Have you ever wondered if there is a simpler way to complete transactions without having to deal with wallets, banks, and third-party apps? Well, thanks to cryptocurrencies, it is now possible. A cryptocurrency is a form of digital or virtual currency that operates on blockchain technology. Blockchain can be described as a set of records that are linked to one another, are highly resistant to modification, and are secured using cryptography.
Cryptography is a means of securing communication in the presence of malicious third parties by using encryption and decryption.
There is no actual coin or bill in cryptocurrencies, and all transactions take place electronically. It used an online ledger with powerful cryptography to ensure the security of online transactions.
How do cryptocurrencies work?
Cryptocurrencies use decentralised technology to allow users to make safe payments and store money without using their identity or going through a bank. They are based on blockchain, a distributed public ledger that keeps track of all transactions that are updated and kept by currency holders.
Some features are :
- immune to counterfeiting
- don’t require a central authority
- protected by strong and complex encryption algorithms There’s a limit to how many units can exist
- Easily verifies the transfer of funds
- Allows new units to be added only after certain conditions are met
what makes cryptocurrencies special:
- Little to no transaction costs
- 24/7 access to money
- No limits on purchases and withdrawals
- Freedom for anyone to use
- International transactions are faster
Bitcoin: Bitcoin is a digital currency that is decentralised and does not have a central bank. It uses blockchain to perform a transaction on a peer-to-peer network.
Bitcoin cash (BCH): Bitcoin cash is a separate digital currency that arose as an offshoot of bitcoin in August 2017 as a result of a ‘hard fork.’ This was in reaction to the slowing of bitcoin transaction rates and the network’s failure to find agreement on planned improvements. The maximum block size for Bitcoin cash is 8mb, compared to 1mb for bitcoin, allowing it to process more transactions per second.
Ether(ETH): Ether is the Ethereum network’s cryptocurrency, which allows users to code and distribute their own ‘decentralised applications (dapps)’ and create smart contracts that automatically enforce their clauses. As transactions are processed, small amounts of ether are destroyed, preventing hackers from spamming the network.
Litecoin(LTC): According to its creator, Charlie Lee, Litecoin is intended to be the “silver to bitcoin’s gold.” Litecoin’s maximum supply of 84 million coins is four times greater than bitcoin’s, just as the supply of silver exceeds the supply of gold. There are also some significant technical distinctions between the two.
Ripple: Ripple is a cryptocurrency that powers the RippleNet payment network, which is used by major banks and financial institutions such as Santander and American Express. Ripple functions in a somewhat different manner than other digital currencies, prompting others to doubt its legitimacy as a true decentralised cryptocurrency.
Stellar (XLM): Stellar is a payment network that works similarly to RippleNet and can handle transactions in various currencies. It is sponsored by a cryptocurrency known as lumens (XLM), which is also known as stellar. (including on the IG platform). Lumens may be used to make network transfers, but they also serve as an anti-spam measure since each transaction needs a small transaction fee, which is paid for in the cryptocurrency.
EOS (EOS): EOS is the cryptocurrency of EOS.IO, a blockchain network that is said to replicate key hardware and operating system features. It provides developers with tools and resources for creating dapps, such as user accounts, authentication, and databases. Responsibility for processing and other activities is spread across the network, allowing it to scale to millions of transactions per second in the future, according to its designers.
NEO (NEO): NEO refers to both the cryptocurrency and the network on which it operates. This network, similar to Ethereum, allows users to build decentralised apps and smart contracts. What distinguishes NEO is that its network is actually closely managed by the ‘NEO Team,’ which requires users to have a verifiable identity on the network.
Difference Between Fiat Currency and Cryptocurrency :
- Cryptocurrency is a digital currency that works as a medium of exchange wherein customers can gain digital coins based on their choice.
- Not regulated by the banks. Hence, no central authority can influence the price. Cryptocurrencies are intangible as they are mostly virtual or electronic.
- Cryptocurrencies can only be stored digitally in your cryptocurrency wallets. Cryptocurrency can transfer funds only digitally.
- The supply of cryptocurrencies is limited.
- Refers to the form of currency which is often supervised by the government and bank.
- Regulated by the government and banks. The government has the power to control the supply of fiat currencies.
- Tangible as they are in the form of coins or money.
- Can be stored in various forms like for instance PayPal allows customers to store money. Fiat money can allow payment or transfer of funds both digitally or physically.
- The supply of fiat currencies is unlimited.