A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.
Introduction
A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
Cryptocurrency has gained popularity but is still widely misunderstood. Before investing in cryptocurrency, you should understand:
- Where does cryptocurrency come from
- How cryptocurrency works with blockchains
- How cryptocurrency helps you remain anonymous
- Ways to obtain cryptocurrency,
- How cryptocurrency might work in the future
Where Did Cryptocurrency Come From?
Cryptocurrency was developed in the wake of the 2008 financial crisis as an alternative to existing banking. The idea for this new system was developed by a person, or persons, going by the alias Satoshi Nakamoto. In 2009, Nakamoto released a white paper that explained the concept as well as software for the first and most famous cryptocurrency—Bitcoin.
Soon, new cryptocurrencies began to emerge. These Bitcoin alternatives are commonly called altcoins. Today, there are over a thousand different altcoins. Some tweak Bitcoin’s original code, but all function essentially in the same way, by using a blockchain.
How blockchain is used by cryptocurrency?
A blockchain is a decentralized database of transactions, commonly called a public or distributed ledger. It’s like an accounting ledger that records transactions and is available to anyone who wants to download it. This allows a community of peers to verify information instead of a single central authority.
A simple analogy for understanding blockchain technology is a Google Doc. When we create a document and share it with a group of people, the document is distributed instead of copied or transferred. This creates a decentralized distribution chain that gives everyone access to the document at the same time. No one is locked out awaiting changes from another party, while all modifications to the doc are being recorded in real-time, making changes completely transparent.
The system of tracking verified transactions adds stability and legitimacy to cryptocurrencies. It prevents users from double-spending their coins and prevents the creation of fraudulent coins.
How Crypto Helps You Remain Anonymous?
![cryptocurrency [UntoldClue]](https://f.hubspotusercontent00.net/hubfs/7670004/anonymous%20blockchain.png)
Although all transactions are recorded on the blockchain, the personal information of the people exchanging coins isn’t.
Cryptocurrency is made up of two parts: a public key and a private key. Both are needed to verify a transaction. The public key is recorded on the blockchain anytime that coin is used in a transaction. The private key is known only to the owner of the coin. It acts as a kind of signature or authorization from the coin owner during transactions, ensuring that the transaction is legitimate.
The use of both public and private keys provides anonymity for users since transactions don’t require identity verification, unlike with credit cards and bank accounts. This allows users to have much more anonymity when they want to make private transactions.
Ways To Get Cryptocurrency.
Before you can get cryptocurrency, you need a “digital wallet.” A wallet allows a user to store, send, and receive cryptocurrency. These wallets can be on desktop computers, smartphones, online websites, and even on paper; it all depends on a user’s preference and needs.
After setting up your digital wallet, there are several different ways to get cryptocurrencies:
- Gifting: Someone can give you coins; it’s like being gifted cash, but instead of receiving physical coins or bills, the crypto is sent directly to your digital wallet. This is one of the few free ways to get cryptocurrency.
- Purchasing: Most people buy or exchange fiat currency, such as the dollar or yen, for cryptocurrency. Online exchanges allow users to buy coins with their credit or debit cards. Bitcoin also has a limited number of physical ATMs that will send the crypto directly to your wallet in exchange for traditional cash.
- Receiving Payment: Another way to obtain coins is to accept the crypto as a form of payment. Anyone can perform a service or offer a product and accept cryptocurrency in return. However, cryptocurrency price swings can be volatile, which might make this a risky option for small business owners. In addition, the IRS has certain tax rules for people who receive crypto as a form of income.
- Mining Coins: Tech-savvy users can “mine” coins by using their computing power to verify blocks. Typically, the first user to solve a block’s algorithm is rewarded with coins. Mining coins is highly competitive, and not a practical option for most people. Miners often spend thousands of dollars upgrading their computers to boost their processing power for a better chance to solve the algorithm first.
Also read: How to Mine Cryptocurrency in Your Phone
For setting up a digital wallet you can use Coinbase. CoinBase is a free crypto platform. You can buy/sell all kinds of cryptocurrency here. You can also use other types of this digital wallet like Binance.
Does Cryptocurrency Have a Future?
Some people use crypto as a cash alternative. Others think of coins as a type of digital gold. Most financial professionals are still skeptical about investing in these coins, but the use of cryptocurrency is growing.
As more institutions begin to accept these coins as payment, at least some types of crypto are likely to be around for the foreseeable future.
Conclusion
Cryptocurrencies hold the key to the future of finance. By understanding its fundamentals and learning to internalize them, you’ve taken the first step toward financial empowerment in the digital age. Enter the world of cryptocurrency with confidence and explore the limitless possibilities it offers.