Crypto 101: What is crypto?
Crypto! The thing that we can neither touch nor feel but has been making some of us huge money all through the year. So, what is cryptocurrency and how does it work? Here in this article, we will introduce you to the world of crypto.
Understanding Cryptocurrencies
At its core, cryptocurrency is typically decentralized digital money designed to be used over the internet. Crypto makes it possible to transfer value online without the need for a middleman like a bank or payment processor, allowing value to transfer globally, near-instantly, 24/7, for low fees. Cryptocurrencies can be mined or purchased from cryptocurrency exchanges.
Cryptocurrencies are usually not issued or controlled by any government or other central authority. They’re managed by peer-to-peer networks of computers running free, open-source software. Generally, anyone who wants to participate is able to. If a bank or government isn’t involved, how is crypto secure? It’s secure because all transactions are vetted by a technology called “blockchain."
Blockchain
A cryptocurrency blockchain is similar to a bank’s balance sheet or ledger. Each currency has its own blockchain, which is an ongoing, constantly re-verified record of every single transaction ever made using that currency.
Blockchain is essentially a set of connected blocks or an online ledger. Each block contains a set of transactions that have been independently verified by each member of the network. Every new block generated must be verified by each node before being confirmed, making it almost impossible to forge transaction histories. The contents of the online ledger must be agreed upon by the entire network of an individual node, or computer maintaining a copy of the ledger.
Types of Cryptocurrencies
There are thousands of cryptocurrencies present in the market today. The most popular cryptocurrencies, by market capitalization, are Bitcoin, Ethereum, Bitcoin Cash and Litecoin. Each cryptocurrency claims to have a different function and specification.
Bitcoin, the most popular and valuable cryptocurrency, was made available to the public in 2009. An anonymous person called Satoshi Nakamoto invented it and introduced it to the world via a white paper in 2008. Bitcoin remains the most widely traded and covered cryptocurrency.
As of May 2022, there were over 19 million bitcoins in circulation with a total market cap of around $576 billion. Only 21 million bitcoins will ever exist.
In the wake of Bitcoin's success, many other cryptocurrencies, known as "altcoins," have been launched. Some of these are clones or forks of Bitcoin, while others are new currencies that were built from scratch. They include Solana, Litecoin, Ethereum, Cardano, and EOS. Ethereum's ether markets itself as gas for the underlying smart contract platform. Ripple's XRP is used by banks to facilitate transfers between different geographies.