What is a cryptocurrency and how does it work?

A form of currency that is used digitally or virtually, cryptocurrency uses cryptography to secure transactions. There is no central issuing or regulating authority when it comes to cryptocurrency. Rather cryptocurrency uses a decentralized system for recording transactions and producing new units.

Since cryptocurrency is used digitally or virtually, one would need an internet connection to access it. Using cryptocurrency relies primarily on the internet as the main avenue for managing transactions and conveying data to miners. For instance, one can get all that through Xfinity internet plans, which offer seamless and secure connectivity. On the internet, there is a web wallet that can send and store cryptocurrency on one’s behalf. They can be accessed from anywhere, any time of the day, as long as one has a working internet connection.

How does cryptocurrency work?

Cryptocurrency requires a peer-to-peer system that enables one to send and receive payments from anywhere at any time. Instead of physical money, cryptocurrency exists in a digital sense only. It consists of a digital database that keeps a record of all transactions being made. When cryptocurrency funds are being transferred, this transaction is recorded in a digital ledger. Cryptocurrency itself is stored in one’s digital wallets.

How is cryptocurrency made?

The creation of cryptocurrency has been considered revolutionary. Cryptocurrencies are mined, rather than created. Every time a transaction is being made, a cryptocurrency miner tries to decrypt the block containing transaction information. Consider this example; if person A wants to send a few bitcoin to person B, miners on the bitcoin blockchain compete with each other to be the first ones to decrypt the block containing transaction information. Decrypting leads to authenticating the transaction as well as providing information as to who sent how much to who and at what time and date.

This whole process is pretty extremely resource-intensive in terms of the computational power it requires. But the reason why miners continue to do it is that it is rewarding for them. The cryptocurrency miner has rewarded a fraction of cryptocurrency every time he decrypts a transaction process.

How many cryptocurrencies are there?

According to CoinMarketCap.com which is a market research website, more than 15,000 different cryptocurrencies are being currently traded publicly. And it doesn’t stop here since cryptocurrencies are continuously being proliferated. Following are the 10 largest and widely used cryptocurrencies being used by market capitalization;

  • Bitcoin
  • Ethereum
  • Binance Coin
  • Tether
  • Solana
  • USD Coin
  • Cardano
  • XRP
  • Avalanche
  • Polkadot

What can one buy with cryptocurrency?

It is possible to buy w wide variety of products from the e-commerce website.

  • Technological devices. Techno products can be bought by paying in cryptocurrency at some companies and websites, such as AT&T, Microsoft, etc. Shopify, Overstock, Home Depot also accept cryptocurrency as a mode of payment.
  • Luxury goods. Luxury retailers also accept cryptocurrency for their products, such as Rolex, Patek Phillipe, and other high-end watches are sold in Bitcoin.
  • Car dealers already accept cryptocurrency as payment.
  • Cryptocurrency can also be used to pay insurance. Premier Shield Insurance, which deals in home and auto insurance in the US, accepts Bitcoin as premium payments. p

Why are cryptocurrencies so popular?

There are several reasons why people are now going towards investing in cryptocurrency or using it as a payment method.

  • Lower Fees. One of the reasons why cryptocurrency is so popular is because there is very little fee associated with it. Users need to incur a large number of fees in other digital payment methods.
  • Cryptocurrencies aren’t associated with the government much like all institutions in the physical world are. This means that when there is turmoil in one country, cryptocurrencies would remain stable anyway. It is also seen as a good way of protecting investment, which is why cryptocurrency will continue to rise over the years.
  • Potential for Profit. This is another reason why people are going into cryptocurrency. If one buys Bitcoin while it is at its lowest price, then he can potentially gain profit when the price increases.
  • Using cryptocurrency as a payment method is a lot safer than other traditional methods, and this is why it is getting so popular over time.
  • Easy to Use. It is easy to use cryptocurrency since more and more online companies are starting to adopt this payment method. There are multiple websites accepting cryptocurrency payment and will only become more prevalent in the future.
  • Easy to Get. It is possible to obtain cryptocurrency that you want to from any reputable sources and the ease of it owes to its popularity. It was used to be considered as something shady before but now it’s becoming pretty common in my circles.

Whatever the reason for its popularity, it is certainly attracting more attention every day. Many people are starting to see that cryptocurrency is an option now and are trying to gain a bit of knowledge on how it works.