The world of cryptocurrency can be very overwhelming. There are so many different coins and tokens, it can be difficult to know where to begin. Cryptocurrency is decentralized and digital, so you might be wondering what that has to do with your everyday life. You don’t need to understand blockchain in order to use cryptocurrency, but it is a necessary concept for understanding the wider scope of the industry.
If you’re reading this, then there’s a high chance you’re new to the world of cryptocurrency. Maybe you have a friend or family member asking you about it, or maybe you’ve heard about cryptocurrency and you want to learn more. Either way, this article is going to walk you through the basics of what cryptocurrency is and the differences between it, fiat currency, and decentralized currencies.
What is cryptocurrency?
Cryptocurrency is a type of digital currency that uses cryptography to secure transactions and uses decentralized control instead of centralized banks.
How do you buy cryptocurrency?
One of the first steps in buying cryptocurrency is figuring out how to purchase it.
You can buy cryptocurrencies on exchanges, through peer-to-peer transactions, or at a Bitcoin ATM.
The most popular way to buy cryptocurrency is by using an exchange. You’ll have to create an account and verify your information before making a purchase. This process can take some time, but once you’ve set up your account, you can instantly trade one type of cryptocurrency for another. There are many popular exchanges, like Binance and Coinbase Pro.
Another way you can buy cryptocurrencies is by using a peer-to-peer platform. These platforms match buyers with sellers. The difference between these exchanges and others is that you won’t need to provide personal information, so you can remain anonymous when trading cryptocurrencies this way. The downside? You may not find the best price when choosing this option as prices will vary among sellers on the platform.
Lastly, if you want to buy Bitcoin or Ethereum directly from a Bitcoin ATM, then track down one near you! You’ll need cash in order to make a purchase at the ATM, but it won’t take more than 10 minutes for your cryptocurrency transaction go through and show up in your digital wallet!
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What is blockchain?
Blockchain is a public ledger that records every single transaction in chronological order. It’s decentralized and distributed, meaning that data is hosted on computers across the world instead of one central authority like a bank or company. Each node stores a copy of the blockchain data and it’s updated to all nodes every time a new entry is made.
Blockchain serves as an open, yet secure, digital record of transactions which can be monitored by anyone at any time. All transactions are recorded and added to the blockchain in chronological order – this means there are no “invisible transactions” where the sender, recipient, and amount are unknown.
How does cryptocurrency work?
The cryptocurrency industry is still in its infancy and it’s constantly changing. The most popular form of cryptocurrency, Bitcoin, is the best example. In the early days of Bitcoin, a single bitcoin was worth nearly $1,000. Today, that same bitcoin is worth less than $200. There are plenty of other cryptocurrencies out there with different values and features. Cryptocurrency has been around for about 10 years now but it’s only been recently that it has gained popularity due to the rapid increase in value of Bitcoin and Ethereum (another popular cryptocurrency).
So how does cryptocurrency work? Cryptocurrency transactions happen between two people digitally, so they don't need to use physical money or even talk to one another. When you initiate a transaction online, your public key will be sent to the receiver and they can use their private key to access your digital coins. This is why it's called 'crypto' currency; because cryptography is used to secure these exchanges of information.
Cryptocurrency transactions are anonymous and irreversible. This means that once you send a transaction, there's no going back. A confirmation process happens afterward where miners verify whether or not your transaction was completed by checking your public key against the sender's private key before recording your transaction on a block in the blockchain ledger at which point you receive new coins from the sender as payment for what you sold them earlier on--you never actually see their public key or know who they are making the purchase from!
How to buy cryptocurrencies
As you go about your day, you’re probably using money that’s backed by a government. It might be U.S. dollars or some other currency depending on where you live. The value of the money is regulated by the government and banks, who are trying to get rid of as much physical cash as possible. Governments and banks don’t want people to use their own currency because it limits their control over how the economy is run and how much total currency there is in circulation.
Cryptocurrency isn't reliant on any one central bank or government, so it's not backed by anything besides the digital coins themselves. They can be bought with fiat currencies, which are currencies issued by a government. When you buy cryptocurrency with a fiat currency like US dollars, then you're buying them at a set price determined by what fiat currency you're using and what cryptocurrency is being exchanged for it (fiat-to-crypto exchange).
Alternatively, you can buy cryptocurrencies from another person in what's called an "over-the-counter trade." This means that when you purchase cryptocoins over the counter, there's no fixed price for what they're worth--you'll have to find someone willing to sell them at a given rate (at least according to them). The price will vary depending on the demand for that coin at the time of purchase.
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What are the differences between cryptocurrencies?
One of the most important concepts in cryptocurrency is decentralized currencies. What does this mean? It means that unlike fiat currency (e.g., the US Dollar, Euro, Yen), cryptocurrencies are not controlled by any single entity or person.
This can be very helpful for a number of reasons. For example, when you use a bank to transfer money from your account to another person’s account, you need the bank’s permission and approval for the transaction to go through. This can lead to high fees and delays with transactions taking up to 5 business days to complete. With decentralized currencies like Bitcoin, Litecoin, Ethereum, Bitcoin Cash and more, there are no delays as every transaction is recorded on a public ledger called blockchain. So what does this mean for you? Well, it means that if you own your private keys then nobody can take your money from you without your permission- even if they were part of an organization such as Coinbase or Binance.
Decentralized currencies also offer other advantages that are not possible with fiat currency:
You don’t need a bank or any other third party institution to send or receive funds; all transactions happen directly between two people or organizations- so it’s faster and cheaper than traditional methods of transferring funds
There is no risk of theft because every transaction has a digital signature which confirms ownership- meaning no one else can spend your digital funds without your consent
When using decentralized currencies like Bitcoin
Conclusion
Cryptocurrencies are a new form of currency, and they're covered in the news almost every day. It's important to understand the basics of what they are, what they're used for, and the types of exchanges you can use to buy them.
Blockchain is the underlying technology for cryptocurrencies. It's a continuously growing list of records, called blocks, which are linked and secured using cryptography. Cryptocurrency is a digital currency that uses principles of cryptography for security.
The key differences between cryptocurrencies are how they are mined, how transactions are verified and how they achieve distributed consensus.