Many people have experienced that awkward moment when friends, colleagues, or classmates suddenly start talking about cryptocurrencies, leaving you standing there alone because you don't know what they're talking about. Don't worry; you're not alone! Cryptocurrency can seem like a complex and hard topic, especially for beginners, but fear not! After reading this simple beginner's guide, you will know the basics of cryptocurrencies.
What is Cryptocurrency?
In a nutshell, cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies (fiat) we use today, like the US dollar or the euro, cryptocurrencies operate on decentralized networks based on blockchain technology. This means that transactions are recorded on a public LEDGER (the blockchain) and verified by a network of computers (nodes) rather than being controlled by a middleman such as a bank or government.
How Does Cryptocurrency Work?
You are probably wondering by now, 'Hmm, interesting... but how does this technology actually work?!' Well, Cryptocurrencies work through a technology called blockchain, every blockchain used its own technology such as proof of work (POW) or proof of stake (POS) but in this example we use the technology bitcoin used, proof of work. So it all starts when a users try does a transaction, it gets send out to the network, where it's get validated by computers known as miners. These miners use powerful computers to solve complex mathematical puzzles, which secure the network and validate transactions. Once a transaction is validated (The moment bitcoin rewards the first miner that solve the complex puzzle I earlier talk about), it is added to a block and chained to the previous block in the blockchain. This chain of blocks creates a tamper-resistant record of all transactions, called the blockchain
Why Cryptocurrency Matters
Cryptocurrency offers big advantages over traditional fiat. For starters, it let you do faster and cheaper international payments, as cryptocurrencies are not subject to the same fees and delays as traditional banking systems. Additionally, Cryptocurrencies are easily accessible for people who may not have access to their own bank account, allowing them to participate in the global economy. Moreover, cryptocurrencies offer greater privacy and security compared to traditional payment methods. Transactions are recorded on a public ledger, providing transparency and security. Last but not least, you are in full control of your own money, thanks to decentralization. There is nobody that can stop you from making a transaction, although some limitations may apply when using bitcoin on a centralized exchange.
Common Cryptocurrencies
Bitcoin is the first and most well-known cryptocurrency, created in 2009 by an anonymous person or group of people that call themself: Satoshi Nakamoto. Since then, thousands of other cryptocurrencies, often seen as altcoins, have been created, each with its own unique features and use cases. Some popular altcoins include Ethereum (ETH), Ripple (XRP), Litecoin (LTC), as well as funny meme coins like Dogecoin (DOGE) or Voodoo Token (VDO).
Risks and Challenges
While cryptocurrency offers many potential benefits, it also comes with risks and challenges. Cryptocurrency markets are highly volatile, resulting in significant price swings within short periods. Additionally, the decentralized nature of cryptocurrencies has made it easy for criminals to engage in activities such as money laundering or financing terrorist activities.
Getting Started with Cryptocurrency
If you're interested in getting started with cryptocurrency, there are a few steps you can take. First, educate yourself about the basics of cryptocurrency and blockchain technology by reading my other articles ;) Next, choose a good cryptocurrency exchange where you can buy, sell, and trade cryptocurrencies securely. It's also important to learn how to use hardware wallets and enabling two-factor authentication, to protect your funds from hackers
So cryptocurrency is a revolutionary technology that has the potential to transform the way we think about money and finance. While it seems like a hard topic at first, with a little bit of reading, anyone can understand the basics of cryptocurrency. So, whether you're a dummy or just looking to expand your knowledge, I hope your fear is gone when others around you suddenly talk about cryptocurrencies.
