're like me, who sometimes struggles to understand the specific terms of modern technologies, you probably never heard of the phrase "blockchain technology."
However, if you want to know what cryptocurrency is and how it works, it is essential to recognise the following facts of blockchain technology:
- It's a digital way to keep a ledger and record-keep,
- It securely and uniquely records and transfers information,
- The Blockchain adds information to the roster in blocks that are created when space is full,
- Blockchain acts as a transaction record that issues a series of digits that helps a persons track their purchase.
An added factor of cryptocurrency that makes it extra safe is that the digital assets are stored on a distributed network across many computers, making it very difficult to trace back and copy.
Although we've considered many technical aspects that define cryptocurrency, it can be understood as a digital currency that is not controlled by a bank and can be used from country to country among consumers of all ages. In a virtual world and a dangerous world, it sure seems that cryptocurrency's versatility and security is the way of the future.
However, what are some of the different types of cryptocurrencies currently in use today? Keep on reading to find out more!
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What are the Different Types of Cryptocurrencies?
Since there are cryptocurrencies and not solely one cryptocurrency, it is a competitive market with many digital currencies to choose from. Do you know which are the different types of cryptocurrencies?
According to recent statistics, there are currently more than 4,000 cryptocurrencies in existence; so, it's practically impossible to recognise all cryptocurrencies by name. However, it's important to state that many cryptocurrencies do not have a large following, any trading value, or enjoy the backing of many investors.
Therefore, we shall highlight the top five following cryptocurrencies that everyone should know about, whether they are using digital money or not:
- Bitcoin (BTC): the mother of all cryptocurrencies, Bitcoin was invented in January 2009 by Satoshi Nakamoto. Bitcoin is the most popular and highest valued of all the other cryptocurrencies. BTC is currently valued at $38,851. Bitcoin is highly volatile, yet it has risen immensely in the 12 years since it was first created.
- Ether (ETH): created by the Ethereum network as their cryptocurrency, Ether is slightly different from Bitcoin. Yet, it is an open-source blockchain cryptocurrency that is second to Bitcoin in overall value. Ether was introduced in 2013 and still has a long way to go to catch up to Bitcoin.
- XRP Ripple: known by some as XRP and others as Ripple, XRP prides itself as being a digital currency that is designed explicitly for global payments. XRP claims that they are the most efficient way to send money transfers to international clients, customers, and accounts; watch out, PayPal, you've got competition! XRP Ripple is currently valued at $1.02.
- Tether: unlike other cryptocurrencies, since it closely follows the value of the United States Dollar, Tether is probably the most reliable cryptocurrency on the market. Many persons use Tether to make cash deposits and withdrawals since it doesn't share the same high volatility as other cryptocurrencies. Tether is currently valued at a little over one USD.
- Cardano (ADA): founded by Ethereum co-founder Charles Hoskinson in 2015, Cardano uses a technology called Ouroboros and describes itself as the safest way to decentralise currency main and avoid banks altogether. Cardano is a public blockchain program that is protected and safer than other cryptocurrencies. It is currently valued at $1.84 and has quickly grown since last year.
There you have it, folks, the top five most frequently traded, used, and recognised cryptocurrencies on the stock market today. If you want to learn more about each cryptocurrency that we have mentioned in the previous list, we recommend considering Coinpedia.
But how do people use cryptocurrencies now? Find out the answer in the following subheading!
How Do I Use Cryptocurrencies?
Since there are many cryptocurrencies and considering that crypto is a digital way to spend and use money, there are many ways to use a cryptocurrency that significantly depends on your circumstances.
In reality, the options available to use virtual money in a digital world are endless. Nonetheless, it's important to state that there are some ways to use a more wise and popular cryptocurrency than others. But before you embark on the process of using your crypto, it is highly essential to decide which types of cryptocurrency you want and what you wish to do with them.
Without further delay, the following are some of the most common ways to use cryptocurrency:
- Invest in Crypto: today, the most popular way to use cryptocurrency is to invest in it by creating an investment portfolio and trading account on a site such as Coinbase, Wealthsimple, or Binance. After your trading account has been completed, you can buy and sell cryptocurrency coins the same way you would with stocks. The amount of cryptocurrency you get for your money depends on its specific value. You can make profits by investing in cryptocurrency; however, you should be aware that crypto is very volatile. Be wise and cautious if you choose to invest as your way of using cryptocurrency.
- Shop Online: since it's becoming increasingly popular, many online retailers accept payment in cryptocurrency. Therefore, instead of using traditional currency to buy things in your favourite online shop, you can purchase items using Bitcoin if you have a cryptocurrency wallet. It's important to state that most large companies accept Bitcoin and no other cryptocurrency for now.
- Buy Goods at Your Local Shop: it might surprise you, but many local shops that sell necessity items such as food, clothing, and other supplies are now accepting cryptocurrency. So, as long as you have your crypto wallet with you, there is the possibility to purchase goods and services from these merchants. The process of buying products using crypto is done in the same way as using a debit or credit card and making a purchase through your phone.
To utilise the cryptocurrency you have purchased, it is crucial to figure out which online wallet you want to use. After you've got your crypto wallet and some currency loaded on it, the world is yours for the taking!
We hope that today's article has given you a better idea of how cryptocurrency works. If you invest and use it with caution, crypto will be your new best friend, and we salute you for taking a step into the future!
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