What is a cryptocurrency: just about the complex

What is a cryptocurrency: just about the complex

Cryptocurrency has already become a full-fledged part of the financial world, which attracts with its prospects not only private investors, but also large companies with multi-billion dollar budgets.

The rules of the game in the rapidly growing cryptocurrency market are becoming clearer every year, and the processes are more transparent.

For beginners and not only, we have prepared a material in which we will explain what a cryptocurrency is, describe its advantages and disadvantages, what types there are, tell us about who nevertheless created the world's first cryptocurrency and why it is called that.

What is Cryptocurrency: Advantages and Disadvantages


Cryptocurrency is a digital form of money that allows people to transfer or exchange value in a digital environment. Simply put, it is a kind of electronic currency, the role of the payment system in which is the technology with which these same crypto-currencies work.

Cryptocurrency is the result of computer calculations. Electronic registers that store information about how many coins users have and where it is transferred. Cryptocurrency is stored on special electronic or cold wallets, or on Exchanges.

Advantages:

  • Decentralization. Most of the top cryptocurrencies are based on decentralization, with the help of which they cannot be controlled by regulators.
  • High transaction speed. Fast transactions are implemented precisely due to the fact that cryptocurrencies do not have intermediaries in the form of a banking system, but are processed by the power of computers or mining farms.
  • Facilitate the transfer of money across borders. Cryptocurrency can serve as an intermediate currency when transferring from one country to another, and then it is converted into local currency.

Disadvantages:

  • Ultra high volatility. If you follow the crypto-currency market, you could see that the prices of coins fluctuate greatly and the growth or fall can reach from 1% to 1% per day. You won't see this in the stock markets. For experienced traders, this is of course more a plus than a minus.
  • Anonymity. Many people claim that cryptocurrencies are anonymous, but let’s be honest – with transactions, there is still a digital trail by which governments or certain bodies can track people’s transactions.
  • Use for money laundering and illegal purchases. The item speaks for itself. Unfortunately, in recent years, you can buy anything from the prohibited list for cryptocurrency.

Types of cryptocurrency


The main types of cryptocurrencies are as follows:

  • Decentralized. The power and control over the network of these cryptocurrencies is distributed among users, and not concentrated in one hand. Bitcoin is one of the most decentralized coins. No individual or organization can voluntarily create new coins or decide how they are distributed or controlled. The creation and distribution of bitcoins is controlled by the Proof of work mechanism.
  • Pseudo-centralized. This type of cryptocurrency is most often controlled by a closed group of people who can block user accounts.
  • Stablecoins. Cryptocurrency whose price is pegged to fiat currency, such as the US dollar, gold, oil, etc. The brightest examples stablecoin - Tether и BUSD.

Who created the cryptocurrency


With the advent of the Internet, there have been periodic attempts to create a digital currency around the world. However, no one trusted these projects - and they did not receive popularity. They were too easy to fake.

The world's first cryptocurrency is considered Bitcoin. By the way, we have an article about the world's first cryptocurrency, which we recommend you read:

Bitcoin was able to solve this problem with the help of Blockchain technology, which is compared to a huge book containing records of what is happening with cryptocurrency. The main feature was that each bitcoin owner had an independent, but identical copy of this very book.

The entries in all books are true and identical. Neither banks, nor the government, nor the creator of the cryptocurrency can forge these records. In other words, there is no single controller in the blockchain, the system is controlled by many participants. Built on mathematical calculations, the system protects the digital currency from counterfeiting or hacking.

It is known that the world's first cryptocurrency appeared in 2009 and it was developed by a person or a group of people under the pseudonym Satoshi Nakamoto, but the real identity of the creator remains unknown to this day.

Bitcoin became the progenitor of a large number of cryptocurrencies. Some aim to surpass it, while others already have their own advantages and features that Bitcoin does not have.

Today, many blockchains allow users not only to exchange money, but also to run decentralized applications using smart contracts. Ethereum is the most striking example of such a blockchain.

Why is this type of assets called cryptocurrencies?


The term "cryptocurrency" is formed by a combination of the words cryptography and currency. To protect transactions, cryptocurrencies widely use cryptographic methods. Hence the name.

Cryptocurrency networks are based on a system of public key cryptography. It is she who ensures the safety of users during transactions.

In this system, the user has a public key and a private key. A private key is a huge number that cannot be guessed. Often it is even difficult to realize how big it is.

In the case of bitcoin, guessing the private key is like guessing the correct result of a coin toss 256 times in a row. Rather, the Earth will stop rotating than modern computers will have time to crack such a key.

In any case, as the name suggests, the private key must be kept secret. With it, you will generate a public key that you can safely share with anyone, since it is almost impossible to recover information about your private key based on it.

With the private key, you can also create digital signatures. It's like signing documents in real life. The main difference is that the validity of a signature is easily determined by comparing it with the corresponding public key. Thus, the user does not need to reveal his private key, but he can prove that he owns it.

If you want to spend your funds in cryptocurrency, you can only do so if you have the corresponding private key. When you make a transaction, you announce to everyone on the network that you are going to transfer funds. Information about the operation is contained in a message (transaction), which is signed and added to the cryptocurrency database (blockchain). As already mentioned, your private key is required to create a digital signature. And since the database is visible to all users, anyone can verify the validity of your transaction against this signature.

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Conclusion


Cryptocurrency is digital money based on blockchain technology. There is no single body, such as a central bank, that controls its output and value. Instead, it falls on the shoulders of blockchain users.

As many people know, the first cryptocurrency in the world was Bitcoin, which eventually set the trend for the creation of altcoins and tokens.

In this article, we analyzed: the definition of cryptocurrency, its advantages and disadvantages, its types, the principle of operation and who was the creator of the cryptocurrency.

Write in the comments if you use cryptocurrencies, which ones you think are promising, as well as which wallets you use and consider convenient for PC or mobile devices, there may have been any problems with certain wallets. Who will have difficulties in buying or selling, questions on creating wallets, you can write to the contacts provided below. We will definitely help and advise you!

We hope this article was helpful to you. All successful and profitable investments!

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Комментарии (4)

  1. Lumin Yesterday, 22: 53

    Cryptocurrency is the future of HYIPs. Already, many projects work only with cryptocurrencies, and in the future, in my opinion, this trend will increase.

    A complaint
  2. n1kto253 26 August 2022 16: 12

    Thank you, it's always interesting to read your articles!

    A complaint
  3. Akimskate 18 August 2022 08: 05

    Thank you for the article!


    A complaint
  4. Managerruslan 12 August 2022 13: 12

    I constantly use Tether TRC, it is very similar to fiats. I loved Etherium and LTC from crypto, but prices jump so incomprehensibly there, I left the world of electronic coins for about six months

    A complaint