Cryptocurrencies are all over the news these days. What started as something others called a passing fancy has become a lucrative and headline-breaking phenomenon. If you’re not yet caught up with this promising asset, here’s the basics you need to know.
What’s a Cryptocurrency?
A cryptocurrency is basically digital or virtual currencies that use cryptography for security. These virtual currencies run on decentralized systems on the underpinning blockchain technology.
These digital assets are appealing to many investors because of its unique features. One such feature is that there’s no central authority controlling it. That means it’s mostly immune to government control and manipulation.
The First Cryptocurrency
The first cryptocurrency on blockchain was bitcoin. And it still remains the most popular and most valuable.
There are many other cryptocurrencies nowadays, all of which have defining characteristics and features.
The Blockchain Technology
The blockchain technology is the underpinning technology that makes it possible for bitcoin and cryptocurrencies to work.
It’s a complex technology, but you can think of it as literal chains of block. But in this case, the ‘blocks’ have digital pieces of information.
The blocks store information about transactions. These include time, date, and the dollar amount of the most recent transaction. They also store information on who participates in the transactions. Each block on the chain have distinct characteristics, like names but in this case, they’re called ‘hash.’ This way, each block is unique and can be differentiated from other blocks in the chain.
Transactions of Cryptocurrencies
When doing transactions with cryptocurrencies, like buying, selling, or trading, you can easily observe some unique characteristics. Some of them are the following.
Transactions are Irreversible
After the confirmation of transactions, they can never be reversed. Regardless of the circumstances along the way, you cannot undo the transactions.
Security is Tight
With cryptocurrencies, a cryptographic system protects your funds using public keys. For you to perform transactions, like sending money, you will need a private key, which you as the owner solely possess. Because of this kind of security, the transactions cannot be forged or copied.
Scale is Massive and Efficient
Transactions go to the ledger in almost no time, depending on the scale, size, and congestion within the network. Afterwards, they are confirmed by the network peers within minutes. In other words, the physical location is irrelevant since the transactions can easily become global and spread across a vast network of computers.
Most Popular Cryptocurrencies
Of course, you wouldn’t want to miss out of which is hot and which is not.
As we’ve mentioned, bitcoin is the most popular digital currency right now, serving as the gold standard within the cryptocurrency world.
Meanwhile, the Ethereum coin is quite different from bitcoin. Its blockchain doesn’t only validate accounts and balances. It also serves as a platform for applications. In practice, this means that other businesses and developers can launch their own tokens through the Ethereum platform and network.
Another frontrunner is the XRP, which is the native cryptocurrency of the Ripple ecosystem. So far, the XRP token functions as a means to make payments and transfers among banks, while making the process completely easier.
Lastly, Bitcoin Cash is another prominent coin in the market. It’s a fork of bitcoin that was created for bigger transactions blocks. Bigger transaction blocks mean more transactions being processed at the same time.