Cryptocurrency: How It Works and Why You Should Use It

Cryptocurrency has experienced a meteoric rise in popularity since its inception in 2009, so much so that it’s now being given serious consideration by economists and financial experts alike. What exactly is a cryptocurrency, and how does it work? In this article, I’ll cover the history of virtual currency, how it differs from regular money, and why you should use it.

The History Of Money

The first known form of currency is the barter system. A person would trade goods for goods, or in rare cases goods for money. The history of paper money is a little more complicated. Paper money was introduced to China during the Tang Dynasty (618-907 AD). The Chinese were using paper as a representation of gold or silver to cover expenses with an agreement that the paper could be exchanged for its equivalent amount at any time.

Bitcoin Basics

Bitcoin is a digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. Through many of its unique properties, Bitcoin allows exciting uses that could not be covered by any previous payment system.

What Is A Cryptocurrency Wallet?

A cryptocurrency wallet is a digital payment system that can be accessed through your smartphone, computer, or tablet. Cryptocurrencies are transferred from one cryptocurrency wallet to another without going through a bank or clearing house. This means the funds are sent electronically (without physical exchange) and they do not incur any type of transaction fee.

Crypto Tips And Tricks

A cryptocurrency is a medium of exchange that uses cryptography for security. Cryptography is the practice and study of techniques for secure communication in the presence of third parties. The purpose of cryptography is to ensure the confidentiality, integrity, and authenticity of data. The first cryptocurrency to be created was Bitcoin in 2009 by an unknown individual using the alias Satoshi Nakamoto.

Better Than Bitcoin

Blockchain technology is the backbone of cryptocurrencies, which are decentralized digital currencies that have no physical form. Blockchain is both a meaning and definition that can be confusing. Essentially, blockchain is a series of complex calculations that make up an encrypted ledger of transactions. A public key and a private key are used to encrypt these transactions. The public key is like your social security number in the United States; it's no secret but everyone knows it belongs to you because it's publicly available information.

The Future Of Cryptocurrencies

Although cryptocurrencies can be volatile, they are a great investment because they have the potential to create a decentralized economy. There is no single entity that controls the currency, which means it can't be manipulated by governments or banks. Cryptocurrencies are created through mining which is like a lottery where computers process transactions, find blocks of data and compete to solve mathematical puzzles first. The winner gets rewarded with coins for their work.