What makes a cryptocurrency unique from online money?
Have you ever seen your friends constantly looking at changing values of some coins? If yes, you have probably heard of cryptocurrencies by now. Simply put, a cryptocurrency is a new form of digital or online money that can be exchanged to make a payment through a digital wallet.
But how much do we actually know about cryptocurrency and how it works? That's why people tend to search for cryptocurrency for beginners online. If you're one of them and don't have much knowledge of cryptos, we are sharing a small guide to cryptocurrencies for all beginners and newbies to understand its concept. Through this guide, we will help you with the basic of cryptocurrencies and explain everything you need to know in plain English with no jargons.
So, let's get started.
What is a cryptocurrency?
Definition of cryptocurrency for starters: A cryptocurrency is a form of digital currency that can be exchanged to make a payment through a digital wallet. It doesn't exist physically like a dollar or a euro. The value of a cryptocurrency changes constantly based on market dynamics which is quite similar to the changing value of a company share. The most important feature of cryptocurrencies is that they are not controlled by any government. That means the value of any cryptocurrency is neither based on any asset nor decided by any authority.
Although the history of cryptocurrency can be traced in the early 1990s, it was in 2008 when the first-ever cryptocurrency was launched. It was Bitcoin. Bitcoin became so popular in the world that it became a household name for cryptos. Bitcoin was launched by an anonymous entity, called Satoshi Nakamoto. With Bitcoin, a new technology made presence in front of the world, called as Blockchain. It is one of the latest technologies which make the base to make to develop new cryptocurrencies. The concept of blockchain will be explained in upcoming blogs. Stay tuned for it!
Bitcoin remained the only crypto until 2011 when Bitcoin enthusiasts realized some flaws in it. Technology and crypto enthusiasts decided to create alternative coins, also known as altcoins.
Cryptocurrencies like Bitcoin and others are created through a process called mining. Mining a cryptocurrency involves solving complicated problems through powerful computers. People that deploy these computers and solve the problem are called miners.
When a person sends cryptocurrency to another person, an online transaction happens. This transaction is confirmed by miners. When a miner confirms the transaction, he gets rewarded with new cryptocurrencies. We will be discussing more about mining and other important terms in detail in our upcoming blogs.
As you would need a wallet to keep cash or a bank account to send money online, cryptocurrency wallets are required to hold cryptocurrencies and make transactions. These are quite similar to mobile wallets which we use in our daily life like Apple Pay or PayPal. These wallets come in different formats and security levels. Crypto wallets allow you to send and receive cryptocurrencies and monitor information such as your current balance and transactions made.
Crypto trading has become a very big business where people can buy and sell around 3000 cryptocurrencies just like shares to make a profit. To start trading in cryptocurrencies, there are a number of cryptocurrency exchanges available. These are websites and mobile apps that list all the currencies with their value and other crucial data. Through these websites, you can use your traditional money to buy cryptocurrencies, exchange them for other cryptos, or even store them in wallets.
In this blog, we have discussed briefly about cryptocurrency basics and a few important aspects related to it. We hope it will give enough you perspective to understand this new form of money and how it can change the world of finance. Just imagine a day when you would use a cryptocurrency to buy you a movie ticket or just a good cup of coffee.
Now you know what a cryptocurrency is, here's a question for you.
What makes a cryptocurrency unique from online money? Share your answers in the comment section below. Stay tuned with us!