What is cryptocurrency, digital currency and bitcoin

what is cryptocurrency


Cryptocurrency – also known as crypto – is a digital currency designed to serve as a medium of exchange. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular digital currency.
Many cryptocurrencies are built on blockchain technology, which is a distributed ledger implemented by a distributed network of computers. Cryptocurrencies are differentiated from fiat currencies such as the United States Dollar or the British Pound.

Types of cryptocurrency
The first type of cryptocurrency was bitcoin, which remains the most used, valuable and popular to this day. Along with bitcoin, other alternative cryptocurrencies have been created with varying degrees of functions and specifications. Some are iterations of bitcoin while others are built from the ground up.
Bitcoin was launched in 2009 by an individual or group known under the pseudonym “Satoshi Nakamoto”. As of March 2021, there were over 18.6 million bitcoins in circulation with a total market cap of approximately $927 billion.
The competing cryptocurrency created as a result of the success of bitcoin is known as altcoin. Some of the famous altcoins are as follows:
• Litecoin
• Peercoin
• Namecoin
• Ethereum
• Cardana
Today, the total value of all cryptocurrencies in existence is approximately $1.5 trillion—Bitcoin currently represents over 60% of the total value.3.

Advantages of cryptocurrency
• Fund transfer between two parties will be easy without the need of third party like credit/debit card or bank
• It is a cheaper option as compared to other online transactions
• Payments are safe and secure and provide an unprecedented level of anonymity
• Modern cryptocurrency systems come with a user “wallet” or account address that is accessible only by a public key and a pirated key. The private key is known only to the owner of the wallet
• Fund transfer is completed with minimal processing fee.

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Disadvantages of cryptocurrencies
• The nearly hidden nature of cryptocurrency transactions makes them easy to be the focus of illegal activities such as money laundering, tax-evasion and possibly even terror-financing.
• Payments are not irreversible
• Cryptocurrencies are not accepted everywhere and have limited value elsewhere
• There is concern that cryptocurrencies like bitcoin are not contained in any physical goods. However, some research has recognized that the cost of producing bitcoin, which requires a large amount of energy, is directly related to its market value.

How does cryptocurrency work?
A cryptocurrency (or “crypto”) is a digital currency that can be used to purchase goods and services, but uses an online ledger with strong cryptography to secure online transactions. Most of the interest in these unregulated currencies is to trade for profit, with speculators sometimes causing prices to skyrocket.

How to make money from cryptocurrency?
The most common way to earn money from cryptocurrencies is to buy coins like bitcoin, litecoin, ethereum, ripple and wait until their value increases. Once their market price rises, they sell at a profit.

What is Digital Currency?
Digital currency is a form of currency that is available only in digital or electronic form. It is also called digital money, electronic money, electronic currency or cybercash.

types of digital currency
Cryptocurrency – A virtual currency that uses cryptography to secure and verify transactions, as well as to manage and control the creation of new currency units.

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Virtual Currencies – An unregulated digital currency that is controlled by its developer(s), its founding organization, or its defined network protocol.

Benefits of digital currency
• Payments in digital currency are made directly between the executing parties without the need for a go-between, so exchanges are generally transient and require low costs.
• These fees contrast well with traditional payment techniques involving banks.
• Digital currency-based electronic exchanges also provide basic record-keeping and transactional simplicity.
• There are many more benefits like fraud protection, easy international payments etc.

disadvantages of digital currency
• Cash is anonymous, but digital transactions can be tracked. While most digital currencies seek to anonymize the identity of the user, transactions leave a mark.
• Since it is a computing technology, digital currency is not safe from hacking and other cyber crimes. If an economy adopts digital currency, financial stability and national security could become a cyber security risk.
• Digital currency presents new challenges for regulators and policy makers trying to ensure financial stability.

what is bitcoin
Bitcoin was created by Satoshi Nakamoto, a pseudonymous individual or team that outlined the technology in a 2008 white paper. It’s an attractively simple concept: Bitcoin is digital money that allows secure peer-to-peer transactions over the Internet.

How is bitcoin mined?
To have a chance to successfully earn a bitcoin reward, the computer must perform a two-part operation:

• Verify a transaction block on the blockchain which is required to allow people to send and spend bitcoins
• Be the first to complete the equation to ensure that only one person is rewarded with the new bitcoin token
By being the first to complete these two processes, the miners receive a bitcoin reward. Learn more about the process of bitcoin mining.

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How do people get bitcoins?
There are three main ways people can get bitcoins.

• You can buy bitcoins using ‘real’ money.
• You can sell things and let people pay you with bitcoin.
• Or they can be created using a computer.

Why are bitcoins valuable?
Apart from money, there are many other things which we consider precious like gold and diamond. The Aztecs Used Cocoa Beans as Money!
Bitcoins are valuable because people are willing to exchange them for real goods and services and even cash.

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