What Is Cryptocurrency – History, Types, Benefits, and More
A Brief Overview of Cryptocurrencies
In the time of the cave dwellers, people used the barter system, in which two or more people traded goods and services. Someone might, for example, trade seven apples for seven oranges. People stopped using the barter system because it had some big problems:
- If you have something to trade, someone else must want it, and you must desire what the other party is providing.
- You must select how many of your stuff you’re prepared to sell for others, and not all items are divisible. For example, you cannot separate a living animal into smaller components.
- In contrast to our current cash, which fits in a wallet or can be carried on a mobile phone, the products cannot be transferred easily.
When people realized that bartering didn’t work well, they tried a few different kinds of money: In 110 B.C., the first official money was made. In 1250, gold-plated florins were introduced and used all over Europe. From 1600 to 1900, paper money became very popular worldwide. This is how the modern money we use today came to be.
Paper money, coins, credit cards, and digital wallets like Apple Pay, Amazon Pay, Paytm, PayPal, and so on are all forms of modern currency. All of it is run by banks and governments, which means a central authority controls how cash and credit cards work.
Traditional Currencies vs. Cryptocurrencies
Imagine that a friend bought you lunch, and you want to send money online to their account to pay them back. There are several ways this could go wrong, such as:
- The bank could have a technical problem, like its systems being down or its machines not working right.
- Your account or the account of a friend could have been hacked. This could have happened because of a denial-of-service attack or because someone stole their identity.
- Your or your friend’s account could have reached its maximum number of transfers.
This is why the cryptocurrency is the way money will work in the future. Now think about a similar deal between two people who use the Bitcoin app. A message asks the person if they are sure they are ready to send bitcoins. If the answer is yes, the system checks the user’s identity, sees if they have enough money in their account to make the transaction, and so on. After that, the payment is sent and the money goes into the account of the person who is getting it. All of this takes place in just a few minutes.
Then, cryptocurrency solves all of the problems with modern banking: You can send as much money as you want, your accounts can’t be broken into, and there is no single point of failure. As was said above, as of 2018, there are more than 1,600 cryptocurrencies. Bitcoin, Litecoin, Ethereum, and Zcash are some of the most popular. Every day, a new cryptocurrency is created. Considering how much they’re growing right now, it’s likely that they’ll grow even more in the future.
Let’s talk about what cryptocurrency is in the next step.
What is Cryptocurrency?
A cryptocurrency is a string of coded data representing a currency unit. Blockchains are peer-to-peer networks that track and organize cryptocurrency transactions like buying, selling, and transferring. They also serve as secure ledgers of transactions. Cryptocurrencies can be used as a currency and a way to keep track of money because they use encryption technology.
A cryptocurrency is a type of digital or virtual currency that is used to buy and sell things. It’s a lot like real-world money, except that it doesn’t exist in the real world and works through cryptography.
Because cryptocurrencies work without a bank or a central authority and are independent, new units can only be added when certain conditions are met. For example, in Bitcoin, the miner doesn’t get paid until a block has been added to the blockchain. This is the only way that new bitcoins can be made. After 21 million bitcoins are made, nobody will be able to make any more.
Benefits of Cryptocurrency
With cryptocurrency, the transaction cost is low or even free, unlike when you move money from a digital wallet to a bank account, which costs money. You can buy things and take money out at any time of day or night, and there are no limits on how much you can buy or take out. And anyone can use cryptocurrency, which is different from opening a bank account, which requires paperwork and proof of identity.
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