Cryptocurrency, also called crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions.
Cryptocurrency is a virtual or digital payment system that doesn't rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency are stored in digital wallets.
Types of cryptocurrency
There are over 18,000 cryptocurrencies in existence as of March 2022 by Investopedia. The best known cryptocurrencies are as follow :
. Bitcoin
. Litecoin
. Ethereum
. Cardona
. Zcash
. Ripple
. Stellar
. Monero
. Dash
. Dogecoin
. Binance coin
Altcoins
Altcoins are considered as coins that are not Bitcoin.
Crypto Coins Vs Crypto Token
Many believe crypto coins and crypto tokens are the same, however, the key difference between the two is based on their utility.
Crypto coin
They operate on blockchain, to make this a little clearer, bitcoin operates and functions on the bitcoin blockchain. Crypto coins can be mined, crypto coins were a money replica that's coins are generally used in the same way as real-life money. Coins are any cryptocurrency that has a standalone independent blockchain e.g. Bitcoin, Litecoin.
Crypto token
It's built on existing blockchain, tokens are cryptocurrencies that do not have their own blockchain but live on another blockchain, transactions rely on smart contracts. Tokens represent assets. When a token is spent, it moves from one place to another. For example, NFTs (no-fungible tokens) are one-of-a-kind items, so the change in ownership must be manually handled. A coin doesn't have to be moved from one place to another. All transactions are recorded on blockchains.
Crypto Wallet
Cryptocurrencies are held within a digital wallet. Just like the pause or wallet we use to keep our money, identification cards and some other important documents needed to be carried around, crypto wallets store your private keys, keeping your crypto safe and accessible. They also allow you to send, receive, and spend cryptocurrencies. A wallet is identified by a long set of random letters and numbers. This is referred to as a private key, which proves the ownership of digital money and allows you to make transactions. If you lose your private keys, you lose access to your money. Unlike the normal wallet that stores cash, crypto wallet technically doesn't store crypto.
Characteristics of a good cryptocurrency
- Security
Cryptocurrency received its name because it uses encryption to verify transactions. This means advanced coding is involved in storing and transmitting cryptocurrency data between wallets and to public ledgers. The aim of encryption is to provide security and safety.
- Decentralization
By avoiding a central authority, there’s an increased level of security. Cryptocurrency users also have a level of assurance that the coin’s value is mostly immune to manipulation or corruption by any group or government.
- Scalability
But in order for blockchain to become mainstream in a financial and/or nonfinancial sense, it has to be scalable. In other words, it has to be built in such a way that a large number of transactions can be handled per second without compromising the effectiveness or security of the network.
- Solve Problems
The main point of cryptocurrency is to fix the problems of traditional currencies by putting the power and responsibility in the currency holders' hands. However, cryptocurrency solve other problems like inflation,
- Usability
Avoid cryptocurrency projects where the user interface is hosted via a website. Good cryptocurrency platforms use full-fledged apps to manage your finances on your personal device.
Demand
Limited Supply
Advantages and Disadvantages of cryptocurrency
Advantages
Below are the benefits of Cryptocurrency.
Transparency
Free/low transaction rate
No third party involvement
Store of value
Accessible
Social awareness is growing
Fast transaction process
Permanent ledger
No restrictions on payment
Disadvantages
Cryptocurrency exchanges are vulnerable to cyber attacks, which could lead to an irreparable loss of your investment.
Cryptocurrency can be vulnerable to scams. Scammers often use platforms like Facebook, Instagram and Twitter to trick people into these investments.
Lack of knowledge about Cryptocurrency
High volatile nature
5.Not accepted everywhere
- No refund or cancellation policy.
History of cryptocurrency
The history of cryptocurrencies can be traced back to the 1980s, when they were called cyber currencies. Cryptocurrency was first mentioned in 1989.
The cryptocurrency was invented in October 2008 by an unknown person or group of people using the name Satoshi Nakamoto.
Bitcoin was launched in 2009 by Satoshi Nakamoto. The first Bitcoin transaction took place between Nakamoto and Hal Finney on 12th January, 2009. Laszio Hanyecz on 18th May, 2010 placed an order for 2 large pizzas and paid with 10,000 Bitcoins. The pizza was delivered to him on 22nd May, 2010. That transaction would now be worth millions of dollars.
In July 2010, Jed McCaleb created Mt.Gox, which was the biggest online bitcoin exchange. In 2014, Mt.Gox was handling 70% of transactions before they went bankrupt and lost $360 million in bitcoin.
In January 2014, Overstock became the first retailer to accept bitcoin. In September 2014, Paypal partnered with Coinbase, Butpay, and Gocoin.
The cryptocurrency market is booming, and it’s only expected to get bigger. Cryptocurrencies are sure to play a large role in what makes up our future money system. Today, there are many different types of cryptos; some have proven more stable than others while still having promise for growth.