What is Cryptocurrency?
A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It’s a decentralized currency that uses cryptography for security and verification purposes during transactions. Crypto investment can have many benefits because it has a high return on investments. Most cryptocurrency systems rely on a public distributed ledgers known as blockchain, which is basically an ever-growing list of records that are highly resistant to modification.
The first cryptocurrency and its mechanism
The first cryptocurrency was Bitcoin which was introduced by Satoshi Nakamoto in 2009 who believed in a new decentralized electronic payment system in which people trade directly to one another rather than using an intermediary like a bank. This system is backed by numerous computers (nodes) that are connected to the network. These nodes have different functions and Bitcoin network has at least 7 types of nodes. There some nodes, however, that perform all the functions they are called full nodes.
The network is so vast and it is spread across the globe. These nodes work based on pre-programmed algorithms and mathematical proofs. The degree and decentralization of different cryptocurrencies differ. Majority of the cryptocurrencies enjoy a public distributed ledger called blockchain. Blockchain is indeed an ever-growing list of records that cannot be modified easily. The blocks are connected to each other in a linear fashion and are in charge of constantly recording the verified transactions which are secured by cryptography. Cryptocurrencies generally work on top of a blockchain that operate according to an underlying protocol. It’s this protocol that defines the operation of blockchain and the cryptocurrency system.
The nodes can make benefit by mining which is the process of collecting and validating the transactions through certain procedures and algorithms such as proof of work (PoW) or proof of stake (PoS) and receiving the block reward as their payment.
Most popular cryptocurrencies
Cryptocurrency encompass all coins and tokens which are referred to as crypto. Bitcoins is the first cryptocurrency as mentioned before. It’s the “Kleenex” of all crypto as it is considered by some to be synonymous and also confused with cryptocurrency. Coins other than Bitcoin are called “Altcoins”. Some of the most popular of these altcoins are Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Bitcoin Cash (BCH), and Tether (USDT).