What is cryptocurrency?
Cryptocurrency is a digital or virtual currency that uses cryptography for security. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
Cryptocurrencies are decentralized, not subject to government or financial institution control. The most well-known cryptocurrency is Bitcoin, but many other types of cryptocurrency have been developed over the years. Cryptocurrencies are often traded on decentralized exchanges and can also be used to purchase goods and services.
Cryptocurrency is still a relatively new phenomenon, and as such, it is subject to a lot of volatility and speculation. However, many believe that cryptocurrency has the potential to revolutionize the global financial system by providing a more secure and efficient way of conducting transactions.
Four types of cryptocurrency
Bitcoin: The original cryptocurrency
Bitcoin was created in 2009 by Satoshi Nakamoto and is the original cryptocurrency. Bitcoin is a decentralized peer-to-peer electronic cash system that does not require a trusted third party. Transactions are verified by network nodes through cryptography and recorded in public distributed ledger called a blockchain.
Bitcoin is unique in that there are a finite number of them: 21 million. Miners are rewarded with Bitcoin for verifying and committing transactions to the blockchain. They do this by solving complex mathematical puzzles using computers. If both parties are willing, Bitcoin can pay for things electronically. This way, it’s similar to conventional dollars, euros, or yen, which are also digitally traded.
Ethereum: Smart contracts and dapps
Ethereum is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of fraud or third-party interference.
These apps run on a custom-built blockchain, an enormously powerful shared global infrastructure that can move value around and represent the ownership of property.
This enables developers to create markets, store registries of debts or promises, move funds following instructions given long in the past (like a will or a futures contract), and many other things that have not been invented yet, all without a middleman or counterparty risk.
The project was bootstrapped via an ether presale in August 2014 by fans worldwide. It is developed by the Ethereum Foundation, a Swiss non-profit, with contributions from great minds across the globe.
Litecoin: A faster Bitcoin
Bitcoin is the original cryptocurrency, but it’s not the only one. There are now more than 1,000 different types of cryptocurrency. Bitcoin is still the most well-known and widely used, but others are catching up.
One of those is Litecoin. In 2011, Litecoin was often referred to as “the silver to Bitcoin’s gold.” It’s similar to Bitcoin in many ways but with a few key differences. For one thing, it’s faster. A transaction on the Litecoin network can be confirmed in just 2.5 minutes, compared to 10 minutes for Bitcoin.
Litecoin also has a higher total supply than Bitcoin. While there will only ever be 21 million Bitcoins in existence, 84 million Litecoins will eventually be mined (though not all at once).
Monero: Private and anonymous transactions
Monero is a type of cryptocurrency that focuses on privacy and anonymity. Transactions made using Monero are private and cannot be tracked. This makes Monero a popular choice for those looking to keep their transactions confidential.
Conclusion: Get started with cryptocurrency!
Cryptocurrency is becoming more and more popular, with people all over the world using it to buy goods and services. There are many different types of cryptocurrency, and knowing which one is right for you cannot be very clear. Here is a brief overview of the four most common types of cryptocurrency.
Bitcoin is the original cryptocurrency and is still the most well-known. It was created in 2009 with over a $100 billion market cap. Bitcoin is seen as a store of value, like gold, and is used by many people as an investment.
Ethereum is the second largest cryptocurrency by market cap and was created in 2015. Ethereum focuses on smart contracts, programs that can automatically execute transactions when certain conditions are met. This makes Ethereum useful for things like supply chain management and voting systems.