What is Cryptocurrency?

by Andrew McGuinness     Sep 05, 2019

Lately it seems like the same stories are being repeated over and over again about how people have invested in Bitcoin and turned a substantial profit. Relatively few people understand exactly what Bitcoin is. Some sort of ‘coin’ that is mined from within a computer somehow, as if that would make sense to more than 30 percent of the population.

It is likely that many investors don’t even know very much about cryptocurrency, the way it works, and what has caused it to expand. Investors are actually not as knowledgeable concerning the nature of their investment as you would think. So, for those uninformed investors, as well as those of you tired of the confusion the world of Bitcoin and cryptocurrencies has caused you to face, here is a basic overview of what exactly cryptocurrency is.

1. What’s in the name

Cryptocurrency is also referred to as digital currency because of its digital, electronic nature. ‘Crypto’ actually means ‘hidden’ or ‘secret’ which says a lot about cryptocurrency and what it was created to do.

2. Privacy and security

This form of currency is private, anonymous and decentralized. This means that there are no third-parties connected to the currency whatsoever, no financial institutions and no executives laying their hands on it when they please. It is also not linked or attached to the owner’s identity in any way, which makes it not possible to retrieve once it is stolen or once you are hacked.

This consequently means that cryptocurrency is more susceptible to hacking than any other form of currency. Considering the fact that some investors have more than hundreds of thousands of dollars worth of cryptocurrency located within one device, it comes as no surprise that hackers choose to focus a majority of their time on the task of reaching these digital currency-filled computers. Attempting to hack anything else would not result with nearly as high of a pay-off.

3. The first cryptocurrency

The very first cryptocurrency was, as you probably know, Bitcoin. This was in 2009. It’s hard to believe how long it has been, when it was only relatively recently that it started to become a popular topic in the news and online.

4. Conception of cryptocurrency

It is speculated that Bitcoin was first developed by Satoshi Nakamoto, but officially, it is unknown who exactly created Bitcoin. Satoshi Nakamoto supposedly aimed to create a peer-controlled electronic means of managing cash. This is very similar to the idea of a peer-to-peer network that is developed for file-sharing.

However, rather than files being transferred from one place to another, cash is transferred from peer to peer in order for transactions to be carried out instantly and free of charge. Bitcoin was the very first type of cryptocurrency and, somehow, to this day, remains the most valuable digital currency.

5. Shopping with digital currency

It used to be impossible to find any merchants that were willing to accept payment in the form of cryptocurrency. Now, however, it seems that things have changed. There aren’t very many options available yet in terms of which cryptocurrency you choose to use. Merchants tend to only accept Bitcoin. Among these are online retailers like Overstock, which sells a large variety of items, much like Amazon. Bitcoin may also be employed when making payments for hotel stays, flights abroad, jewelry, or even the college degree you never thought you would be able to afford.

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