What is a Crypto Currency?

A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.

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Introduction

A cryptocurrency is a digital or virtual asset designed to work as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled.

Cryptocurrencies are decentralized. This means they are not subject to government or financial institution control. The prices of cryptocurrencies are volatile and go up and down quickly. This makes them an investment opportunity, but it also means you could lose money.

Bitcoin, created in 2009, was the first cryptocurrency. There are now more than 5,000 different cryptocurrencies, but Bitcoin is by far the most well-known. Other popular cryptocurrencies include Ethereum, Litecoin, Dogecoin, and Bitcoin Cash.

What is a cryptocurrency?

Cryptocurrency is a digital or virtual currency that is secured by cryptography. Cryptocurrency is decentralized, meaning it is not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.

Bitcoin

Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto in 2008. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.

Ethereum

Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third party interference.

Ethereum is a public blockchain-based distributed computing platform, featuring smart contract (scripting) functionality. It provides a decentralizedirtual machine, the Ethereum Virtual Machine (EVM), which can execute scripts using an international network of public nodes. Ethereum also provides a cryptocurrency token called “ether”, which can be transferred between accounts and used to compensate participant nodes for computations performed. “Gas”, an internal transaction pricing mechanism, is used to mitigate spam and allocate resources on the network.

Ethereum was initially described in a white paper by Vitalik Buterin in late 2013 as a result of his work on Bitcoin Magazine. Buterin had proposed that Bitcoin needed a scripting language for application development. Failing to gain agreement, he proposed development of a new platform with a more general scripting language.

Litecoin

Litecoin is a cryptocurrency that was created in 2011 by Charlie Lee. Litecoin is similar to Bitcoin in many ways, but it has a faster block generation rate and can therefore handle more transactions per second. Litecoin also uses a different proof-of-work algorithm, called Scrypt, which makes it easier for people with regular computers to mine Litecoins.

Monero

Monero is a decentralized cryptocurrency, meaning it is secure digital cash operated by a network of users. Transactions are confirmed by distributed consensus and then immutably recorded on the blockchain.

Monero uses ring signatures, stealth addresses, and Ring Confidential Transactions to obfuscate the origins, amounts, and destinations of all transactions. Monero provides all the benefits of a decentralized cryptocurrency, without any of the typical privacy concessions.

Since 2014, Monero has experienced rapid growth in both adoption and price. In January 2017, Monero was trading at around $12 USD. By January 2018, Monero had reached an all-time high price of $475 USD.

Ripple

Ripple is a real-time gross settlement system (RTGS), currency exchange and remittance network created by the Ripple company. Also called the Ripple Transaction Protocol (RTXP) or Ripple protocol, it is built upon a distributed open source Internet protocol, ledger and cryptocurrency called XRP (ripples). Released in 2012, Ripple purports to enable “secure, instant and nearly free global financial transactions of any size with no chargebacks.” It supports tokens representing fiat currency, cryptocurrency, commodities or other units of value such as frequent flier miles or mobile minutes.

How do cryptocurrencies work?

Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.

Blockchain

A blockchain is a digital ledger of all cryptocurrency transactions. It is constantly growing as “completed” blocks are added to it with a new set of recordings. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. Bitcoin nodes use the block chain to differentiate legitimate Bitcoin transactions from attempts to re-spend coins that have already been spent elsewhere.

The blockchain is publicly available for anyone to view, even you. But while transactions are publicly recorded on the blockchain, identifying information is not. That’s what makes possible for digital currency to exist.

Mining

Mining is how new Bitcoin and other cryptocurrency are created. Miners are rewarded with cryptocurrency for verifying and committing transactions to the blockchain digital ledger. Ethereum miners are rewarded based on their share of work done, rather than their share of the total number of blocks mined.

To be able to mine, you need specialized computer hardware that computes mathematical proofs to add new transactions to the blockchain ledger. The first miner (or group of miners) to find the proof-of-work solution updates the blockchain and receives a reward in the form of cryptocurrency. Ethereum miners are currently rewarded with 3 ETH per block, which consists of 1 ETH “base reward” plus 2 ETH for fees paid by transactions included in the block.

Advantages and disadvantages of cryptocurrencies

Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control.

Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, there have been thousands of different cryptocurrencies created. Some of the more popular ones include Ethereum, Litecoin, and Ripple.

Cryptocurrencies have a number of advantages over traditional fiat currencies (currencies that are backed by a central government). They are:

– Decentralized: Cryptocurrencies are not subject to government or financial institution control. This means that they can’t be inflationary like fiat currencies.
– Secure: Cryptocurrency transactions are secured by cryptography. This makes them difficult to counterfeit or double-spend.
– Borderless: Cryptocurrencies can be used anywhere in the world without worrying about exchange rates or cross-border fees.
– Anonymous: Cryptocurrency transactions are usually anonymous, meaning that the users’ personal information is not attached to the transaction.

However, cryptocurrencies also have a number of disadvantages. They are:

– Volatile: The price of cryptocurrencies is highly volatile and can fluctuate wildly from day to day. This makes them risky investments.
– Illiquid: It can be difficult to convert cryptocurrency into cash, especially in larger amounts. This can make it hard to use cryptocurrency as a real currency.

Conclusion

Cryptocurrency is a type of digital asset that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are decentralized, meaning they are not subject to government or financial institution control. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.

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