What Is Cryptocurrency? The Most Trending Thing Now?

Cryptocurrency
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What Is Cryptocurrency?
What Is Cryptocurrency?

The cryptocurrency market has been growing rapidly over the past few years. There are now well over 700 different types available in circulation.

The three most popular cryptocurrencies are Bitcoin, Ethereum, and Litecoin. But many more are on the rise and you should keep an eye on them, as the technology continues to improve and grow.

In this article, we’ll take a look at each of these three cryptocurrencies. Try to explain how they work and why you should or shouldn’t invest in them.

 

The key players

Key players
Key Players

The most well-known cryptocurrency, Bitcoin, has been around since 2009.

It’s open-source and anonymous (meaning no one knows who created it). Its value stems from user participation—users exchange cash for bitcoins (the currency) using a platform like Coinbase.

While bitcoin is still largely associated with illegal activity on sites like Silk Road. More companies are accepting it as a legitimate form of payment.

 Other cryptocurrencies have entered (and some have already exited) the market, though bitcoin remains by far the most popular. Its success has inspired other cryptocurrencies

1. Litecoin

It was launched in 2011 by former Google employee Charles Lee. Was one of the first altcoins to be created after bitcoin.

It differs from bitcoin primarily in:

  • Faster block generation time (2.5 minutes)
  • Increased maximum number of coins (84 million).

Litecoin has also fallen victim to extreme price volatility. In fact, it has a lower market cap than bitcoin at present.

2. Etherium

It was not created to be used as a currency.

The platform instead allows for smart contracts. Computer programs that automatically execute under certain conditions and it serves as a decentralized virtual machine.

Ethereum can process transactions much faster than bitcoin. So it has become popular with companies that want to use blockchain technology without a middleman like Coinbase.

3. Ripple

 It was created in 2012.

It differs from bitcoin primarily in that it uses blockchain technology to build an open payment network for financial institutions instead of individuals.

The current market cap of Ripple (XRP) exceeds $10 billion and it ranks among CoinMarketCap’s top three cryptocurrencies.

Of course, like other cryptocurrencies on our list, its value has also fallen victim to volatility—but Ripple has increased 60% over 2022 so far.

 

 The adoption of cryptocurrency has led to greater interest in blockchain technology, and more people want to understand how it works. Blockchain was initially developed for bitcoin, but other companies have started using it for different purposes. One such use case is smart contracts—programs that facilitate the exchange of money, content, property, or anything of value with a transaction. Proponents see a future where we have blockchain-based currencies in addition to cryptocurrencies like bitcoin.

 

How does Bitcoin work

How does Bitcoin work
How does Bitcoin work

Bitcoin uses something called a blockchain, which is essentially a public ledger that keeps track of how much money you have. It’s important to keep in mind that there isn’t actually any such thing as bitcoins—the currency itself is simply a long series of numbers that represent monetary value. In other words, don’t think of it like pounds or dollars.

 Each coin or transaction has a public key and a private key that match. The public key lets anyone see how much Bitcoin you have, while your private key is like a secret password—only accessible to you—that allows you to spend it.

 Your private key isn’t stored on your computer or phone, but it still needs to be kept safe because if someone else gets a hold of it, they can use your Bitcoin. This means you need to store it somewhere secure and back it up regularly.

 You can store your Bitcoin in a variety of sizes, but it’s best to find a wallet that’s hosted by a reputable company with a good track record. If you decide to keep your cryptocurrency on an exchange, you should only do so while you actively trade. Many exchanges have proven to be unsafe in the past.

 When you’re ready to spend your Bitcoin, you’ll need to tell whoever you want to pay that they should send you some Bitcoin. You do so by sharing your public key with them and letting them know how much they should send. This can be done in a number of ways, including over a chat app or through an email.

 

 

How does Bitcoin get its value?

How does bitcoin work
How does bitcoin work

The value of Bitcoin, like all currencies, is determined by how much people are willing to exchange it for. This means that its value depends on supply and demand. As demand for bitcoins rises, so does their value. As demand falls, so does their value. There are a limited number of Bitcoins in circulation. However, new Bitcoins will continue to be issued until there is 21 million Bitcoin in existence. This makes Bitcoin more valuable than other currencies.

 Bitcoin has a fixed supply, but there’s an upper limit to how many can be created every year. In 2017, about 16.4 million Bitcoin will be in circulation. Every four years, that number is cut in half—but it gets cut by half from its highest point. So by 2024, only 4 million more Bitcoin will be added to circulation. After 2028 (the next halving), just 2 million Bitcoin will be added each year thereafter.

 Here’s an example of how that would work:

Let’s say in early 2014, Bitcoin was trading at around $1,000. If I had bought $1,000 worth of Bitcoin then and just left it alone for two years (presumably not touching it to avoid falling prices), I could trade my 1,000 Bitcoin at that time for around $2,600—an increase of over two-and-half times my initial investment.

