Cryptocurrency is a digital currency that utilizes cryptography for security and can be sent from one person to another anywhere around the world at very low processing charges.
Cryptocurrencies are virtual currencies exchanged between people around the world using cryptography and shared public ledgers thus creating a secure, anonymous and stable monetary system.
Cryptocurrencies derive their name from cryptography, a system where information is encrypted not only to ensure secure delivery but to prevent unauthorized users from snooping its contents.
Bitcoin was the first cryptocurrency to be created. It was developed by Satoshi Nakamoto, a mysterious entity who has remained anonymous since then.
Examples of cryptocurrencies include Bitcoin, Ethereum, Altcoin, Litecoin, Ripple and Monero among others.
How it Works
Cryptocurrencies utilize peer to peer technology to allow individuals and corporations have the ability to send virtual currencies. In order to send or receive the virtual currency, you must have a digital wallet. Two types are available – software and hosted wallets.
Software wallets refer to applications that can be installed on smartphones or PCs enabling the individual to send, manage and receive cryptocurrencies.
Hosted wallets are made available by third party companies like Coinbase. They eliminate the need of investing in solo security options plus they provide users access to their wallets regardless of their location in the world.
Private and public keys are used to manage cryptocurrencies. Public keys can be shared and used to send or receive cryptocurrencies while private keys are used to secure one’s wallet.
How to Acquire Cryptocurrencies
One of the most popular cryptocurrency is Bitcoin. Bitcoins are obtained through mining, a process where miners are used to solve complex puzzles.
For every Bitcoin mined, the miners are rewarded and the cryptocurrency is added to the public ledger. In order to ensure mining is successful, one must have the following:
a. Bitcoin miners
c. Bitcoin wallet
d. Connection to cheap electricity
e. The basics about Bitcoin mining
Benefits of Cryptocurrencies
Enables easier transfer of funds
To send funds to other parties, you need public and private keys. These help to ensure the transaction is secure. Funds are transferred from one wallet to another.
Lower processing fees
Unlike the traditional legal tender where financial institutions like banks charge steep fees to send money from one point to another, cryptocurrencies charge minimal fees. This is one of the reasons why they have become popular.
There is no central authority that manages cryptocurrencies unlike the legal tender where governments and banks manage and monitor all transactions.
Cryptocurrencies not only use private and public keys to ensure security but they use cryptography preventing unauthorized users from accessing one’s wallet. Also, major eCommerce companies are accepting cryptocurrencies thus allowing individuals to make payments for products and services.
Cryptocurrencies are growing in popularity each new day thanks to low processing fees, lack of government regulations, improved security and accessibility. As a result, the price of Bitcoin, a cryptocurrency surpassed the $4,000 mark just recently.
At the time of writing, 1 Bitcoin was trading at $4080.69. As years go by, cryptocurrencies will find new applications and one day, you may end up settling your bills and expenses such as rent, medical, air travel and energy with them.