Written by: James Page
In recent years, cryptocurrency has been one of the crucial drivers of innovation in the digital economy, encouraging more and more individual startups and corporate businesses to say goodbye to outdated payment and communication systems.
However, even though cryptocurrency has been receiving an increasing amount of mainstream attention, for a lot of people, the way these digital coins work and how they can be used still remains an enigma. If this speaks to you as well, keep reading to find the answers to these burning questions and more about cryptocurrency.
How Does Cryptocurrency Work?
As their name suggests, cryptocurrencies are virtual coins designed with a special cryptographic proof mechanism that combines mathematical theory and computer science.
They were primarily designed to transform the financial system and allow for decentralized, private, faster, and cheaper money transfers, but have since found multiple use cases across different industries.
Although cryptocurrencies are not the product of one software engineer’s work, as there were many of them working on novel solutions to perfect the technology, there’s one mastermind who is regarded by the crypto community as the father of cryptocurrency.
In early 2009, a mysterious developer using the pseudonym Satoshi Nakamoto, launched the first fully-fledged decentralized electronic payment system and the world’s first cryptocurrency, Bitcoin.
Instead of relying on the trust in third-party institutions that monitor and approve people’s transactions, Nakamoto created a peer to peer payment network based on cryptographic proof stored on an impenetrable digital ledger called the blockchain. This has resulted in cheaper, faster, and more private money transactions for network users.
Almost twelve years later, while not recognized as legal tender, cryptocurrencies serve as authentic mediums of exchange and stores of value because they’re fungible, divisible, and countable.
The Most Popular Cryptocurrencies
Being the first cryptocurrency available for purchase, Bitcoin (BTC) still remains the most popular among crypto enthusiasts around the world. Back in 2009, 1 BTC was worth less than a US dollar but right now, Bitcoin is worth well above $17,000!
Therefore, it’s not surprising that a lot of leading companies like Microsoft, Overstock, Home Depot, famous food chains, travel agencies, restaurants, etc, are accepting Bitcoin payments. Even PayPal has recently made it possible for customers to buy BTC using their PayPal accounts. However, while some like to spend their BTC, others prefer investing in this “digital gold” and holding onto it.
The second-largest cryptocurrency is called Ether or Ethereum (ETH). It was launched in 2015 by Russian-Canadian developer Vitalik Buterin who saw the potential of blockchain technology and decided to create a cryptocurrency that would perform more than just a monetary function. Ethereum functions as a utility token and it’s used to build and secure self-executable smart contracts and decentralized applications.
Litecoin (LTC) was created by Charlie Lee, an ex-employee of Google, who wanted to improve some of Bitcoin’s features in his own cryptocurrency project. He achieved this by tweaking the coin’s mechanism to make Litecoin more scalable and therefore more suitable for small everyday purchases. This is why crypto traders refer to this coin as “the silver to Bitcoin’s gold”.
Ripple (XRP) was co-founded by Ryan Fugger, Jed McCaleb, and angel investor Chris Larsen. The main idea behind this project was to create a digital currency and network that would make cross-border payments faster and cheaper. This makes XRP extremely profitable for central banks and large businesses that make regular international payments.
Where Can You Use Cryptocurrency?
Cryptocurrencies can be used to purchase all sorts of goods and services. Until recently, retailers only accepted Bitcoin payments but not other cryptocurrencies due to their volatility. However, things have started to change in altcoins’ favor, with Apple adding up to 10 different cryptos supported on the App Store.
Cryptocurrencies are an attractive investment for a lot of people, especially as a diversification strategy. Crypto exchanges are the number one marketplace for selling, buying, transferring, or storing cryptos. However, due to the volatile nature of the crypto market, you should be very careful.
Finally, a lot of developers have found their niche in cryptocurrency. The underlying blockchain technology is behind all sorts of fintech startups in healthcare (decentralized record system), the car industry (self-driving cars), and retail (tracking goods).
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