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The Basics of Cryptocurrency

Cryptocurrency, also known as crypto-currency or crypto, is any form of currency that exists digitally or virtually and uses cryptography to secure transactions. It is a revolutionary kind of digital asset that is actually an intangible, digital currency that uses a highly sophisticated type of encryption called cryptography in order to secure and verify transactions and to control the creation of new units of currency.

How does it work?

Cryptocurrency networks are designed to work as a medium of exchange that’s decentralized or independent of a central authority, like a financial institution. While Bitcoin is the most well-known cryptocurrency, there are other major types of cryptocurrencies, such as Ethereum, Ripple, Bitcoin Cash and Litecoin.

Units of cryptocurrency are created through a process called “mining,” which involves using computer power to solve complicated mathematical problems that generate coins. The miner is awarded a transaction fee (a new coin) in exchange for contributing to the underlying blockchain algorithm by being the first to solve a cryptographic puzzle. Note that mining is extremely competitive and requires significant computing power.

You can also purchase cryptocurrency networks. Buying cryptocurrency networks is relatively easy. There are crypto exchanges, like Binance and Coinbas, where one can purchase various digital coins. These crypto exchanges are platforms that allow cryptocurrency enthusiasts to buy and sell digital coins.

You can store and spend them using digital wallets.

Examples of cryptocurrency

  • Bitcoin – founded in 2009, Bitcoin is the first cryptocurrency network to gain game. The currency was developed by Satoshi Nakamoto, which is widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown. The network collectively manages the issuance and transaction of Bitcoin since the cryptocurrency leverages opensource peer-to-peer technology. It effectively cuts out the middleman.

  • Ethereum – the most popular cryptocurrency after Bitcoin, this is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. Ether is its specific cryptocurrency. This cryptocurrency network stands out from Bitcoin because it attempts to disrupt the online storage of data instead of disrupting banking by working as a currency. The blockchain on Ethereum has become popular in storing smart contracts.

  • Litecoin – this currency is most similar to Bitcoin but it claims to be faster. Some enthusiasts see Litecoin as another potential alternative coin to Bitcoin that can become a legit currency.

  • Ripple – founded in 2012, Ripple is a distributed ledger system that can be used to track different kinds of transactions, not just cryptocurrency. Its cryptocurrency is XRP. The strength of XRP as a currency lies on its ability to minimize liquidity since it can be utilized in the middle of any transactions between two different fiat currencies.

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