 When you consider that money has value only because people are willing to accept it in exchange for goods or services, and faith in a currency can be eroded by an unstable economy or political situation, Bitcoin starts to look less like a stable investment and more like how you might buy gold. If fewer people begin accepting Bitcoin as payment, then demand for Bitcoin will fall—and so will its price. Theoretically speaking, if trust in Bitcoin evaporates entirely, then its value will go to zero.

 So, what determines Bitcoin’s value in a more concrete sense? It all comes down to supply and demand. Let’s say you believe Bitcoin will be widely accepted as a form of payment by 2025.

 

Can I really make money from cryptocurrency?

Yes, you can. However, it will take some time and knowledge to fully understand how. There are many ways to make money with cryptocurrency, but they all take a great deal of time and research. Do not expect overnight riches! The road to cryptocurrency riches takes patience and hard work. You have to have a clear understanding of which digital currency you believe in (or think will succeed) so that you can put real money into it—and be patient while it grows in value over years or even decades.

 If you want to make money with cryptocurrency, you need to understand that it’s not a get-rich-quick scheme. Many people have lost large sums of money by investing in something they don’t fully understand.

 Many of us have heard stories about people who have made thousands or even millions of dollars through cryptocurrency. These are rare cases, and you should not expect to become a millionaire overnight by buying into cryptocurrency.

 If you are interested in cryptocurrency and want to make money with it, do your research. Don’t invest large sums of money that you can’t afford to lose. Research each currency carefully before putting real money into it. Understand how a cryptocurrency’s value grows and declines over time, along with its pros and cons. Become informed about its strengths and weaknesses, so that you can learn when to buy or sell a certain digital currency for maximum profits.

 

Where can I buy a cryptocurrency and how do I store it

Trading cryptocurrencies can seem confusing at first, but there are many tools that can help.

Many exchanges, like Binance and Coinbase Pro, allow you to deposit fiat currency (like USD) to purchase cryptocurrency. Other exchanges only accept cryptocurrencies themselves as payment.

You can use your cryptocurrency wallet to store your digital assets securely. Each wallet has a different user interface and features, so it’s important to find one that suits your needs.

 Some wallets, like those from Jaxx or MyEtherWallet, are available for download on your computer. Mobile wallets, like those from Coinomi and Coinbase Wallet, allow you to hold your funds directly on your phone.

Hardware wallets

Hardware wallets store your assets offline in a secure physical device. Usually USBs or external hard drives, these hardware devices often come with extra security features such as backup options. Some users even have their private keys tattooed onto their skin so they can’t be misplaced.

Deciding which kind of wallet to use depends on how you intend to use your cryptocurrency. If you want to purchase goods or services with your cryptocurrencies, any digital wallet that supports major cryptos should be sufficient.

For investors looking to trade their digital assets, however, it’s important to have a secure storage solution in place.

Each wallet has a different user interface and features, so it’s important to find one that suits your needs.

Coinomi

Coinomi, for example, allows you to hold up to 100 cryptocurrencies and has ShapeShift built-in. Jaxx lets you hold several cryptocurrencies and also supports tokens like ICON (ICX).

For investors looking to trade cryptos often and at will, look for something with low fees. Airbitz or MyEtherWallet are good options if you want secure offline storage with no transaction fees.

Once you’ve decided on a wallet, purchasing some of your first cryptocurrencies is relatively straightforward.

Register for an account with an exchange like Binance or Coinbase Pro and deposit fiat currency to buy cryptocurrency from another exchange user.

Coinbase lets you buy four cryptocurrencies—Bitcoin, Ethereum, Litecoin, and Bitcoin Cash—using either USD or EUR. Binance offers five options: BTC, ETH, XRP, LTC, and BNB.

 Many exchanges require you to verify your identity, but once you’re registered and verified, transferring funds between your account and exchange is simple.

On Coinbase Pro, for example, a transfer of funds from USD to BTC takes about five business days. Binance allows for instant deposits using cryptocurrency transfers so that’s a good option if you want to cut down on transaction times.

 

Basic trading terms to understand

The cryptocurrency market can seem like a foreign world to new entrants, filled with arbitrary acronyms and esoteric concepts.

But while cryptocurrencies are wholly digital, they do share some characteristics with other currencies. Here’s what you need to know before you buy.

To be a cryptocurrency, a digital asset must have some core characteristics:

  • It should be decentralized so that no single authority can control it
  • It should operate on blockchain technology, with transactions recorded in a ledger visible to all users of that network.
  • It should have its own unit of value separate from other currencies.

In addition to these shared characteristics, many cryptocurrencies are designed to increase in value over time—or at least retain their value against inflation.

 And unlike fiat currencies, cryptocurrencies are not backed by governments or physical assets. They’re purely digital, and their value depends on what people think they’re worth.

 These characteristics make cryptocurrencies a volatile investment and one that’s particularly risky for newcomers. Many experts caution against investing in crypto assets at all until you understand how they work—and must warn you not to invest any money you can’t afford to lose.

 Nonetheless, cryptocurrencies have become an important part of financial life over the past few years. 

