Cryptocurrency is dependent on the internet to solidify its value and confirm relevant transactions. Each transaction is verified and becomes a matter of public record. This helps prevent the same digital coin being transacted twice.
What is Cryptocurrency?
Cryptocurrency is a form of digital money and it was designed to be a secure method of transacting, which is also anonymous. It uses encryption techniques which are used to bring regulations to the digital currency and to generate its release. Cryptocurrency is mostly associated with the internet and uses a method called cryptography. This is the process which involves converting data into a difficult code, in an attempt to track cryptocurrency transactions. Cryptography was created out of the need for a secure communication in the second world war. It has since evolved since its inception in the digital era, with elements of mathematical theory and specialised computer studies, and now it is a secure means of communication, data and money transfers online.
Bitcoin was the first cryptocurrency created in 2009 and is still the most popular cryptocurrency today. There have been many new cryptocurrencies emerging in the past decade and now there are more than 1000 cryptocurrencies available online. Bitcoin’s Cryptocurrency price value soared to $20 000 a few years ago as many people wanted to buy bitcoin, thereafter the bitcoin exchange crashed to about $6 000 establishing the Bitcoin price in this range. So, you can see the Bitcoin price has fluctuated a lot. Cryptocurrency values are reaching an all-time high since 2017 and this boosted the interest in all cryptocurrencies.
Cryptocurrencies work by using decentralised technology and allows the users to make secure transactions and save money without using their names or going through a bank.
How are Cryptocurrency Records Managed?
There is a digital public ledger in which all transactions are kept on record, known as blockchain. Information is stored throughout the network therefore it is not prone to manipulation by hackers or central failure.
Each record or group of records stored on the blockchain is known as a block. Each block is sent to the network and included in the blockchain after it has been accepted by the network as a valid transaction. The blocks cannot be changed or altered in any way once it has been verified.
Related: 5 Ways to Smartly Invest in Cryptocurrency
What is Cryptocurrency Mining?
Cryptocurrency mining is unlike mining for gold as you will need more tools. If you want to start bitcoin mining, you will need:
- Mining Hardware – You will need to have an ASIC chip for your computer which is designed specifically for the mining of bitcoin and other cryptocurrencies.
- Mining Software – You should look out for free software that has easy to follow instructions, and clearly explain how the software works with your ASIC chip.
- Bitcoin Wallet – Once a block is completed, you will need to store your bitcoin in a bitcoin wallet for later bitcoin exchanges.
How can I Purchase Cryptocurrency?
Cryptocurrency is a very unpredictable market with Cryptocurrency prices and exchange rates that constantly fluctuate, daily or even hourly. Bitcoin is however, the most well-known and valuable cryptocurrency available which is why many people prefer to buy bitcoin but there are also cryptocurrencies like Litecoin, Peercoin and Dash available.
When a person transacts with cryptocurrency, they are provided with a digital key to the address of that currency. They can then use this digital key to access and validate their transactions.
Digital keys must be kept safely, which is why a cryptocurrency wallet is important.
There are many cryptocurrency wallets to choose from:
- Desktop wallets
- Online wallets
- Mobile wallets
- Paper wallets
- Hardware wallets
How can It be Used?
There are many uses for cryptocurrency today, here are a few:
- Windows and Xbox Content – In 2014 Microsoft first started accepting bitcoin to purchase games, videos and apps.
- Coffee – In 2018 Starbucks announced that it would be accepting payments from the Bakkt app, which accepts a number of different crypto coins.
- Home Décor – Overstock, a popular home décor company announced in 2014 that it would now be accepting payments using bitcoin.
- Gift Cards – Popular site eGifter allows the purchase of gift cards that can be used at over 250 different stores, using crypto like Bitcoin, Litecoin and Ether.
Related: Key Things You May Not Know About Digital Wallets
What are the Common Cryptocurrencies?
- Bitcoin – Bitcoin (BTC) is very valuable and has a large userbase. It also has a good reputation and can now be used at many retailers and service providers. You can also withdraw BTC to Visa or Mastercard in a few simple steps.
- Blackcoin – Blackcoin allows for a quicker mining process that uses less power.
- Dash – No public ledger is available therefore; it is difficult to check on your savings and transactions.
- Litecoin – Litecoin is also accepted by many retailers and has plans to release 84 million coins.
- Dogecoin – Aimed to prevent large companies from monopolizing its mining however this did not work as planned. They still have a substantial following.
- Peercoin – There is no limitation on the number of coins that can be minted, but it is designed to attain an eventual 1% inflation rate.
Why should You Use Cryptocurrency?
Cryptocurrencies have a few advantages over the standard currency issued by one’s government. These include:
- Low Transaction Fees – There are little to no fees associated with core transactions.
- Ownership – With the digital key that you receive, access to the currency is yours alone.
- Identity Protection – Cryptocurrency can be sent straight to the recipient without requiring any further information except for the amount you want to transact.
- Accessibility – You do not require any bank or line of credit to transact with cryptocurrencies electronically. You don’t need permission to use cryptocurrencies.
- Risk-Free for Sellers – Payments cannot be reversed so this means that people cannot be defrauded.
What are Some of the Things to be Aware of when Using Cryptocurrency?
Many people don’t understand cryptocurrencies and the cryptocurrency exchange so, here are a few things to be aware of when using cryptocurrencies:
- Even though many people are starting to accept cryptocurrencies, it is still a small number compared to people accepting credit and debit cards.
- Cryptocurrency exchange rates are highly volatile and change constantly.
- Cryptocurrencies are constantly growing and also falling, some of the cryptocurrencies that are available today may fall by the wayside tomorrow.
Cryptocurrencies are gaining popularity day by day and many companies and people alike, are beginning to trust them and use them in daily activities.