Cryptocurrency is relatively new to the world. David Chaum created the first cryptocurrency back in 1990 called eCash. Since eCash, there have been many other cryptocurrencies but not many managed to take off. That was until 2009 when Bitcoin was introduced to the world.
Cryptocurrency is a digital or virtual currency that many people trade and invest with. Although there is no regulating authority for this digital currency, there is a system which manages to record the transactions in the crypto world and develop new issues. However, there are market caps for some of these coins. For example, Bitcoin has a cap of 21 million once they have all been mined.
In this article, we explain everything you need to know about digital currency and give you a better understanding of why it is talked about.
What Is Cryptocurrency?
Crypto doesn’t need to rely on banks for verifying transactions as it is managed through a digital paid system. It allows anyone to trade with anyone, making all transactions possible which is great to a certain extent. There is no physical form of these digital currencies, they don’t exist. They are purely recognised through a database which explains the transactions in terms of worth. Furthermore, cryptocurrency is stored in an online crypto wallet so we don’t even need to carry a wallet with us anymore.
The name “cryptocurrency” sounds rather cryptic and that is because it is. The reason why it has that name is that it uses encryption to confirm transactions. What this means is digital code is used to store as well as transfer cryptocurrency. The whole point of encryption is to ensure these transactions are safe and have a form of security.
The most well-known cryptocurrency in the world, you guessed it, is Bitcoin. It is a cryptocurrency that has been in the news for over a decade, most recently for the crypto market crash. The main reason people deal with Bitcoin is to gain profit however, it is a very volatile market so that doesn’t work for everyone.
How Does This Digital Currency Work?
These cryptocurrencies are run through a public ledger which is known as a blockchain. It is a record of all of the transactions which are recorded and who holds the currency. To create a new unit of cryptocurrency, they will be mined by multiple computers to solve mathematical problems. Think of a large room in the mid to late 1900s, that is what these cryptocurrency mines look like. Some have hundreds of computers to mine this cryptocurrency which can cost thousands of pounds.
It isn’t just computers that can obtain these currencies, people can trade with them so, if you manage to afford the worth of the bitcoin now, which is £19,211.31, then you can buy that off someone.
If you buy a form of cryptocurrency, you won’t own anything physical. Instead, you will own the key which allows you to move this cryptocurrency to another area, without needing a third party to manage the transaction.
Although Bitcoin is relatively new, there are many other cryptocurrencies which are emerging. These are slowly being recognised by businesses around the world. Stock brokers and financial assets are also trading with this digital currency.
Examples of Cryptocurrencies Which Are On The Market In 2022
There are many examples of cryptocurrencies but some of the most common are those below.
The most popular cryptocurrency is Bitcoin and it is also the most valuable on the market. Since its launch in 2009, it has been talked about by media agencies all around the world. However, Bitcoin hasn’t always been worth thousands of pounds. It wasn’t until 2017 that this cryptocurrency began to increase in worth. When was the first real-world transaction with Bitcoin? In the year 2010, a programmer from Florida bought two Pizzas with Bitcoin. Just imagine how much they are worth now.
Bitcoin peaked at a worth of £51,000 in November 2021 and since then has dropped in value. Nonetheless, there is no doubt that Biton won’t retain the value it was once valued at.
This is the second most valuable cryptocurrency on the market and was developed more recently than Bitcoin. Ethereum, established in 2015, is another cryptocurrency platform and is highly valuable. The cryptocurrency Ethereum is now worth £1,380 however, it peaked at £3,607.44 in November 2021 and since then, has also been on the decline.
Finally, we have Litecoin, a cryptocurrency which is very similar to Bitcoin. However, this cryptocurrency moves more quickly during transactions, allowing more transactions to be made. In April 2021, this cryptocurrency was valued at £295.45 but now, it is only worth £49.40. Again, another cryptocurrency has been a bumpy road for its value but there is no doubt it won’t reach heights like that again.
Is Cryptocurrency Safe?
There are a lot of questions surrounding cryptocurrency and the main one is, is it safe? These cryptocurrencies are built with blockchain technology. It is a daily complex that the average person may not understand. It is a digital ledger designed solely for the movement of cryptocurrency. Due to its complexity, it makes it very difficult to gain access to the system.
Trading cryptocurrency isn’t that simple and is well protected. Before you begin a trade, it requires two-factor authentication. This means not only does it require a username and password, but it will also send a code to your phone to prove that the transaction is you.
Although cryptocurrencies are well secure, it does not mean they are un-hackable. Some cryptocurrency start-ups such as Coincheck and BitGrail have been victims of cryptocurrency hacks. They are also recorded as two of the biggest crypto hacks of 2018.
Unlike the value of government-based currencies, the value of cryptocurrency is solely down to supply and demand. That is why the cryptocurrency market is so volatile. That is why so many people are interested in dealing with cryptocurrency due to the volatility. A lot of people are hoping that it swings in their favour however, it can lead people to lose a lot of money as well. These people that lose money won’t be covered like you are with stocks and bonds, making dealing with cryptocurrency highly risky.
That is cryptocurrency in a nutshell. It is one of the most talked about topics in the world at the moment, with billion-pound companies buying cryptocurrencies. Tesla is one of those companies that bought Bitcoin which was worth $1.5 billion however when Tesla announced this transaction, it decreased in value on the stock market. Indicating that many people in the world still do not have faith in this digital currency.