 

Quick steps on how to start using cryptocurrency

Crypto-currency is all over mainstream media lately. You’ve probably heard that Bitcoin prices recently hit an all-time high of $3,000 USD, or you may have read about how countries like China are banning crypto-currency. Regardless of what you’ve heard or read, here are a few quick steps on how to start using cryptocurrency:

 1. Obtain a Virtual Wallet. This is where your Bitcoins will be held, just like a real wallet. You can download an app or go to a website to obtain one that you trust. You can also find them in brick-and-mortar stores as well (coinbase), which allows credit card purchases, being one example).

 2. Purchase some Bitcoin(s). There are many places to buy bitcoin online and in-person; find one that you trust and makes you feel comfortable. Coinbase is a trusted site where anyone can easily exchange their fiat currency (dollars, pounds, etc.) for cryptocurrency via credit card or bank transfer. They make it super easy to get started!

 

 3. Move your Bitcoin into your Virtual Wallet. Once you have bitcoin in your virtual wallet, you can send it to anyone with a virtual wallet through an address. The transaction can take a few minutes or several hours (or more!) depending on network congestion and other factors, but once it’s completed, that Bitcoin will be held securely in someone else’s virtual wallet!

 4. Hold your Bitcoins. Bitcoins can be stored in a virtual wallet, just like money would be stored in a physical wallet or bank account.

 5. Spend your Bitcoins. You can use your Bitcoin to buy goods and services, just like you would use physical money.

 6. Exchange your Bitcoins for another currency.

 

Other digital currencies

Despite Bitcoin’s growing popularity, there are many other cryptocurrencies being used around the world. Some of these alternative currencies are more and more becoming accepted as legitimate currency.

Take a look at some of these digital currencies that you might be interested in learning about.

 Zcash – unlike most other cryptocurrencies, Zcash provides users with enhanced privacy protections for both their payments and their identities. For example, Bitcoin transactions are published on a public blockchain ledger, but with Zcash, only sender and receiver can see payment details. Other cryptocurrency users can also take advantage of private transactions.

 Augur – also known as a decentralized prediction market, Augur is an open-source, peer-to-peer oracle and prediction market platform built on Ethereum. It allows users to trade in real-world events by forecasting outcomes and buying or selling shares in those outcomes. Shares can be purchased from anywhere, allowing Augur users to bet globally with anyone.

Factom

Aiming to create a record-keeping system for enterprise data, Factom uses a distributed architecture and blockchain technology to simplify records management, record business processes, and address security. The goal of Factom is to allow people and businesses to organize their financial transactions in secure, editable distributed ledgers at a low cost. Factom’s open-source software can be used by anyone looking for ways to manage data better.

 Lisk – a 2016 cryptocurrency, Lisk aims to enable JavaScript developers to deploy their own custom blockchains and decentralized applications (DApps). By building on top of two previously established cryptocurrencies – Litecoin and BitSharesX – Lisk launched as a fork of Crypti. Lisk’s primary difference from most other cryptocurrencies is that it uses its own consensus algorithm instead of proof-of-work or proof-of-stake.

 Stratis – a 2016 cryptocurrency, Stratis was created to fulfill Microsoft’s vision of how decentralized applications should be built. It offers simple and affordable end-to-end solutions for the development, testing, and deployment of native C# and .NET blockchain applications on the Azure platform. The goal of Stratis is to reduce obstacles in blockchain adoption.

 Dash – an open-source, peer-to-peer cryptocurrency forked from Litecoin in 2014, Dash (formerly known as Darkcoin) offers instant transactions (InstantSend), private transactions (PrivateSend), and token fungibility. It also uses a self-governing and self-funding model that allows it to pay individuals and businesses who perform work which adds value to Dash.

Steem

Also known as a blockchain-based social media platform, Steem was created by Ned Scott and BitShares co-founder Daniel Larimer. Users are rewarded for creating and curating content, known as posts and votes respectively, on social media platforms like Reddit and Facebook. They’re then paid in cryptocurrency for their contributions.

 Zcash – a decentralized and open-source cryptocurrency forked from Bitcoin in 2016, Zcash offers private transactions. Its goal is to offer complete financial privacy by obscuring the sender, recipient, and amount of every transaction made as well as making transactions impossible to block or track.

 Golem – built on Ethereum’s blockchain, Golem aims to create a decentralized sharing economy of computing power. Computers owned by users are made available for rent to others in exchange for payments in cryptocurrency. This enables users to make money from their computer hardware while they aren’t using it and reduces costs associated with server hosting providers. This can improve efficiency in industries like scientific research, CGI rendering, and machine learning training among others.

 Monero – an open-source, private cryptocurrency forked from Bytecoin in 2014, Monero offers untraceable and unlinkable transactions by obscuring the sender, recipient, and amount of every transaction made. The team plans to make all Monero transactions confidential in a future update. It also uses ring signatures to protect users’ privacy as well as stealth addresses to hide both transaction and balance information on their public blockchains.


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