What is a cryptocurrency? A simple explanation
Currencies have always been important in our lives. It proceeded through various revisions over time, eventually evolving into the versions we have today. We currently have paper money, coins, digital wallets, and credit and debit cards. The system is centralized and regulated by authorities, which restricts how it operates. It is controlled and regulated by banks and governments, which limits its functionality. The current system has many faults, and cryptocurrencies aim to provide a solution.
So, what is a cryptocurrency?
A cryptocurrency is digital or virtual money that functions similarly to traditional currency but is not physically present. It uses a digital ledger called blockchain to record transactions and cryptographic algorithms to secure data.
Cryptocurrencies allow us to perform all kinds of financial activities without involving a third party (e.g., banks, government). Anyone with access to the internet can own a cryptocurrency and use it to buy, sell, and trade.
The first blockchain-based crypto was Bitcoin which is still the most valuable currency. Other popular cryptocurrencies include Ether, Binance Coin, and Dogecoin. Each of these coins serves a different purpose.
How do cryptocurrency transactions work?
Cryptocurrencies use algorithms to encrypt data. They also use a public key that acts as a virtual identity. A private key is a user’s digital signature and is used to authorize transactions.
Suppose you want to perform a Bitcoin transaction; you need to enter transaction details like the receiver’s wallet address and the number of Bitcoins to send. Then, you authorize the transaction through your private key. The information will pass through an algorithm that encrypts the data. After that, it will be distributed on the blockchain across the internet for verification. The output will hold your public key. It is what miners use to validate transactions. After the verification, the transaction is added to a blockchain where it cannot be changed or altered.
Each cryptocurrency has its use. For example, Bitcoin is used similar to government-issued money to perform real-world transactions. On the other hand, Ether works as well as cash and fuels decentralized apps on the Ethereum network.
What is the future of cryptocurrencies?
While the market for cryptocurrencies is expanding rapidly, there is still a debate about the future of crypto. On one side, we have supporters like Elon Musk and Jack Dorsey, who believe that crypto is better than the regular currency. On the contrasting side, we have Warren Buffet and Charlie Munger, who are against it. Some people think it is being used as a means for criminal activities.
Cryptocurrencies have started to get massive traction among internet users. Some countries have already legalized them or have accepted some of these cryptos as legal tender. Due to its anonymous nature, governments across the globe are cautious while others are working towards regulating them.
According to Coinmarketcap, over 10,000 cryptocurrencies are already traded in the market. With its growing public interest, more people are looking to invest in this trillion-dollar industry.
Realizing the pain of new investors looking to invest in this risky and volatile market, TeraBlock has developed a platform that uses a machine-learning algorithm. It runs on highly tested strategies to enter and close trades on your behalf, removing the hassle new investors have to go through when executing trades.
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