What is Cryptocurrency and how does it work?
Cryptocurrency - Meaning and Definition
Cryptocurrency, sometimes called crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrency does not have a central issuing or regulating authority, instead using a decentralized system to record transactions and issue new units.
What is Cryptocurrency?
Cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a peer-to-peer system that enables anyone to send and receive payments anywhere. Rather than moving and exchanging physical money in the real world, cryptocurrency payments exist purely as digital entries in online databases describing specific transactions. When you transfer Cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrencies are stored in a digital wallet.
Cryptocurrency got its name because it uses encryption to verify transactions. This means that advanced coding is involved in storing and transmitting cryptocurrency data between wallets and public ledgers. The purpose of encryption is to provide security and protection.
The first cryptocurrency was Bitcoin, which was established in 2009 and is still best known today. Much of the interest in cryptocurrencies is to trade for profit, with speculators at times causing prices to skyrocket.
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How does Cryptocurrency work?
Cryptocurrency runs on a distributed public ledger called a blockchain, a record of all transactions updated and kept by currency holders.
Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complex mathematical problems that generate coins. Users can also buy currencies from brokers, then store and spend them using cryptographic wallets.
If you have Cryptocurrency, you have nothing real. You have a key that allows you to transfer a record or unit of measurement from person to person without a trusted third party.
Although bitcoin has been around since 2009, applications of cryptocurrencies and blockchain technology are still emerging in the financial context, and more uses are expected in the future. Transactions including bonds, stocks and other financial assets can eventually be traded using the technology.
Cryptocurrency Example
There are thousands of cryptocurrencies. Some of the most famous include:
bitcoin:
Founded in 2009, bitcoin was the first cryptocurrency and is still the most traded. The currency was developed by Satoshi Nakamoto – widely considered a pseudonym for an individual or group of people whose exact identity remains unknown.
Ethereum:
Developed in 2015, Ethereum is a blockchain platform that has its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after bitcoin.
Litecoin:
The currency is similar to bitcoin but has evolved more quickly to develop new innovations, including a process allowing faster payments and more transactions.
Ripple: (Ripple)
Ripple is a distributed ledger system that was established in 2012. Ripple can be used to track a wide variety of transactions, not just cryptocurrencies. Behind this the company has worked with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are known collectively as "altcoins" to distinguish them from the original.