The Hustler's Digest StaffIt has been a better time to fill in on crypto knowledge and currencies. As more businesses adopt cryptocurrencies, more people learn and invest. Predictions today suggest an increase in crypto investors in coming years, and stats argue in their favor. Cryptocurrency, however, can seem like a huddle to learn. Its complex terminologies, systems, and inner workings can be daunting for a rookie. Luckily, we’ve curated a guide to level the obstacle.
Read on as we delve into a comprehensive beginners’ guide to cryptocurrencies:
What is Cryptocurrency?
Cryptocurrencies are digital currencies that offer an alternative payment type to legal tender. We can use crypto as a payment or virtual accounting system for online and offline transactions.
Unlike physical money, you need a digital wallet, called a crypto wallet, to store your cryptocurrencies. The wallets operate a cloud-based service, using unique encryption keys to confirm the user’s identity before permitting access.
Although cryptocurrencies are relatively new, many platforms have incorporated them into their systems as payment methods, diversifying their payment options and amassing crypto. People favor them because of their decentralized nature, allowing anonymous transactions without hidden fees.
How Does Cryptocurrency Work?
Blockchain is a decentralized public ledger or record of transactions, and it functions like a database that stores data. It holds crypto on a dispersed network that is globally accessible. Hence, the blockchain updates whenever a user transfers digital currency to another.
Each block is “chained” to the one before it, providing details about the transaction. As a result, older transactions or data inputs cannot change, be altered, or be deleted, keeping data in chronological sequence. Blockchain technology provides secure transactions for bitcoin users as a result.
What Kinds of Cryptocurrencies Are There?
There are several types of cryptocurrencies, including:
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Bitcoin (BTC)
Bitcoin (BTC) is the first cryptocurrency to ever exist in the crypto market, and Satoshi Nakamoto invented it in 2009. BTC operates on a blockchain or ledger, like most cryptocurrencies, and logs transactions across thousands of computers.
Bitcoin is secure and protected from fraudsters because distributed ledger updates must be validated by cracking a cryptographic puzzle known as proof of work.
Bitcoin rates have steadily skyrocketed as it has gained popularity. The price of a single Bitcoin in May 2016 was roughly $500. By December 20, 2022, the cost of one Bitcoin was approximately $16,795, growing by 3,259%.
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Ethereum (ETH)
Ethereum is a decentralized blockchain technology with a peer-to-peer network that securely verifies smart contracts. These smart contracts allow participants to transact among themselves without a trusted central entity. Its records are verifiable, secure, and evenly distributed across the network, providing users with complete ownership and access to transaction data.
ETH transactions are received by and sent from user-created Ethereum accounts. The user must sign transactions and spend ETH as the transaction processing cost on the network.
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Tether (USDT)
Tether is a stablecoin, which is a type of cryptocurrency pursuing steady validation. The currency’s design mimics the U.S. dollar, creating stable digital cash. Its stability makes it easy for traders and merchants to store and transfer crypto assets. Investors, who want to avoid the volatile nature of cryptocurrencies, comprise a lot of the currency’s traffic.
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U.S. Dollar Coin (USDC)
Like Tether, USD Coin (USDC) is a stablecoin that aspires for a 1 USD to 1 USDC ratio and mimics the U.S. dollar. You may use USD Coin to execute cross-border transactions because Ethereum powers USDC.
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Binance Coin (BNB)
Binance, one of the biggest cryptocurrency exchanges in the world, accepts payments in the form of Binance Coin (BNB), a type of cryptocurrency. Binance Coin has grown since its introduction in 2017 and now does more than enable transactions on Binance’s exchange platform.
Now, you can trade, process payments, or even make trip plans with the currency. Additionally, you can exchange or convert it into other cryptocurrencies like Ethereum or Bitcoin. In November 2017, BNB cost only $0.50, so its price increased by 248,944% to roughly $249 by the end of December 2022.
