Cryptocurrency includes hundreds of different types of digital currencies. They are non-tangible items, and they are not regulated by any governing authority as yet. All cryptocurrencies run on blockchain technology, and the founder of this revolutionary new digital currency is regarded to be Satoshi Nakamoto. He, she or they invented Bitcoin. It was devised as a peer-to-peer cashless system to be transmitted over the Internet. The most important aspects of cryptocurrency are their decentralized nature and the open source code for peer-to-peer transfers. Cryptocurrency is grounded in decentralized filesharing. The most critical component of a cryptocurrency like Bitcoin is that there is no double expenditure with transactions. In a centralized system, transactions would be conducted by the server, but not so with a decentralized network.
Cryptocurrency balances are ‘like’ money in a traditional bank account, except that the only way a transaction can be amended is by meeting specific conditions. In this case, banks do not have the final say – it’s everyone on the network. Every single transaction has to work perfectly for cryptocurrencies to function effectively. This is done by way of private keys once somebody has a certain quantity of cryptocurrency, everybody on the network will be advised that that quantity has been transferred; this is how peer-to-peer technology works. A verify transaction is then concluded with the contracts, data and other records. This then creates a new block of data for the public ledger and it is added to the blockchain. Nothing can alter the blockchain – it is permanent. This then reflects on the user’s computer, smartphone or tablet.
Why are cryptocurrencies such a big deal?
Cryptocurrencies aren’t just future technology. They’re already being used today, and they’re doing things that were impossible just a few short years ago. Imagine sending US dollars to Europe, having it automatically converted to euros and deposited in the account of your choice. Now imagine doing it almost instantly and anonymously, at competitive exchange rates, all while paying just a couple of dollars or less in fees.That’s not a hypothetical example. That’s something you could do today if you wanted, and it’s just the tip of the iceberg. Most cryptocurrencies are built for a specific purpose and with the specific intention of being able to do it better than anything else ever could. This makes them the perfect disruptors of existing industries.
Transactions with cryptocurrencies step-by-step
It’s important to understand that the digital currency a.k.a. cryptocurrency has no intrinsic value. You cannot redeem it for commodities like oil, silver, gold. It can be traded on exchanges for USD or GBP, only because trading platforms and traders assign value to it. It also does not have a physical form, meaning that you cannot withdraw physical coins or paper currency from your digital wallet or trading platform. More importantly, digital currency is not centrally controlled by a bank or government. It is imperative that all cryptocurrency transactions are confirmed on the network. Once that happens, it is ironclad.
What do I need to get started?
Getting involved in the world of cryptocurrencies is easier than it looks. It involves three simple steps.
Choose a cryptocurrency
Bitcoin and Ethereum are just the beginning. There are over a thousand different cryptocurrencies in existence, and they’re all different. A lot of people start with bitcoin or Ethereum, and then spread it into a more diverse portfolio with the goal of improved returns on investment and more security in case the price of a coin crashes. Investing in a cryptocurrency is a lot like investing in a business. You’ll want to choose a coin that you think will become successful.
Get a wallet
Where do you hold crypto-money? In a crypto-wallet of course. Most of these wallets take the form of computer programs you can quickly download to your phone or PC, although physical devices called hardware wallets are recommended for long-term storage. But not all wallets can hold all coins. Before buying, check whether your wallet can hold your chosen cryptocurrency, or whether you can leave the coin in storage on the exchange you purchased it at.
Buy from an exchange
The third step is buying your cryptocurrency. The first purchase will usually involve exchanging fiat currency (such as USD) to your chosen cryptocurrency. After that, you might find it easier to trade cryptocurrencies for each other.