A cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using a distributed ledger enforced by a disparate network of computers. A prominent feature of cryptocurrencies is that they are generally not issued by any central authority. So how is the currency regulated? Here is everything you need to know about cryptocurrencies.
What are cryptocurrencies used for?
Cryptocurrencies are digital or virtual currencies underpinned by cryptographic systems. They enable secure online payments without the use of third-party intermediaries. There are different types of cryptocurrencies, and each type has specific purposes. Some are transactional, while others are security tokens or utility coins.
Crypto coin types aren’t the same as coin names; the names don’t imply their purpose. The term ‘crypto’ refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption and hashing functions.
Blockchain technology- what’s it all about?
You’ve probably heard of blockchain in relation to crypto. Blockchain, in the context of cryptocurrency, is a digital ledger whose access is distributed among authorized users. This ledger records transactions related to various assets, like money, house, or even intellectual property.
The access is shared between its users, and any information shared is transparent and immediate. A blockchain contract is immutable, meaning anything that blockchain records is there for good and cannot be modified or tampered with- even by an administrator.
Cryptocurrency as a form of democracy
The value of cryptocurrency isn’t stable, all right. But these virtual currencies offer transparency as no single governing entity or any form of ‘upper hand’ exists. Everyone in the network has access to the same information that cannot be altered.
Data remains accessible only to the users of the network, and it is heavily secured. Shared ownership also means all users sign off on how accurate the data is, which means there is very little scope for data mismanagement or miscommunication.
Buying and storing cryptocurrencies
Users can buy cryptocurrencies from central exchanges, brokers, and individual currency owners. Exchanges or platforms are also easy ways to buy cryptocurrencies. You can also sell your cryptocurrencies to them. Just like regular currencies, there are ways of storing them.
After purchase, you can either store your crypto in a hot or cold digital wallet. Hot means the wallet is connected to the internet, making transacting easier and increasing vulnerability to fraud. Cold storage is safer but makes it harder to transact.
Buying goods and services with cryptocurrencies
You can transfer cryptocurrencies from one digital wallet to another using only a smartphone. You may trade in them, convert them into cash, or use them to buy goods and services. Many online platforms now accept popular coins like Bitcoin as payment.
Many users use Bitcoin for purchases through debit-card-type transactions. You can also use these debit cards to withdraw cash, just like at an ATM. Converting cryptocurrency to cash is also possible using banking accounts or peer-to-peer transactions. Crypto is the new cash!