Ever heard of cryptocurrencies like Bitcoin? They’re like digital money that use something called blockchain to keep track of all the transactions.
You can “mine” them by using your computer to solve complex math problems or buy them from a broker and store them in a special digital wallet. Cryptocurrencies are still new and people are still finding new ways to use them, it’s exciting stuff!
Cryptocurrencies Meaning and Definition
In simple terms, cryptocurrency is a digital currency. Cryptocurrencies are not available in physical forms, such as coins or cash, but are commonly used worldwide. In cryptocurrency, everything is entirely virtual. Even so, this digital money has a reasonably high value.
Cryptocurrencies can be stored in ‘digital wallets,’ available on mobile phones or other computer devices. In addition, cryptocurrency owners can use digital currency to buy and sell transactions.
How Does Cryptocurrencies Work?
Cryptocurrencies are digital money that run on something called blockchain, which is like a public ledger that keeps track of all the transactions. It’s updated and held by all the people who own the currency.
To get these digital coins, you can “mine” them by using your computer to solve complex math problems. Or you can buy them from a broker and store them in a special digital wallet.
When you own cryptocurrency, you don’t own something physical, you own a key that lets you move a unit of the currency from one person to another without needing a middleman.
Bitcoin was the first cryptocurrency and it came out in 2009, but there are more and more cryptocurrencies popping up and people are finding new ways to use blockchain technology. In the future, it’s possible that things like stocks, bonds and other assets could also be traded using blockchain.
Cryptocurrencies, Since When?
Digital currency, or the concept of cryptography, has been known for a long time, since the time of World War II. The country that uses it is Germany.
Germany uses the concept of cryptography for war strategy. They will send secret codes. These codes are used for the troops. So that the opposing forces have yet to learn the tactics they will run.
Conventional currency is centralized. Meanwhile, this digital currency is decentralized. Decentralization is a government system that gives more power to local governments.
CharacteristicsÂ
There are several other definitions of cryptocurrency. The meaning seen from its characteristics and its use is as follows:
1. Digital
Cryptocurrency is a digital currency, it can only be done and is valid through a computer. Cryptocurrencies doesn’t exist in physical form. It’s is different from the money we hold every day.
2. Peer-to-peer
Cryptocurrency can be used for transactions. Transactions are carried out from one person to another. This transaction is carried out online.
3. Global
Cryptocurrencies have similarities in every country. Therefore, this currency transaction can be used freely. Transactions can be made between countries, but will not be affected by exchange rates.
4. Encrypted
Cryptocurrency makes every user have a code. The code is useful when making transactions with cryptocurrencies. When making a transaction, the user cannot see who the transaction was made with. This is because no real name appears in every digital currency transaction.
Apart from that, there are no rules whatsoever in this transaction. Anyone can transact as long as they can use it. Then, you have to know what it will be used for.
5. Decentralized
In general, any money transaction will involve several parties. The party functions to mediate the process of marketing. An example that we can see is the Bank.
However, this digital currency is different. In the transaction process, there is no bank as an intermediary. There are also no other parties involved in the transaction. Everyone will be responsible for their money independently in this digital money transaction.
6. Truthless
Relates when plunging into the world of cryptocurrency. That means the user doesn’t need to trust anyone inside the system.
Function
Cryptocurrency certainly has various functions, as follows:
1. Buying goods or services
Many shops have started using cryptocurrency as payment, including two well-known companies, Overstock, and Newegg.
You can also use cryptocurrencies in many restaurants, airlines, hotels, apps, and bars. Quoted from Cointelegraph, some universities have also implemented cryptocurrency. However, the predominance of new companies is accepting Bitcoin.
2. Investment
Another cryptocurrency function is an investment. At the beginning of the cryptocurrency’s popularity, its price increased sharply. It’s no wonder that many people are ‘suddenly rich’ after investing in cryptocurrency.
Cryptocurrency has the same principles as economic principles; prices will increase when there is a lot of demand. The more people invest in cryptocurrencies, the higher the price.
However, the increase in the price of this digital currency has not been as significant as in previous years. This can be caused because investing in cryptocurrencies is included in the high-risk category.
3. Mining
Mining or mining is essential in cryptocurrency. Cryptocurrency users confirm by solving complex cryptographic puzzles and recording them in the blockchain. This puzzle can be solved by mining.
The greater the user’s computing power, the greater the chance they will be able to solve it. If you successfully solve the puzzle, you will be rewarded with a transaction fee.
Cryptocurrencies Example
It is known that there are more than 2,200 types of cryptocurrencies that are publicly traded. It shows that there are so many types of cryptocurrencies that gain public trust. The following types of cryptocurrencies are widely sold:
1. Bitcoins
Bitcoin is the first type of cryptocurrency, which is still very popular today. This type of cryptocurrency first appeared in 2009 by Satoshi Nakamoto.
The mention has yet to be discovered. It is the name of the person, company, or group. As of November 2019, over 18 million Bitcoins were traded, with a total market value of around US$146 billion. Quoted from Investopedia, so far, 68% of cryptocurrency is Bitcoin.
2. Litecoins
Litecoin is a type of cryptocurrency that was present when digital currency was launched. This type of cryptocurrency came into being in 2011 as a peer-to-peer (P2P) digital currency that generates new blocks to form the blockchain faster.
Therefore, Litecoin allows users to make transactions more quickly without needing a powerful computing system.
3. Dogecoins
It is a derivative of Litecoin, which appeared in December 2013. As the name implies, Dogecoin is a cryptocurrency with a mascot, the Shiba Inu dog.
This type is known as the friendliest cryptocurrency because the community always does charity, donations, and other positive activities.
Dogecoin has a much lower value than Bitcoin. So, do not be surprised if this cryptocurrency is generally used for donations, small transactions, and tipping.
4. BitcoinCash
It was launched in August 2017 and is already in the top five cryptocurrencies. This type was also found because of a group of Bitcoin users who disagreed with the applicable rules.
This group of users split off and formed their digital currency called BitcoinCash. The group also made improvisations that they thought were better than the first cryptocurrency.
5. Feathercoin
It is a type of cryptocurrency that is open source. Peter Bushnell, an IT officer at Brasenose College, Oxford University, created Feathercoin
This type was created by Peter Bushnell, an IT Officer at Brasenose College, Oxford University, in April 2013. This Feathercoin resembles Litecoin and is under the MIT/X11 license.