What is a Cryptocurrency, How it Works, and Types of Cryptocurrency

What is a Cryptocurrency, How it Works, and Types of Cryptocurrency

Surely you have heard the term on more than one occasion. And surely you also have a vague idea of ​​what it refers to. However, most users get lost in the maelstrom of this virtual money. We will approach this topic simply and clearly so that you know what cryptocurrency is and some particularities of this payment system that has been with us for over a decade. Shall we start?

What is cryptocurrency?

Cryptocurrency (also known as cryptocurrency or crypto assets) is a digital medium of exchange that uses cryptographic methods to secure transactions. It fulfills the same function as a currency but is digital; you can transfer a cryptocurrency to someone on the Internet without an intermediary, such as a bank. The value of each cryptocurrency is variable.

The first cryptocurrency was Bitcoin, created by “Satoshi Nakamoto, “the pseudonym of someone whose real name is still unknown, although they say he is one of the richest people in the world. Nakamoto published an article in 2009 describing a P2P payment system called Bitcoin.

How do cryptocurrencies work?

Cryptocurrencies exist solely as digital records in a database that describe specific transactions. This database is called “blockchain,” a technology used in all cryptocurrency projects. The data in this record cannot be subsequently modified or tampered with, ensuring network security, but you cannot reverse a transaction.

Also Read: How Does a Financial Marketplace Work?

In other words, the blockchain is similar to a large, unchangeable, shared ledger written by many computers simultaneously.

What kinds of cryptocurrencies are there?

As we have already said, the first cryptocurrency was, but there are currently thousands of cryptocurrencies. We show you some of them and their characteristics:

Bitcoin: It remains the most commercialized and the most popular. There are only 21 million, and there will be no more (as they say).

Ethereum: Since 2015, it has been a blockchain platform with its cryptocurrency, Ether or Ethereum. It is considered very reliable and one of the fastest. It has no emission limit.

Litecoin: is similar to Bitcoin, although it includes faster payments and processes to allow more transactions. It was created in 2011, and its emission limit is 84 million.

Ripple: It is a distributed ledger system founded in 2012 and can track different transactions, not just cryptocurrencies. More banks accept it.

Dogecoin was founded in 2013 by an engineer from IBM and another from Adobe.

Dash: Created in 2014 and designed to send payments from person to person. It has a lower transaction cost than other cryptocurrencies and can be used entirely via text message.

How to buy cryptocurrencies?

To do it safely, you must choose the platform you will use. Generally, you can choose between a traditional broker or a dedicated cryptocurrency exchange. The next step is to fund your account so you can start trading. You can order through your agent’s web or mobile platform or exchange. There are also other ways to invest in cryptocurrencies. These include payment services like PayPal, Cash App, and Venmo, which allow users to buy, sell, or hold cryptocurrency.

Once you have purchased cryptocurrency, you must store it securely to protect it from theft or hacking.

Of course, you can use them to buy things like luxury goods, cars, technology, or even insurance.

Cryptocurrency scams and fraud

As more people are interested in cryptocurrency, scammers are finding more ways to use it. Pay attention to the following:

Fake websites: with dubious testimonials and incomprehensible jargon on top of many promises of profit.

Virtual Ponzi Schemes: Cryptocurrency criminals promote non-existent opportunities to invest in digital currencies.

Celebrities: Scammers pretend to be billionaires or famous people, promising to multiply your investment in a virtual currency.

Romance Scams: Scammers persuade people they meet on dating apps or social media to invest or trade in virtual currencies.

We hope that the world of virtual currency has become clearer to you with this post.

Also Read: The Importance of Cybersecurity in a Company

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