Over the past several years, cryptocurrency has captured the imagination of investors, technologists, and the general public alike. But just what is cryptocurrency, and how does it work?
In this article, we’ll review what one needs to know about cryptocurrency, including its underlying technology, popular cryptocurrencies, and the potential impact cryptocurrency may have on the future of finance.
What is Cryptocurrency?
Cryptocurrency is some form of digital or virtual currency. It may use cryptography for security and operate on blockchains, which are in essence decentralized transaction networks. Unlike traditional fiat currencies, there is no governmental or financial institution that issues cryptocurrencies; they are decentralized.
How Does Cryptocurrency Work?
Cryptocurrency is based on the invention of blockchain technology. A blockchain is a certain kind of distributed ledger that keeps track of all transactions across its participating network of computers. Each transaction gets validated by miners and, upon verification, added to a block linked to a previous block-in other words, a chain of blocks.
A cryptocurrency is stored in a digital wallet. It is a form of software that enables the owner to send, receive, and manage their collected cryptocurrency. Every wallet is assigned an address; this, however, is more similar to a bank account number as it is used in sending and receiving transactions on the blockchain.
Popular Cryptocurrencies
Bitcoin is the first cryptocurrency and, in general, the best known. It was founded in 2009 by a person or an anonymous group under the pseudonym Satoshi Nakamoto. Generally speaking, bitcoin paved the way for thousands of other cryptocurrencies, and these other cryptocurrencies are normally known as altcoins. Some popular altcoins include Ethereum, Ripple, Litecoin, Bitcoin Cash, among many others.
Why Cryptocurrency Matters
Advantages accrued from these over more traditional fiat currencies include lower transaction fees, faster speeds, increased access, and increased financial privacy. Also, cryptocurrencies facilitate borderless transactions; this means that users can send or receive any form of payment from any part of the world without necessarily needing any intermediaries, which are normally banks or any other forms of processors of such payments in which a fee may be involved.
The Future of Cryptocurrency
While the market for cryptocurrencies is young and extremely volatile, one thing certainly can be: disruption in the financial realm is sure to occur. The more the people and the institutions that continue to adopt and invest in cryptocurrency, the greater the influence and the impact it will certainly have. The governments and regulators have, over time, come to realize that cryptocurrency is growing in importance, which means that its ultimate platform-blockchain technology-is, too. A few countries are even considering options to create and issue their own versions of digital currency.
This is revolutionary in the paradigm shift of thought regarding money and finance. Mastery of basic issues in cryptocurrency and blockchain technology will help people to really capitalize on opportunities and possibilities that this new class of assets holds.
