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Cryptocurrency for Dummies: Definition and Types

What are cryptocurrencies?” — This is a common but baffling question often asked by interested folks. Cryptocurrencies obtained more enthusiasm because of the remarkable advantages it can supply. Despite this, many people still do not get the real gist of cryptocurrencies. In addition, because of the scarcity of easy-to-digest knowledge about it, people tend to stray away from investing.

How do they actually work? Here is cryptocurrency for dummies:

What are cryptocurrencies?

Cryptocurrencies are digital units of currency. Cryptocurrencies, like Bitcoin and Stablecoin, are decentralised. It means transactions do not go through a central authority such as a bank. Therefore, when you send money to another person, no one else can access your cash.

Who can track all these transactions? Everyone can track them. Wait, what? Relax. Networks of users and high power computers, called blockchains, securely track all of those transactions. Examples of blockchains are Ethereum and Hyperledger.

The public aspect of blockchains helps in preventing fraud. Everyone in the Blockchain can see how much money is sent to whom; therefore, there is absolutely no room for fraud. Not all of them are public, though. Some are private and have for-business purposes only, such as Hyperledger.

Cryptocurrency was first launched in 2009 via Bitcoin.

Why the name “cryptocurrency”?

The word “crypto” is taken from the word “cryptography” which are systems that keep safe information from hackers. In world history, cryptography is known as a tool for delivering exchange secret messages and info by the Allied Forces in the World War 2.

Kinds of Cryptocurrencies

Bitcoin

Bitcoin was shared via a white paper published online by a mysterious Satoshi Nakamoto. Nonetheless, it was later on demystified that the authentic Bitcoin developer’s name was never Satoshi Nakamoto. To this particular day, not anyone has the knowledge of who is the true geek behind the original cryptocurrency.

Bitcoin has made a considerable reach for many years and captivated a deluge of capitalists and media in 2013 when its value reached $266 for each bitcoin. However, soon after arriving at a market value of over $2 billion, it saw a decline of 50% in its market value thanks to the surging uncertainties regarding the future cryptocurrencies.

The deed of validating deals associated with Bitcoin is called mining. Confirmed operations of Bitcoin are then saved on an encrypted database called a blockchain.

Folks nowadays desire to find out more about cryptocurrency; many wish to understand more about the other kinds in addition to Bitcoin.

Altcoins

Huge parts of the Altcoins are taken into consideration as a close backup of Bitcoin but with slight changes. Just like people who use Bitcoin, Altcoins likewise utilize blockchain to safe keep verified purchases; having said that, there are thousands of Altcoins on the industry these days and not all of them are faithful alternatives to Bitcoin as some are totally incomparable in regards to algorithms, purpose, and objectives.

Factom is a sort of Altcoin which is totally distinct from Bitcoin; it makes use of POS (proof of stake) which indicates the individuals who do purchases with Factom are named stakers and not miners.

Token

A token is used mainly on decentralized applications (dApps). In contrast to Bitcoin and Altcoin, a token is a truly distinct style of cryptocurrency because it does not need to be secured in a blockchain.

You can use tokens acquire stuff in the dApp or can be used for coupons and electronic voting charges. Tokens come with either price value, which individuals can purchase, or market for a particular amount.

Cryptocurrency is undoubtedly an appealing topic in this age’s technological arena. Do you want to learn more besides the answers to “What are cryptocurrencies?” Read more here: https://kinesis.money/en/guides/what-is-cryptocurrency/.