Home Cryptocurrency Cryptocurrency Explained: What It Is; How It Works and How It’s Traded

Cryptocurrency Explained: What It Is; How It Works and How It’s Traded

by Cynthia
Cryptocurrency Explained

In very simple terms, cryptocurrency is a digital currency that makes it possible to transfer value online and that functions as a virtual accounting system. Have you heard of cryptocurrency and wished to know more about it? Do you wish to pay clients anonymously and store monetary value that is decentralized online? Then sit back to learn the A-Z of cryptocurrency – from creating a wallet with your preferred crypto alternatives to trading in crypto to make money.

What Is Cryptocurrency?

Cryptocurrency has been described as a decentralized digital currency that can be stored online for monetary value. It can be used to pay for goods and services across international borders – and anonymously too. Cryptocurrency is decentralized because it is not controlled by any central authority or government – and is secured against a blockchain technology that verifies every transaction for improved security.

When people think of cryptocurrency, the first thing that comes to their mind is Bitcoin. This is because Bitcoin was the first cryptocurrency to be launched in 2008 by Satoshi Nakamoto and the most influential and the most priced. To this end, let’s examine some of the major cryptocurrencies out there.

Major Types Of Cryptocurrencies

Some of the major cryptocurrencies by market capitalization are as follows:

  • Bitcoin
  • Ethereum
  • Litecoin
  • Bitcoin Cash
  • Ripple
  • Kucoin
  • Dogecoin
  • Tezos
  • EOS
  • Dash
  • Monero
  • Zcash
  • Stellar Lumens

There are other cryptocurrencies that are not listed here; they do not all have the same technologies – some are engineered with spectacular features so that users can enjoy various transfer values.

What are the Key Elements of Cryptocurrencies?

Just as paper or fiat money has certain characteristics such as portability, durability, divisibility, acceptability, uniformity, and scarcity, cryptocurrencies also have major elements which shall be highlighted below:

  • Privacy

When sending cryptocurrency to anyone, the identity of the sender must be as private and confidential as they want it. This means it is not necessary to reveal personal sensitive information before transactions can take place.

  • Transferability

Monetary value for goods and services must be transferrable just the way it is easy to pay for purchased items using cash – but in the case of cryptocurrency, digitally.

  • Security

Blockchain security verifies the integrity of all payment transactions using the most sophisticated encryption technology possible in the world today.

  • Portability

You can access your money anywhere you are in the world without carrying cash. It does not matter if the global finance system crashes and banks are in crisis, your cryptocurrency remains safe and available for use anywhere and at all times.

  • Transparency

Every transaction is verifiable since they are published for public scrutiny on all networks, so there is no room for unscrupulous manipulation or fraud of any kind.

  • Irreversibility

It is not possible to reverse any transaction once it has been processed. Unlike bank and credit card transactions, you can’t cancel a transaction once it is sent; and this serves to eliminate fraud.

  • Safety

Cryptocurrency networks have never been hacked, and this speaks to their utmost security. All users and investors understand that their money and transactions are safe.

How to Buy and Sell Cryptocurrencies

Trading in cryptocurrency involves buying and selling based on price movement speculations. There are three major ways to trade in cryptos – through a CFD trading account, through a cryptocurrency exchange, and through brokers. When you trade via CFD, you make an advance deposit and then buy or sell without necessarily acquiring the coins that are mined.

If you are trading through an exchange, you pay up the entire trading sum through your wallet and take ownership of coins. To invest or start trading in cryptocurrency, you have to register with an exchange such as Coinbase or Binance by opening an account.

You can then buy cryptocurrencies using your ATM bank card or direct bank deposit; you can buy as little as $25, $50, or $100 worth of cryptocurrencies, and the value is stored in your wallet – from where you can use it to pay for goods and services. Sometimes, funding your account may attract some small fees, so consider the safest and cheapest options for funding your account before or after creating your account.

What Should You Know About Cryptocurrency Mining?

Mining is the process where cryptocurrency transactions are constantly verified in the ledger and new blocks (transactions) added to the blockchain. The verification is to check if the sender has enough funds to complete a given transaction and if the sender actually authorized the transaction using private keys.

Cryptocurrency is usually mined by a group of persons who harness their resources together for the event and by companies, but it can also be done by an individual with a super-fast computer and internet speed as well as stable electricity. Mining is done when the miner solves a complex mathematical or algorithmic problem.

Based on the costs and rigors of mining, experts believe mining activity is not always as profitable.

Final thoughts…

Store your cryptocurrencies in a very secure wallet to protect your money. You can apply your cryptocurrency to buy things from shops, make charity donations, embark on foreign trips, buy real property, and game online.

Photo by Alesia Kozik

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