Cryptocurrency can seem like an unfathomable beast that no one but computer programmers could understand, but it turns out that cryptocurrency isn’t all that hard to understand once you break it down into the basics. Don’t let the complexity of the subject intimidate you — in this article, we will explain cryptocurrency in layman’s terms so that you can have a better grasp of what cryptocurrency is and how it works. With this knowledge, you will be able to make better decisions regarding which cryptocurrencies to invest in, or even whether or not cryptocurrencies are right for you at all! What are cryptocurrencies?
What Are Blockchains?
Blockchains are distributed ledgers that make up a huge, global database of all transactions occurring within a cryptocurrency. Blockchains can either be public (like Bitcoin) or private (like those used by banks), but what’s most important is how they record and organize information. Rather than having a central entity like a bank that controls all of your information, blockchain technology enables you to hold your data and decide who gets access to it. This feature makes blockchains extremely secure, something we’ll talk about in more detail later. It also means that no one person or company has control over any given blockchain.
How Do They Work?
The most basic way to understand cryptocurrencies is to think of them as a store of value, kind of like gold. The difference is that cryptocurrencies are digital (hence their name) and can be sent directly from one person to another without any third-party broker or institution like a bank. If you want your cryptocurrency, you need what’s called a wallet to store your coins in — in other words, it’s something like an online bank account. From there, they can be used almost anywhere that regular money can go.
They’re mostly unregulated by governments so far but some countries have started looking into creating digital legal tender (much like physical cash) for their citizens. It’s a bit early to say how all of these currencies will play out over time but if you’ve ever bought anything with Bitcoin or Etherium then you know how easy it is to send money around now. You just tell whoever’s receiving your payment that they should put X amount of currency into whatever account number you give them, then hit send, and voila! Money travels at light speed now compared to waiting days for funds to clear through traditional banks.
And because no one has control over these currencies except those who use them, they can’t be taken away by any central authority either – which makes things safer on both ends since no personal information needs to be shared when sending payments back and forth.
What Is Decentralization?
If you’re wondering why cryptocurrency has attracted so much attention, decentralization is one of its most crucial aspects. Decentralization refers to a network that operates on a peer-to-peer basis. P2P networks allow each computer to interact directly with every other computer in an organization.
No single entity can control or manipulate information stored on a decentralized network. For someone to break into a decentralized system, they would need access to every single node at once — effectively shutting down thousands of computers simultaneously, which is unlikely (if not impossible) and highly inefficient. Decentralized systems are also more efficient than centralized ones. For example, Bitcoin mining nodes compete against each other to solve math problems and validate transactions on the blockchain.
The first miner to solve a problem gets rewarded with new bitcoins while also validating transactions across the entire blockchain. This means miners have an incentive to keep their nodes running as fast as possible because it’s more profitable for them in terms of time and money if they do so. On top of that, since no single party controls any given node within a decentralized network, there is no central point of failure — if one miner shuts down their node due to technical issues or lack of profitability, it doesn’t impact anyone else’s ability to continue mining blocks.
Benefits of Cryptocurrencies
Cryptocurrencies like Bitcoin and Ethereum are encrypted decentralized currencies. This means that you can use them to transfer money quickly and securely without involving a bank or another financial institution. And since it’s decentralized, there is no single point of failure—if someone steals your cryptocurrency, it’s like taking money from a bank account that doesn’t exist. Plus, transaction fees are typically much lower than what you would pay with traditional banking institutions (when was the last time you didn’t get charged an overdraft fee?). Many cryptocurrencies have also reached an all-time high in value over recent months and years — meaning they could be a smart investment if you invest in them before they grow further in value.
Disadvantages of Cryptocurrencies
If you’re new to cryptocurrencies, choosing a currency can be intimidating. It’s a tough task given there are over 1,500 different currencies traded in markets around the world. For most people, it will help to narrow down your list of options by first thinking about what you want out of a digital currency and then narrowing it down to where you can spend it. Our favorite digital currencies for 2018 are Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Monero (MXR), and Litecoin (LTC). Each one has its unique attributes and values, so choose one that works best for your investment strategy.
Best Digital Currencies For 2018
It can be difficult to wrap your head around cryptocurrencies like Bitcoin and Ethereum, so we’re here to help. Digital currencies make it easier to send money faster and farther with lower fees — but that’s just a small part of what makes them so revolutionary. To understand why these new assets are poised to change our lives, you need to first understand what they are, how they work, and why people value them so much. If you’re interested in learning more about digital currencies like Bitcoin and Ethereum — or if you want some suggestions on which ones might be right for you — read on!
