What are Cryptocurrencies? For Beginners Only!
Would you like to know what cryptocurrencies are because if you are a complete beginner, then this will be useful for you?
I believe that you have heard a lot about cryptocurrency, but still don’t understand exactly what it is and how it really works.
Well, many players in the money market such as banks, governments and businesses already know about its importance and are making good use of it.
So what exactly is this new global phenomenon?
I will try to explain it in simple terms in this post so you will understand it better and know how it works.
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What are Cryptocurrencies? For Beginners Only!
A "cryptocurrency" is defined in simple words as a medium of exchange that takes place in form of digital currency with the use of cryptography to ensure security and verify transactions.
Bitcoin, Ethereum, Litecoin, Ripple, Bitcoin Cash and EOS are the major blockchain networks for cryptocurrencies, even though there are others, and even more can be created anytime.
The beginning of cryptocurrency
Now that I have explained what a "cryptocurrency" is, the next thing you need to know is how it came into existence. There were many attempts in the past years to create digital cash, but all of these attempts failed mainly because of fraud, disagreements and financial problems. These failures made the creation of cryptocurrency to be seen as a lost cause and the creators seemed to have given up.
However, a number of developers under an alias called Satoshi Nakamoto proved that the creation of cryptocurrency is possible when they created Bitcoin, which they defined as an electronic cash transfer system from peer-to-peer.
That marked the beginning of digital currency known as cryptocurrency.
How it works?
Understanding how cryptocurrency works is somehow a complex situation for some people as the explanations can be a little confusing. But do not give up just yet as I will use the simplest explanation possible to make you understand.
Within the cryptocurrency network, there is a process of confirming a transaction called mining. This is an open source process, which allows anybody to confirm a transaction.
To confirm a transaction, the system requires a miner to solve a cryptographic puzzle, which is increasingly complex. Once a miner confirms a transaction, it is marked as legitimate, and then spread across networks, and finally it is added to the network’s database.
After the transaction is confirmed, no individual can change or block it. Hence the transaction cannot be changed, reversed or forged. It becomes permanent and the miner gets a reward, a small transaction fee, which is added to their wallet.
The uses of cryptocurrencies
Cryptocurrencies are increasingly gaining fame across the globe as they become more important and appreciated by many people. Finding a merchant who accepts a cryptocurrency is now easier as compared to the situation in the past. This has increased their acceptance in the market hence increasing their use.
Some of the uses include:
Buying goods
Cryptocurrencies can be used in many places for buying goods both online and offline including restaurants, bars, shops and many more, just by using your smart phone. The biggest cryptocurrency, Bitcoin, is accepted in many places and is used to pay for hotel rooms, book flights, do shopping and even pay a college degree.
Other cryptocurrencies such as Ethereum, Ripple and Litecoin are not famous yet, but are expected to gain the same acceptance as that of Bitcoin in the coming years.
Investing
Another important use of cryptocurrency is through investment. It has created the best investment opportunities that everybody is now running to get. People are increasingly becoming billionaires through Bitcoin investments as the value for Bitcoin continues to increase year by year. Bitcoin is currently dominating in the cryptocurrency investment sector followed by Ethereum.
Payment method
Cryptocurrency is also used as a form of an electronic payment for businesses. Many businesses now put a sign that shows their customers that they accept Bitcoin payments. Accepting Bitcoin for payment is just the same as accepting cash or gift cards as a form of payment for a service.
Well, that might not be all you need to know about cryptocurrency, but it is enough to get you started with the growing world of digital currency.
There are several types of cryptocurrencies, which are secure and ensure maximum privacy. You can now start your journey of self-development by investing in this digital currency.
I hope that this is useful for you if you are starting to learn about cryptocurrency.
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Michel Gerard
You sure summed that up well. Great explanation.
@gungho, thank you for commenting. I am glad you like it.
Very nice post ..great
Thank you very much @kanika-44,I am glad that you like the post.
Before, what I heard was that Sakamoto was one man, now you're saying its a group of developers, well, that's by the way.
I learnt from this, and conceiving the "bitcoin" word is now made easy.
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Nobody really knows who is Satoshi Sakamoto, and it is very unlikely he worked alone because there is always a team around new coins that are created.
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