Cryptocurrency (or crypto for short) is probably one of the most talked-about topics these days. From Bitcoin to Ethereum and beyond, those who are interested in the future all seem to be jumping on the cryptocurrency bandwagon. With so many new currencies out there, it can be hard to know what your money is really getting you. This article will go through different cryptocurrency types and what they are all used for!
What is Cryptocurrency?
Cryptocurrency refers to digital currency that uses encryption techniques to regulate its use, ledger keeping, and transfer of value between parties. Cryptography provides security and control with a decentralized system since everyone has equal access (rather than having one central bank or centralized authority).
While Bitcoin is the original cryptocurrency and the first to be created, there are now hundreds of different cryptocurrencies out there. If you haven’t heard about cryptocurrency before, then you probably have never jumped on the bandwagon. However, if you are already a fan, this article will help you become even more knowledgeable when it comes to all things crypto!
What is Bitcoin?
Bitcoin is a cryptocurrency that can be used for payments. Anybody can send and receive it without an intermediary (like a bank). It is run by its worldwide network of computers called miners. In order to spend bitcoins, they must be exchanged first from their digital wallet and transferred in currency form to the recipient via online banking or emails.
Bitcoin was created by Satoshi Nakamoto in 2009. It is a form of digital currency, and is one of the most valuable and popular cryptocurrencies in existence. There are many other forms of Bitcoin, and they are also known as altcoins. As the world’s first cryptocurrency, it has some great advantages over other cryptocurrencies such as Ethereum (which will be discussed later).
How Do People Use Bitcoin?
Bitcoin users can exchange their bitcoins for common currencies like dollars, euros and yen online via a number of online exchanges. A lot of online retailers can also be paid with bitcoins. This gives users more privacy and also reduces fraud. A few websites like Overstock, Expedia and Microsoft accept it as a form of payment.
What Is Ethereum?
Ethereum is a cryptocurrency that can be used to program smart contracts and applications. It uses the computing power of the entire network to make calculations more efficient. For example, when one transactions is sent across the network, the other transaction records are saved in the public ledger called a blockchain. It is what makes Ethereum different from other cryptocurrencies such as Bitcoin. Unlike with Bitcoin, however, Ethereum allows users to create their own applications for uploading a smart contract on top of an existing blockchain i.e. Ethereum.
This technology is still developing and many are excited to see where it will lead the way in terms of blockchain technology. It has a lot of potential, especially when it comes to being able to write smart contracts, which are digital contracts that automate certain procedures and cuts out third parties like banks. Some examples include real estate buying and sales, sports betting, land titles insurance, etc. By removing third-party monitoring of data and controlling how information is shared, it can save costs for parties involved without sacrificing transparency or security.
How Do People Use Ethereum?
Ethereum can be traded for other similar cryptocurrencies such as Bitcoin and USD on cryptocurrency exchanges like Binance, Coinbase or Kraken. Many online merchants accept it as a form payment.
What is Litecoin?
Litecoin is a cryptocurrency that was created in 2011 and derived from Bitcoin. It was intended to be lighter and faster than Bitcoin, making it a better option for point-of-sale transactions. It uses the blockchain, which is a digital public ledger to store transactions information. Litecoin uses the mining process to create new coins on a schedule that allows for regular emission of coins (every 2.5 minutes). They can be traded for other cryptocurrencies or fiat currencies such as USD or Euros. Some merchants also accept LTC as payment (like Litecoin.com).
What is Ripple?
Ripple is another cryptocurrency that uses the blockchain to allow for faster speeds and lower costs. It was created in 2012 by Chris Larsen, Jed McCaleb, and Arthur Britto. On top of its speed, it also allows for instant transfers (of any amount) between participating banks. However, unlike Bitcoin, Ripple does not focus on being a currency but just as a faster method for facilitating transactions between financial institutions. This makes it different from Litecoin as well because Ripple’s main focus is banking transactions rather than being used as a currency. This means that Bitcoin/Litecoin transactions could be cheaper as it utilizes the Bitcoin blockchain, while Ripple is a more established and easier option for banks.
What are other Cryptocurrencies?
There are many other different cryptocurrencies out there that you may have heard about, but not known much about them especially if you haven’t been following cryptocurrency for a long time. Some examples include NEM, Verge, and Monero (known as XMR). Monero is one of the most popular and widely traded cryptocurrencies in existence. It uses stealth addresses to make bitcoin transactions untraceable, making it a popular privacy coin. Other ways to use it include paying merchants or making online purchases via online shops that accept payments in Monero.
What are the Tokens?
Cryptocurrencies such as Bitcoin, Litecoin, and Ripple all use a shared ledger called the blockchain. Tokens, however, do not use the blockchain. Other cryptocurrencies exist that are designed to automate the process of creating tokens. Applications can be built on top of this system that issues tokens to their users on a periodic basis and without going through the tedious process of mining.
A good example is Ethereum’s ERC20 tokens. It allows users to create DApps (a decentralized application built on the Ethereum network) for their token for issuing digital assets or shares in a company or projects. This makes it easier to create tokens and also helps facilitate transactions in a more secure way.
What are the Benefits of Cryptocurrency?
