What is cryptocurrency?
The prefix crypto- stands for “cryptography,” which is a technology that keeps information safe and hidden from attackers. You may have heard of cryptography in history class — it was used to send and receive secret messages by the Allied Forces in World War II.
The Three Main Types of Cryptocurrency
1.Bitcoin (BTC) was the first cryptocurrency to be created and remains the world’s leading cryptocurrency by market cap. Bitcoin is a global peer-to-peer electronic payment system that allows parties to transact directly with each other without the need for an intermediary such as a bank.
2.Altcoins
The release of Bitcoin and its open-source code in 2008 paved the way for thousands of other cryptocurrencies to be created. These new coins have been dubbed ‘alternative coins’ or ‘altcoins’ as they are alternatives to Bitcoin.
While some do serve a similar purpose to Bitcoin, other cryptocurrency types such as altcoins actually encompass a wide range of different uses. For example, Ethereum (ETH), the world’s first programmable blockchain, enables developers to build and deploy decentralised applications (DApps) and smart contracts.
3.Tokens
Unlike Bitcoin and Altcoins, tokens are not able to operate independently and are dependent on the network of another cryptocurrency. That means they do not have their own underlying DLT or blockchain, but instead, are built on top of an existing cryptocurrency’s blockchain.
In present day, computer technicians put cryptography to use in many different ways. One of those ways is cryptocurrency!
Decryptionary.com defines cryptocurrency as “an electronic money created with technology controlling its creation and protecting transactions, while hiding the identities of its users.” For now, you can forget about how types of cryptocurrency are created, and instead focus on what it does.
Thanks to cryptocurrency, people no longer need to trust banks to handle their money and private information (that’s the same for credit card companies, too).
We don’t need banks to process our transactions anymore. Instead, transactions in cryptocurrency are processed on the blockchain. The blockchain is a shared database.
It is shared because it is run by lots of different people and companies, instead of just one company, like the banks are. This way, nobody has power over the transactions or the cryptocurrencies involved, and you don’t need to trust one single company (like a bank) to handle your money.
All rights reserved
