Cryptocurrency Demystified - Burton Wilde Explores Its True Meaning

Cryptocurrency (sometimes referred to as crypto) is any form of currency that exists in a digital or virtual manner and uses cryptographic technology to secure transactions. Cryptocurrencies have no central issuing or regulatory authority and instead utilize decentralized systems to record transactions and issue new units.

What is Cryptocurrency?

Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions. It’s a peer-to-peer system that allows anyone, anywhere to send and receive payments. Cryptocurrency payments are not physical currencies carried and exchanged in the real world but rather digitally recorded entries in an online database describing specific transactions. When you transfer cryptocurrency funds, the transaction is recorded on a public ledger. Cryptocurrencies are stored in digital wallets.

Cryptocurrency gets its name from the use of cryptography to validate transactions. This means that the process of storing and transmitting cryptocurrency data between wallets and to the public ledger involves advanced coding. The purpose of encryption is to provide security.

The first cryptocurrency was Bitcoin, established in 2009, and it remains the most famous to this day. Much of the interest in cryptocurrencies is for trading with the goal of making profits, and speculators occasionally drive prices higher.

How Cryptocurrency Works?

Cryptocurrency operates on a distributed public ledger called the blockchain, which is a record of all transactions that currency holders update and hold.

Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complex mathematical problems that produce coins. Users can also purchase cryptocurrencies from a broker like Lane Club’s broker and then store and spend them using a digital wallet.

If you own cryptocurrency, you don’t have anything tangible. What you have is a key that allows you to move a record or unit from one person to another without a trusted third party.

While Bitcoin has existed since 2009, applications of cryptocurrency and blockchain technology continue to emerge in finance, with more expected uses in the future. Transactions, including those involving bonds, stocks, and other financial assets, may ultimately use this technology.

Examples of Cryptocurrencies

There are thousands of cryptocurrencies. Some of the most famous include:

Bitcoin:

Established in 2009, Bitcoin is the first cryptocurrency and still the most widely traded. This currency was developed by Satoshi Nakamoto, a pseudonym widely believed to represent an individual or group of people; the exact identity remains unknown.

Ethereum:

Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency called Ether (ETH) or Ethereum. It’s the second most popular cryptocurrency after Bitcoin.

Litecoin:

This currency is most similar to Bitcoin but acts faster when developing new innovations, including faster payments and processes to allow more transactions.

Ripple:

Ripple is a distributed ledger system established in 2012. Ripple can be used to track different types of transactions, not just cryptocurrencies. The company behind Ripple has collaborated with various banks and financial institutions.

Cryptocurrencies other than Bitcoin are collectively referred to as “altcoins” to distinguish them from the original cryptocurrency.