I was confused at first when I set out to understand cryptocurrencies.
It seemed like everyone had their own way of explaining it, and sometimes they would add fluff or buzzwords that just seemed to muddle things.
So here I am, offering a no-nonsense article that takes only 2 minutes to hopefully explains:
- What is cryptocurrency?🤔
- How do they work? ❓
- And why is everyone so excited about them?
So here's a summary of the contents from this article
What are Cryptocurrencies?
🌐Cryptocurrencies are digital-only tokens.
The key ingredient is cryptography which is used to control
- 🪙token creation
- ⚖️trading
- 🔒security
🚫🏦Most importantly it doesn't need or use a central bank or government to manage it.
The forerunner, Bitcoin
👤First outlined in a whitepaper in 2008 by the anonymous "Satoshi Nakamoto", it was called a "peer-to-peer electronic cash system".
The Bitcoin blockchain then launched in 2009
What is blockchain?
Blockchain is an alternative to traditional databases.
It is a global ledger that records every transaction made, and stores a copy across every node(computer) in the network.
💪 It provides the backbone that powers cryptocurrencies.
What are the traits of a Cryptocurrency?
Every cryptocurrency is:
- 🌐digital (completely online)
- 📚decentralized (stored on a public global ledger)
- 👥peer-to-peer (crypto is exchanged directly between parties)
How are new coins created?
❓Most cryptos create new coins through the process of "mining".
⛏️Mining: groups or individuals use expensive computers to solve cryptographic problems that will allow them to add new transactions to the blockchain.
💰Miners are rewarded with newly created coins.
Just a replacement for Fiat Money?
❓Is crypto just used to replace $ and £?
No!
These digital assets can be used for different things:
- 💎Ethereum(2015) is designed to power apps that live on the blockchain (Dapps)
- 📂Filecoin(2020) allows people to rent storage space, sorta like Dropbox!
What's the appeal of crypto?
Why is everyone saying crypto is the next big thing?
Well some factors that make it appealing
- 👤Semi-anonymous
- 🚫No-government
- 🌐Borderless
- 🔒More secure
- ⏩Cheaper, faster transactions
Looking towards the future
🪦You will notice many cryptocurrencies rise and fall
But cryptocurrencies as a whole, the technology and the industry around them are here to stay.
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