Cryptocurrency Basics

The Tech

Beginner

By Matt Hussey

Learn

Jan 18, 2019

A cryptocurrency is a type of digital currency. It uses cryptography to regulate how people transfer them, how they’re created, and how secure they are. The first of its kind was Bitcoin, created in 2009.

What you will learn

What you will learn

What cryptocurrencies are, how they're being used and why there are so many of them.

In just a few years, more than 1,500 cryptocurrencies have appeared, all offering something a little different. But what are they? We explore a few, what they're being used for and why everyone is so excited.

What is a cryptocurrency?

A cryptocurrency is a digital currency. It uses cryptography to regulate how people transfer them, how they're created, and how secure they are. Oh, and last but not least, it doesn't need a central bank or government to control or manage them.

Cryptocurrencies are:

  • 👾 Digital: Cryptocurrencies are completely native to the internet. They have no physical form.
  • 🎨 Bitcoin began it all: The first cryptocurrency widely adopted was Bitcoin, created in 2009 by the fictitious person or group Satoshi Nakamoto.
  • 📝 They use a distributed ledger: All cryptocurrency transactions are stored on a global list or ledger. That means the records are stored in many places at once.
  • ⚒️ Not all currencies are created the same: Most cryptocurrencies generate new units or coins through the process of Mining. This is where individuals or groups solve cryptographic puzzles and get rewards for their efforts.
  • 🌎 Decentralised: Cryptocurrencies don't live in one place. They circulate across a network made up of nodes.

Give me some examples

Cryptocurrencies weren't created just to be an alternative to your $ and £. They can be used for lots of different things.

  • ⚡Ethereum - Ether is used to power transactions and Dapps on its network.

  • 💻 Golem - the GNT is used to rent computer power.

  • 💽 Siacoin - is used to rent hard drive space.

Bitcoin was invented to be a form of digital money, but since then cryptocurrencies have become more sophisticated.

We explore that further below.

3 Generations of Crypto

Why are there so many?

Bitcoin was the first currency that solved some of the key problems of creating a currency that just lives online. But it wasn't without its flaws.

You can read more about Bitcoin's limits here.

Subsequent cryptocurrencies are trying to fix those problems, or come up with new use cases for cryptocurrencies.

Why are cryptocurrencies so special?

  • 👻They're anonymous (sort of) - cryptocurrencies can be designed so that no one can see who you are or what you're spending your crypto on.
  • 🚷They're not controlled by a government - People in unstable countries where currencies are volatile can use cryptocurrencies as an alternative way to buy goods and services.
  • 🌎They're borderless - just like the internet, cryptocurrencies can go anywhere.
  • 🔒They're secure - distributed ledgers are very difficult to hack.
  • 📉Lower transaction fees - while some cryptocurrencies have fees as part of their transactions, they tend to be cheaper than what it costs to move money across borders in the real world.
  • 📄They can be used for contracts - cryptocurrencies aren't just used as a form of money. They can be used to create contracts between people, or transfer resources that were previously difficult to quantify using regular money.

The future

We're just at the beginning of the cryptocurrency age. Many currencies will come and go, some will become incredibly valuable, others might drop to zero.

But one thing is for certain, cryptocurrencies are here to stay.

By Matt Hussey

Learn

Jan 18, 2019

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2019 © Decrypt Media, Inc. All Rights Reserved.

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