Increased efficiency and speed
According to Ethereum co-founder, Charles Hoskinson in an interview with Bitcoin Magazine, “Cryptocurrency is like regular cash: you can use it for good or bad”. This statement summarizes what cryptocurrency is really about: freedom of choice. Just like how cash can be used for evil (these are not necessarily examples of evil, but you get the idea…) e.g. drugs, terrorism, etc. Cryptocurrency provides an alternative to using banks in one’s transactions.
Unlike banks that require users to go through a long, tedious process of waiting in line to apply for loans and go through several documentation processes and even then, they are not guaranteed of getting the loans they need. Cryptocurrencies can allow users to bypass banks by creating their own currency/tokens without requiring as much paperwork or processes. All they would need is a computer with an internet connection and their cryptocurrency wallet program (if it requires mining).
Instant traceability and transparancy
The technology of cryptocurrency is still in its early stages and is constantly being developed on. Blockchain, which uses a distributed ledger, transactions and data are recorded identically in multiple locations, can be used by banks to monitor transactions and payments without involving a third party, thereby reducing costs. It can also be used to make transactions between banks more efficient and accurate, creating an audit trail that record the source of an asset at every step on its journey
High rewards
Many people are interested in investing in cryptocurrency because of the potential to make a lot of money as the price increases over time due to supply-and-demand market activity. As the demand for these cryptocurrencies increases, it tends to push up the price (just like any other market). This proves to be true with Bitcoin, the biggest and most well-known cryptocurrency in the world.
Many people are also interested because of the high reward they can get in the future through mining. When a cryptocurrency is mined (where a certain amount of these coins are released into the outside world), this triggers an increase in demand. For example, if Ethereum was mined to 11 million coins, it would create a lot of demand for more Ether-based cryptocurrencies since there is only about 60 million coins available.
How to Buy Cryptocurrency?
Although cryptocurrencies are not as widely accepted as other payment methods such as credit cards and bank transfers, they can still be bought with fiat currencies (USD/Euros or even Bitcoins). You can buy cryptocurrency through your usual payment methods like PayPal and bank transfers.
Despite using a credit or debit card to purchase cryptocurrency is possible, it would be hard to find a way around the Visa and MasterCard fees. Using bank transfers is also an option but you would have to send money from your bank account to the exchange (where you will receive the coins). This can be done at many different exchanges so it’s easier for people to purchase their first cryptocurrency.
You should set up multiple wallets for storing cryptocurrencies for different purposes. For example, one wallet should be used for trading, another for holding the coins in case of an emergency, another for spending, and so on. This helps prevent losing your coins. Also, do not keep all the cryptocurrencies in one wallet. This is just a rule of thumb when it comes to cryptocurrencies where you should hold different types of coins instead of one type (e.g. ETH/BTC).
You can also store your cryptocurrency in cold storage, which means you won’t be able to access them if your computer is not on and they are stored offline and away from any kind of network or internet connection. Paper wallets are a good example of this if you have an offline safe combined with a printer connected to the internet that plays an essential part in printing out the currency’s private key onto a piece of paper.
Cryptocurrency Wallets
If you want to get started with cryptocurrencies, the easiest way to do so is by getting yourself a cryptocurrency wallet. The best thing about cryptocurrency wallets is that they are free and allow you to store your cryptocurrencies in an easy-to-access place.
There are thousands of different cryptocurrency wallets in existence, however here are some of the most popular cryptocurrency wallets:
- Coinbase: https://www.coinbase.com/ (Great for beginners)
- MyEtherWallet (Ethereum Wallet): https://myetherwallet.com/ (Great for beginners)
- Blockchain (Bitcoin Wallet): https://blockchain.info/wallet/#/signup (Great for beginners)
If you aren’t comfortable with developing your cryptocurrency wallet, or simply don’t want to, there are many online wallets where you can store your coins. The best thing about these online wallets is that they’re very easy to use and often provide you with extra features such as insurance or security features. For example, Coinbase is an extremely popular online cryptocurrency wallet because it provides its users with multiple security measures that help keep people’s money safe.
If you’re thinking of investing in cryptocurrencies, the first thing to keep in mind is the market capitalization of each currency. The market capitalization is the total value of all coins in circulation.
For example, if you own 1 Bitcoin and it is worth $100, then your market capitalization would be $100 and you’d be the owner of 1% of the whole market.
If investing in cryptocurrencies, you’ll need to take into account your specific situation and your personal preferences to determine which cryptocurrency will be the best for you. There are many different cryptocurrencies out there with various characteristics such as fast transaction times, high transaction fees (e.g. Bitcoin), stability (e.g. Ripple), anonymity (e.g Monero), self-mining (e.g NEO), etc. Some people like to invest in cryptocurrencies with high potential for growth, however, they can also be risky since there is no guarantee that the value will increase exponentially. Your goal should be to find the best cryptocurrency for your investment needs rather than just trying to invest in any cryptocurrency that jumps out at you.
Final Words
Despite being on everybody’s mind, remember that cryptocurrency is still relatively new and is highly risky and speculative. Each individual situation is different as such you should always consult with a qualified professional before making a financial decision. If you plan to participate, do your research, and invest conservatively to start.