Meta Description: Cryptocurrencies, often referred to simply as crypto encompass all forms of digital or virtual currencies that use cryptography for securing transactions
Cryptocurrencies, often referred to simply as crypto encompass all forms of digital or virtual currencies that use cryptography for securing transactions. Cryptocurrencies aren’t under central issuing and are not regulated by a certain authority. Instead, they use a decentralized system that records transactions and issues.
Examples of cryptocurrencies
Bitcoin’s name is almost synonymous with cryptocurrency. It is the first and to this day – the most famous crypto. It was founded in 2009 and to this day holds its leading position.
Bitcoin (BTC) was developed as an alternative form of payment, which isn’t controlled by a central bank, bypassing all central authorities in a safe and legal manner.
Besides Bitcoin, there are other famous and successful cryptos like:
Here are a few examples
Ethereum employs a similar tech as Bitcoin but operates under peer-to-peer (P2P) payments. Ethereum is a massive project – it has its own network, created on a blockchain with the same name. It powers up entire ecosystems to operate without a central authority. It is something like insurance without an insurance company, or real estate without a title company.
Litecoin
Very similar to BTC, this coin is quicker to develop new innovations, like faster payment for more transactions.
Ripple was founded in 2012, as a distributed ledger system. It can be used to track a large variety of transactions, not just on blockchain. The company that manages Ripple is known to partner with banks and large institutions.
Altcoins
Altcoin is a wide term, used for all tokens besides BTC. Most altcoins are used to capitalize on blockchain tech with a good investing perspective.
How does cryptocurrency work?
Crypto runs on blockchain – a distributed public ledger, that records all the transactions updated and held by users that own currency.
The coins are created through minting – a process that uses computer power to solve math problems that in turn, generate the coins. Brokers also sell coins, which users can store and spend through their crypto wallets.
It may come as a shock, but cryptocurrencies are not something tangible. You, as a user, own only the key that allows you to move a record from one user to another without using the services of a third party.
And blockchain is yet to develop even further, as new ways to use it and apps are still emerging. Through it, you can trade bonds, stocks, and a variety of financial assets.
How to Buy Cryptocurrency
If you are looking to buy your first cryptocurrencies, then head to a crypto exchange. There you can trade tokens with other users, just like at the stock market. After purchasing your coins, you’ll need to store them in a wallet or a third-party service such as Coinbase. You can later use those coins to buy some goods.
If you are looking to use crypto as a type of investment, then you can do it through a brokerage, like Robinhood. You can purchase BTC or other crypto, but you won’t be able to withdraw them from the platform.
Cryptocurrencies run on a blockchain, which is used to maintain a tamper-resistant record of the transactions and keeps a record of properties and their owners. It can be used to address problems faced by older attempts to create a digital currency, especially preventing people from creating copies of their holdings.
Depending on their way of use, separate units of crypto are known as tokens and coins. Some can be exchanged for services or goods, others can be staked or stored, while another group can be used to purchase items from app stores or in-game shops.
How are cryptocurrencies created?
Mining is the primary way to obtain cryptocurrencies. It is primarily used by Bitcoin and is an energy-consuming process where computers solve complex problems in order to identify the authenticity of transactions on the network.
There are other methods to create crypto, and some are far-less impactful on the environment. But the most popular is to simply buy some from an exchange.
Advantages and Disadvantages of Cryptocurrency
As every other financial asset, cryptocurrencies have their advantages, but also carry an amount of risk.
Advantages
👉No single point of failure
👉Easy to transfer
👉No third parties
👉Can generate returns
👉Remittances are streamlined
Disadvantages
👉Transactions can be pseudonymous, which allows for crime use
👉Highly centralized
👉Hard to return on investment
👉Off-chain security issues
👉Volatile prices
Cryptocurrency fraud and cryptocurrency scams
There are more and more cases of crypto scams and cybercrime.
Fake websites
Fake websites feature testimonials and heavy use of crypto jargon. They promise easy returns with a ‘small’ amount of investment.
Virtual Ponzi schemes
Cybercrimes that promote fake investment opportunities that are supposed to pay-off old investors with the money from the new ones. BitClub Network raised over $700 mil through a Ponzi scheme before its perpetrators were sent to jail in 2019.
"Celebrity" endorsements
Scammers use the names of well-known celebrities and billionaires to promote investment opportunities in fake cryptocurrencies. They contact victims through message apps and sell their stock when investors drive the price up, they sell the stock, thus reducing it in value.
Romance scams
According to the FBI, there has been a spike in online dating scams wherein fraudsters convince people whom they contact through dating apps or social media to invest or trade in virtual currencies. In the first seven months of last year, the FBI's Internet Crime Complaint Center received 1,817 crypto-focused romance scam complaints associated with losses of $133 million.
In conclusion
Crypto is advancing at a lightspeed pace, coming off a long way in the last 15 or so years. Now we can store value, transfer, and spend in different ways, by using numerous assets in terms of unmatched safety.
There is a new perception of crypto and blockchain, as they provide companies with new opportunities like a state-of-the-art supply chain. The future of cryptocurrencies and the supporting tech seems bright, as they keep growing and adapting to new and various uses.
Frequently asked questions
What is cryptocurrency?
Cryptocurrencies are a form of digital asset that uses cryptography to secure transactions. These transactions are managed through the blockchain.
What is blockchain?
The blockchain is a distributed public ledger, that records all crypto transactions. It is maintained through nodes that ensure security and transparency.
How are cryptocurrencies created?
Through mining – the process involves the use of computer power to solve complex problems in order to verify transactions and place them on the blockchain.
