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Cryptocurrency Overview

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Summary

Cryptocurrency Overview

We recommend reading Blockgeeks' article, What is Cryptocurrency: Everything You Must Need To Know!

In the future, cryptocurrencies may become the most widely used kind of currency.

A cryptocurrency is a digital currency. It can be used to buy things. A cryptocurrency's price reflects how valuable it is, which usually corresponds to how widely used it is. Cryptocurrencies use cryptography techniques for security, so that is why they are called cryptocurrencies. One use is the encrypted addresses of cryptocurrency accounts.

Traditional currencies like dollars, pounds, yen, etc. are issued by governments. These fiat currencies are regulated by a central authority. So governments control the inflation, deflation, and supply of fiat currencies. Governments are often the reason for a fiat currency's devaluation.

In contrast, cryptocurrencies are not regulated by a central authority. They are regulated by a large community of users, known as a decentralized network.

The cryptocurrency's source code controls the supply, which is limited in most cases. So cryptocurrencies are secure from political influence. And, they don't incur dramatic inflation or deflation.

A cryptocurrency runs on a software technology called a blockchain. A blockchain is a public database, which shows records of every transaction that has ever occured in that cryptocurrency.

In most cryptocurrencies, there are nodes (i.e. user computers) in the decentralized network that are responsible for verifying the legitimacy of transactions. This is a stark contrast to fiat currencies where a sole central authority (e.g. banks) are responsible for verifying financial transactions. The cryptocurrency verification model enables global transactions that are much faster than fiat currencies. It also increases legitimacy of transactions since they're verified by a large network of nodes.

Cryptocurrencies vary on their method of verification, which is called the consensus algorithm. Different consensus algorithms impact a cryptocurrency's security, transaction speed, and other attributes.

Once the transaction is verified, it is added with other transactions in a new block to the blockchain. These transactions are permanent and can never be changed by anyone.

The image below this article shows a diagram of how cryptocurrency works.

It should be noted that blockchain technology can also be used to verify contracts, records, and other information. For example, it can be used to verify the supply chain history of a food product in a supermarket or a package location in international shipping. These and other uses are realized in dAPPS (decentralized applications). dAPPS run on a blockchain and usually have an associated cryptocurrency.

Cryptocurrencies including those associated with dAPPS are also used as a store of value. There are many exchanges such as Changelly where you can trade cryptocurrencies similar to how you would with stocks.

Cryptocurrencies are a revolutionary form of money with a promising future. We hope the "descryptions" on this site will help you quickly learn about different cryptocurrencies. Thank you for reading.


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