Crypto enthusiasts witnessed the third Bitcoin halving this May 12 at 6.25 BTC per block. Bitcoin is the most wide-known type of cryptocurrency present today, being the first successful digital currency ever built.
But what is cryptocurrency? What role does it play in the advancement of financial technology? In this article, we will explain briefly cryptocurrency to guide beginners who are just new to the industry.
Cryptocurrency, in layman’s term, is a form of digital currency or virtual money. Even if they are a form of currency, it doesn’t physically exist.
Most cryptocurrency transactions run in blockchain technology, a recordkeeping technology or ledger that uses a network of computers to store a record of transactions such as date, time and amount, etc. Timestamps are added at the end of previous timestamps, thus, creating a “chain-like” flow making these records nearly impossible to get altered or change. This technology helps users confirm their cryptocurrency transactions without going through any central authority, making it decentralized and theoretically immune to government interference or manipulation.
Brief History
The idea of cryptocurrency has long existed since the 1980s but it was only in 2008 when a person or a team under the name Satoshi Nakamoto published a paper titled, “Bitcoin: A Peer-to-Peer Electronic Cash System” it was fully realized.
In the paper, Nakamoto emphasized two important ideas: “peer-to-peer transactions” and “digital currency.” Nakamoto found a way to make the digital currency transaction without going to any central authority — using cryptography and blockchain technology to make the transactions efficient and secure.
Kinds of Cryptocurrencies
Since the introduction of Bitcoin in 2008, thousands of cryptocurrencies emerged and each has its own specific function. At present, there are over 2,000 reported number of cryptocurrencies available. These thousands of cryptocurrencies fall under three categories: Bitcoins, Altcoins, and Tokens.
Bitcoin is the cryptocurrency that started the success of all the cryptocurrency available today. It runs on its own blockchain, with each transaction happens directly between users calling it a “peer-to-peer network.” This technology that Bitcoin introduced, paved the way to the success of the succeeding cryptocurrencies available in the market today.
Altcoins or “alternative” coins to be exact pertains to any coins other than Bitcoin. Like Bitcoin, these coins run its own blockchain network and operates separately and differently from Bitcoin.
Some of these coins run a very different use compared to Bitcoin. In the case of Ethereum (ETH), it is designed not to be used as a digital currency but to fuel the transactions for creating applications on its own blockchain. As stated on its website, in Ethereum, “you can write code that controls digital value, runs exactly as programmed, and is accessible anywhere in the world.”
The third type of cryptocurrency is called Tokens. Unlike Bitcoin or Altcoin, Tokens do not have their own blockchain. Instead, they rely on using existing blockchains such as Ethereum or NEO.
Some developers create their own tokens to be used in their decentralized applications. In the case of Swipe, the Swipe Wallet and its native token Swipe Token (SXP) are tied and built into the Ethereum blockchain using its Wallet Smart Contracts and Time Lock Contracts that are open-sourced and available on its GitHub page.
So, what is the best cryptocurrency available to use? The answer to this question is really subjective as the choice depends on each user and their specific needs.
Why Use Cryptocurrencies?
Simple. Thanks to this modern discovery, people will have a better option for managing, sending, and investing their own funds.
Financial institutions take time to validate international settlements, and it usually comes with hefty transaction fees. Imagine a life where you can use, send, spend, or manage your money without going through the tedious process of going through any banks or any authority to do these transactions. Wouldn’t it be easier? That’s what cryptocurrency aims to bring on the table. Cryptocurrencies work around the traditional system with the use of blockchain technology.
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This blog entry is also posted at: https://sw.pe/blogunderstandcrypto
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