Cryptocurrency has been in existence for more than a decade. It has in recent years emerged to be one of the most popular inventions in modern technology. The advanced technology behind the cryptocurrency has been one of the greatest boosters of its success.
So, what is cryptocurrency? How does it work? What are some types of cryptocurrency?
Here, we arm you with first-hand information about cryptocurrency. We tell how it operates, the types of crypto, and of course its advantages and disadvantages. Here is the right place to start if you wish to invest in cryptocurrency.
What is Cryptocurrency?
Cryptocurrency is a digital currency that is built based on blockchain technology. It stands to be one of the safest and most secure ways to make digital transactions. Cryptography and blockchain have played a major role in making cryptocurrency what it is today.
Blockchain technology is a decentralized means of making digital payments. It operates without being supervised by any central authorities. By using this technology, cryptocurrencies get the best secure way of making digital transactions and keeping ledger records.
Crypto can be used to purchase regular goods and services. However, most people prefer to invest in cryptocurrency just like any other asset such as stocks trading and mining precious metals. Cryptocurrency is a great asset generation class. However, you need in-depth research for you to know how the system works and understand the dos and don’ts
Types of Cryptocurrencies
There are over 5,000 types of cryptocurrencies available today. Most of them have been developed recently after being inspired by the success of the pioneer crypto. A huge list of cryptocurrencies can be found at Coingecko. Here are some of the most popular cryptocurrencies available today.
- Bitcoin: It is currently the most popular and most valued cryptocurrency in the world. Launched in 2009 by a group known as Satoshi Nakamoto, Bitcoin currently has a total market value of over $ 400 billion.
- Litecoin: This cryptocurrency was founded in 2011, just like Bitcoin, it is also built based on blockchain technology. However, Litecoin provides a faster transaction speed and has a higher coin limit. Its current market value is about $4 billion
- Ethereum: Ethereum (also known as ETH) was launched in 2015, its main aim was to build an open-source market that helps run programming codes for decentralized apps. It allows app developers to pay for services and transaction fees using its network.
- Bitcoin Cash: Bitcoin Cash is a fork of Bitcoin; its main aim was to improve certain features in Bitcoin. It has been able to increase block sizes which have allowed more transactions and a fast-processing speed.
- Ethereum Classic: this cryptocurrency is related to Ethereum. However, it runs on smart contracts using the same blockchain technology. This gives the platform the means to operate without downtime or the risk of possible fraud.
- Zcash: just like the other cryptocurrencies, Zcash is built based on blockchain technology. It is best known for its unbeatable user privacy feature, the coding used in the platform makes hacking next to impossible.
- Steller Lumen: Popularly known as XLM, Stellar Lumen was founded in 2014 as a platform that facilitated currency exchange. It allows users to send money in any currency to a recipient of a different currency. Utilizing blockchain technology gives users in the platform confidence to undertake transactions without worrying about security and transaction speed.
How Cryptocurrency Works
Cryptocurrencies are built based on blockchain technology. Blockchain technology is a decentralized form of making digital transactions. Unlike other currencies like USD and Euros which are managed by a central authority, the value of crypto is determined by users.
The use of cryptography has ensured that transactions are secure. There is no risk of double transactions. Cryptographic proof has helped secure payment by using a confirmation node before a transaction is completed.
Advantages of Cryptocurrency
Since cryptocurrency was started, it has proved to have many benefits to users. These benefits include;
- Security and privacy: Using blockchain ledgers that are difficult to decode has made crypto a secure way of transacting.
- Protection from inflation: It’s important to control the number of users in a crypto platform, this helps maintain the value of the cryptocurrency. Bitcoin has only 21 million coins available in the whole world, this has helped maintain its value and limit inflation
- Self-governance and management: Cryptocurrencies are based on a decentralized form of governance; this gives crypto the power to maintain their value without being monitored by a central body.
- Fast transfers: Cryptocurrency has proved to be a fast and secure way of making transactions.
- Cost-efficient: Wallet-to-wallet transfer has helped crypto avoid the unnecessary cost that could be incurred if third parties were involved.
Disadvantages of Cryptocurrency
Even with all the benefits it brings, cryptocurrency also has a couple of shortcomings.
- Illegal transactions: Cryptocurrency has created a major loophole for illegal transactions to be carried out. Things such as money laundering have become easier for criminals, this is because it is hard for the government to track the transaction and trace illegal money.
- Data interference can cause massive losses: Cryptocurrency is a purely electronic way of making transactions, and all data is kept in a digital form. If there is a slight loss of such data, users can incur huge losses.
- Risk of hacking: Even with its hard coding and strict security guidelines, hacking can still occur in cryptocurrency. once a hacker gets hold of user information, it makes it easier for them to hack and steal money.
- No refund or cancellation protocol: cryptocurrencies have no refund or a cancellation protocol, which makes it easier for scammers to defraud people and steal their money.
The cryptocurrency industry is fast growing and continuously improving its services. Blockchain technology has also improved the security of online transactions by a huge percentage. In the future, it is predicted that blockchain technology could also be used to undertake every form of financial transaction.
As technology takes root, cryptocurrency remains to be one of the most amazing inventions that have graced the world. Further improvements are making crypto more attractive to users. Who knows, cryptocurrency could in the future replace all other currencies as we know them today! Take a crypto course today and get started with this amazing opportunity. Our crypto frequently asked questions will answer some of your other questions.