What is Cryptocurrency

What is Cryptocurrency

Cryptocurrency (or Crypto) is decentralised digital money designed to be used over the internet. Cryptocurrencies can be used to buy goods or services or held as part of an investment strategy.

The first cryptocurrency Bitcoin, which launched in 2008, remains by far the biggest, most influential, and best-known of all Cryptos. Other popular cryptocurrencies, by market capitalization are Ethereum, Bitcoin Cash and Litecoin.

Who controls Cryptocurrency?

Cryptocurrencies are usually not issued or controlled by any government or other central authorities. They’re managed by peer-to-peer networks of computers running free, open-source software. Therefore Cryptocurrencies can’t be manipulated by any central authority, simply because there isn’t one. No matter what happens to a government or a banking institution, your cryptocurrency will remain secure.

What is a Blockchain?

A Blockchain is a list of transactions that anyone can view and verify. A cryptocurrency blockchain is similar to a bank’s balance sheet or a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain which makes it difficult or impossible to change, hack, or cheat the system.

Each block in the chain contains a number of transactions, and every time a new transaction occurs on the blockchain, a record of that transaction is added to every participant’s ledger. 

The decentralised database managed by multiple participants is known as Distributed Ledger Technology (DLT). Blockchain is a type of DLT in which transactions are recorded with an immutable cryptographic signature called a hash.

This means if one block in one chain was changed, it would be immediately apparent it had been tampered with. If hackers wanted to corrupt a blockchain system, they would have to change every block in the chain, across all of the distributed versions of the chain.

Blockchains such as Bitcoin and Ethereum are constantly and continually growing as blocks are being added to the chain, which significantly adds to the security of the ledger.

Blockchain technology is also exciting because it has many uses beyond cryptocurrency. Blockchains are being used to explore medical research, improve the sharing of healthcare records, streamline supply chains, increase privacy on the internet, and so much more.

What is Ethereum?

Ethereum, which launched in 2015, is the second-biggest cryptocurrency by market cap after Bitcoin. Ethereum, like Bitcoin, is an open source project that is not owned or operated by a single individual. 

Ethereum is a decentralized computing platform that takes the security and openness of blockchains and extends those attributes to a vast range of applications — including the entire universe of DeFi (Decentralized Finance).

Decentralized finance is a blockchain-based form of finance that does not rely on central financial intermediaries such as brokerages, exchanges, or banks to offer traditional financial instruments, and instead utilizes smart contracts on blockchains, the most common being Ethereum.

Ethereum has become a popular investment vehicle and store of wealth (and can be used, like Bitcoin, to send or receive value without an intermediary).

Ethereum-based apps are built using “Smart contracts.” Smart contracts, like regular paper contracts, establish the terms of an arrangement between parties. But unlike an old-fashioned contract, smart contracts automatically execute when the terms are met without the need for either participating party to know who is on the other side of the deal — and without the need for any kind of intermediary.

What is a Token?

A “Token” often refers to any cryptocurrency besides Bitcoin and Ethereum (even though they are also technically tokens). Because Bitcoin and Ethereum are by far the biggest two cryptocurrencies, it’s useful to have a word to describe the universe of other coins. Another word you might hear with virtually the same meaning is “altcoin.”

Altcoins are specific virtual currencies that have their own dedicated blockchains and are primarily used as a medium for digital payments. On the other hand, the crypto tokens operate on top of a blockchain that acts as a medium for the creation and execution of decentralized apps and smart contracts, and the tokens are used to facilitate the transactions or represent an asset or utility.

Most often, they are used to fundraise for crowd sales, but they can also be used as a substitute for other things, for example, one can have a crypto token that represents x number of customer loyalty points on a blockchain that will be exchanged for another type of an asset (i.e. Amplivo’s FLP for CSR token).

Tokens can also be held or traded like any other cryptocurrency.

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