Eric Finman was just 12 years old when he decided to invest in cryptocurrency. He used the $1000 he received from his grandmother as a Christmas gift to buy his first Bitcoin. And with relentless dedication, he went on to become a self-made millionaire at the age of 18. Being a big shot in cryptocurrency lore, Eric has inspired people to invest in cryptocurrency.
In the past decade, cryptocurrency has gained tremendous popularity. By now, your neighbor, office colleague, or someone from your gym must have tried to convince you about cryptocurrency investments. And even you have started thinking about it occasionally.
But do you understand what cryptocurrency is and how it works? If not, in this guide, you will find answers to all the questions you have about cryptocurrency.
So, if you feel motivated by Eric Finman, and are willing to invest in cryptocurrency, read on:
What is Cryptocurrency?
In simple words, cryptocurrency is digital or virtual money. It is not present in physical cash and is completely digital.
Cryptocurrency uses blockchain technology as a medium of exchange. Which is a digital record of transactions conducted between individuals.
To understand the concept of cryptocurrency, you need to understand what a blockchain is.
What is Blockchain?
Blockchain was an idea of a person or a group of people alias ‘Satoshi Nakamoto’. They conceptualized the first blockchain in 2008. And since then, it has started getting recognition.
Blockchain technology is a structure recording information in a way to prevent hacking or cheating of the system. A blockchain is a kind of database that records every transaction ever done in a computerized system. The data stored is managed by a series or a cluster of computing devices across the world.
Also known as ‘Distributed Ledger Technology’, blockchain use blocks to record the data. And these blocks are timestamped thus, giving an accurate date and time of a transaction. Connected through a chain of commands Blockchain justifies its name.
How does Cryptocurrency Work?
- Blockchain ledgers or records are generally public and decentralized.
- This means they are not issued by a centralized board; instead, they are operated by a network of computerized systems.
- There is not one single person in authority; it is overseen by several entities worldwide.
To use cryptocurrency, you first need a wallet. You can create and store your wallet yourself or get a wallet provider. These providers also do the job of managing these wallets for you.
The most important aspect of ensuring security is that public and private key is required for any successful transaction.
- The public key is used for identifying your wallet and
- The private key is used to unlock the wallet and access the money
You can make transactions with the person you want to with the use of these wallets. But the final transaction will be counted after it has been added to the blockchain.
What are the Major Forms of Cryptocurrency?
As per Coinmarketcap, there are more than 3,000 forms of cryptocurrencies. But the most popular ones are as below:
1. Bitcoin (BTC):
It is a prominent cryptocurrency referred to as ‘digital gold’ or the gold standard. It means the price of every other cryptocurrency is tracked against bitcoin.
2. Litecoin (LTC):
It is said that Litecoin is the silver to bitcoin’s gold. It was released in 2011 with many similarities to bitcoin. Litecoin processes transactions faster than bitcoin.
3. Ethereum (ETH):
Launched in 2015, Ethereum is different than bitcoins. They are used as a computing platform that allows the creation of ‘smart contracts’ or ‘dapps’, i.e., decentralized apps.
The decentralized apps are open-source applications, and a smart contract refers to a string of commands or codes executed on completion of a task.
What are the Characteristics of Cryptocurrency Transactions?
Here are some of the prominent characteristics of cryptocurrency transactions:
- Unchangeable: Once the transaction is done and confirmation has been received, the deal cannot be reversed. Even if there occurs any matter, the transaction is carried out anyhow.
- Extreme security: Without both private and public keys, the transaction cannot take place. Thus, making the system extremely secure that cannot be tampered with in any way.
- Decentralized: The whole system is decentralized, which means the authoritative power is distributed across all the peers. Due to this, the chances of hacking or manipulating the data are less.
Now you know the basics of cryptocurrency. We agree the volatility of the cryptocurrency market is very high. But just like Eric, if you can develop an investment strategy wisely, you will be able to gain lucrative profits as well.
So, Getting educated about the financial terms will go a long way for you. There are many other factors associated with cryptocurrency for you to explore. Keep browsing our website for more interesting articles and related information.