What is Cryptocurrency?

By Danny Xia2 min read · Posted Sep 28, 2022

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Cryptocurrency

Cryptocurrency, also called coins or altcoins, is an encrypted, decentralized, digital currency that is built around blockchain technology.

Technology

Due to its digital nature, one crucial aspect of understanding cryptocurrency is technology - specifically, blockchain technology. A blockchain is a record of transactions of the cryptocurrency. This is usually compared to a ledger. Let’s say I gave my friend an amount of bitcoin. This transaction would be stored in the blockchain. The intricate part of the blockchain is security. In order to provide verification to the blockchain transactions, computers compete to solve mathematical equations that are then used to add to the blockchain. As a reward for providing security, as a large amount of computing software would be needed to fake a transaction, the computers are awarded cryptocurrency as payment. This awarding has created the crypto miner industry.

Different Coins

The most popular cryptocurrencies are Bitcoin and Ethereum. However, there are thousands of different types of cryptocurrencies. You, yourself, can set up a cryptocurrency! With all of these different types of cryptocurrencies, in combination with the digital aspect of cryptocurrency, meme coins, such as Doge coin or SHIBA INU, have gained notable traction.

Investment

Before choosing to invest in cryptocurrencies, it is important to understand the risks, implications, and processes involved. Firstly, cryptocurrencies are very volatile, since cryptocurrencies are a very speculative market and can change in price to reflect public opinion. Secondly, due to its decentralized and digital nature, security can be an issue. Since cryptocurrency is relatively new and decentralized, governments have not fully regulated it. Theft or crimes towards your crypto wallet (software that stores cryptocurrency and your identity) may not be punished or can be hard to track. Despite these potential risks, cryptocurrencies can still be a worthwhile investment. Some investors consider cryptocurrencies to be the currency of the future, being online and not tangible. Other investors might be drawn in because the coin is decentralized and not tied to the government or banks. Other investors may simply be interested in cryptocurrency's ability to increase tremendously in price, such as bitcoin's 1000% growth in the past five years. Other buyers of cryptocurrencies might just be using it for secure online transactions, instead of investing

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