What is Cryptocurrency?

What is Cryptocurrency

Cryptocurrency is the name given to a digital money form that is protected by encryption methods. Such money appeared to correct the shortcomings of classical money, the ones that are in your pocket, or in a bank account.

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Cryptocurrency is not a banknote; you can not hold it in your hands. It is stored in electronic wallets. And the transfer of coins is confirmed using two encryption tools: private and public keys.

An operation between two people is first authenticated by a private key. Then, all holders of electronic coins confirm the transaction. This interaction of the two types of encryption is called a blockchain. Blockchain makes cryptocurrencies the safest form of money.

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Reasons for cryptocurrency popularity

People all over the world use cryptocurrencies every single day. But, what are the core aspects that make them so popular? Let’s discuss this.

  • Anonymity

Transactions within the system, are considered anonymous. At the same time, one user may not know anything else about the end recipient other than their wallet address. In addition, the transfer in the system is non-refundable.

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These properties attract not only ordinary users but also dishonest people, so when conducting transactions, it is important not to make mistakes with wallet addresses and work only with projects that have a good reputation.

  • Large selection of cryptocurrencies

In the early years, only Bitcoin was in demand with a huge popularity gap from other coins. Today, there are already 1,500 different altcoins on the market to choose from. Having considered their unique benefits, each person himself is able to decide which cryptocurrency is best to use for payments, and which one is easiest to invest.

Cryptocurrency exchanges, various investment platforms, and individual businessmen with their services provide easy access for customers to manage their money when trading, exchanging, withdrawing to a card, and so on.

  • Low commission

If you compare cryptocurrency transactions with bank transfers, they are more profitable due to low fees. Since the system is supported exclusively by the capacities of its participants, large percentages of the transaction due to fees are not taken out.

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Types of cryptocurrency

The main purpose of cryptocurrencies is easy transactions. All cryptocurrencies have a common feature: they are built on the basis of blockchain technology, which stores all transaction information encrypted using cryptography. But each cryptocurrency has its own characteristics. Let’s consider the most popular ones:

  • Bitcoin

Bitcoin is the most well-known and expensive cryptocurrency as of today. The main purpose of its creation was the need to provide the world with an alternative to ordinary money that is not regulated or dependent on state bodies.

  • Ethereum

Ethereum can act as a means of money transfer, but its main function is to be the fuel for the smart contracts on its platform. It is smart contracts that make this cryptocurrency special, expensive, and popular. The user can create a contract with the terms “if – then” and enter any information. The system will automatically execute the second part of the contract as soon as the first is performed.

  • Litecoin

Litecoin is the first altcoin, designed by the desire to facilitate mining and accelerate cryptocurrency transactions. It was released in 2011 by Charles Lee. Litecoin was developed based on the source code of Bitcoin, but the developer made constructive changes to it that improved the algorithm and made it possible to deal with a large number of transactions quickly.

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Development prospects of cryptocurrency

As time has shown, this form of money has a future. Cryptocurrencies are actively used, and interest from users has not ceased to grow. Bitcoin remains the most sought after, but other options have a large number of adherents.

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In many ways, the growth possibilities depend on the domestic policies of countries. So, for example, the European Union is already considering Bitcoin as a universal tool for conducting operations. In eastern countries, the attitude to the currency is completely opposite. In Japan, crypts were officially adopted, but in China, they were categorically banned.

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Thus, cryptocurrency is one of the progressive and modern methods of mutual settlement. It is completely new and has just begun its existence. Only 10 years have passed since its inception, and in comparison to banknotes, which have been in existence for hundreds of years, it is only at the beginning stage of its development.