When you hear the word “cryptocurrency,” what comes to your mind? Bitcoin, perhaps? It’s no secret that cryptocurrency has been gaining a lot of attention lately, but what exactly is it?
In this blog post, we will be exploring the basics of cryptocurrency. What is it? What is the need of it? How does it work? By the end of this post, you should have a better understanding of cryptocurrency and whether or not it’s something you’d like to invest in.
Currency VS Money: What’s the difference?
Before jumping directly into Cryptocurrency let’s look at the difference between Currency and Money. Currency and money are often used interchangeably, but there is actually a big difference between the two. Currency is a type of money that is used as a medium of exchange within a country or region. Money, on the other hand, is a broader term that can refer to currency, but also includes other items such as gold, silver, and other precious metals.
So, when people talk about money, they could be referring to either currency or to a broader concept of money. It’s important to be aware of the difference so that you can understand the context in which people are using the term.
Centralized & Decentralized Currency
Centralized Currencies are the currencies that are controlled and manipulated by our Government. Governments can now print currencies as many as they want. This is how they manage and control inflation, or manage interest rates.
Whereas Decentralized Currencies are not controlled by any organization and are limited in quantity. Let’s take Bitcoin for an example, its total circulating amount is 21,000,000 and hence has a price that varies with demand. I will be talking about the differences between Centralized and Decentralized currencies in my upcoming blogs.
Cryptocurrency is a digital currency in which transactions are verified and records maintained by a decentralized system using cryptography, rather than by a centralized authority. Now the question arises what is a digital currency? It is nothing but a medium for exchange which is done electronically. Earlier digital currencies were considered unsafe as people did not understand their workings. Now the scenario has changed. Physical currencies are considered unsafe as they can be robbed or destroyed. Cryptocurrencies use encryption techniques to control the creation of monetary units and to verify the transfer of funds. The records of transactions are stored in a digital ledger called Blockchain.
In this Blockchain, entries can not be deleted or modified. Using Blockchain technology, anyone can do transactions without any central authority. According to investopedia.com, Blockchain is a distributed database or ledger that is shared among the nodes of a computer network. As the data in the blockchain is distributed, the data cannot be removed even if a single node or nodes of the computer system crashes.
Already have Cryptocurrencies? Visit CoinMasters Cryptocurrency Converter to get the latest prices of your Crypto. I will be talking more about blockchain in future.
Thank you for reading