What are Cryptocurrencies?

A Beginner’s Guide On Bitcoin and other Cryptocurrencies

 

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If you haven’t been living under a rock in the last two to three years, chances are you’ve heard of the word “crypto” very recently. Whether it be on the news, on social media, or from your cool friend who’s invested his money in the currency, crypto has been more popular than ever.

But what exactly is crypto? Is it the next evolution of money? Is it just a waste of everyone’s time and hard-earned cash?

In this article, we’ll be answering all your questions and more.

However, before we delve into cryptocurrencies, we highly encourage you to visit clovr.com. Clovr has all the best tips, guides, and articles on all things related to cryptocurrencies, casino crypto games, and many more. Definitely check them out!

Now, back to cryptocurrencies.

What are cryptocurrencies, exactly?

Cryptocurrencies refer to a digital currency that does not have a central monetary authority regulating or maintaining it. Instead, it uses a decentralized system of cryptography and is commonly accessed through a vast computer network.

For newbies, one would need only an email, an internet connection, and something called a crypto wallet. Crypto wallets are basically software that enables you to store your crypto token of choice, allowing you to manage your coins and balances.

Now, how does this all relate to Bitcoin?

Contrary to what novices might think, Bitcoin and Cryptocurrencies are not the same thing. Bitcoin is a kind of cryptocurrency and is widely recognized as the most popular one to date. Bitcoin’s rise has allowed for the general public to get acquainted with cryptocurrencies as it has started to break into the mainstream.

Now that we’ve established that Bitcoin is only a KIND of cryptocurrency, are there other crypto coins out there then? Yes! These are what’s commonly referred to as altcoins, which are any crypto coins that are not Bitcoin. Some of the most notable and popular non-Bitcoin cryptocurrencies are Ethereum, Litecoin, and Cardano.

How do cryptocurrencies work?

Most cryptocurrencies are based on blockchain technology. The blockchain is a distributed ledger that stores and maintains all transaction records of a particular cryptocurrency. Essentially, it is a chain of blocks that house information about these transactions. They carry with them data on who was the Sender, who was the Receiver, what was the amount of coins transferred, etc.

This chunk of data is what’s commonly known as “blocks.” These blocks are then chained together, creating a structure of interwoven data that is spread out and distributed across a vast network of computer systems.

As a currency, crypto differs from regular fiat currencies because their value is not prescribed by a government and does not enjoy the privilege of trust that comes with coming from such institutions. Cryptocurrencies derive their value from a number of factors, but they are similar to traditional currencies in that they gain their value from supply and demand.

What makes crypto appealing to the general public?

Now, there are a host of reasons why cryptocurrencies have been so popular over the past few years.

One of crypto’s most notable claims to fame is its decentralized nature. Many people find appeal in the absence of a government or a central monetary authority to handle their money. As crypto utilizes a decentralized system to maintain all transactions and exchanges, the system is seen to be more user-friendly and user-centric.

In addition to decentralization, there is the underrated plus of cryptocurrency’s convenience. Because everything is essentially tied down to having an internet connection, a digital wallet, and having a computer or a smartphone, the convenience, accessibility, and speed of cryptocurrencies is simply unmatched.

Last, but certainly not least, there is the heavy emphasis on increased security and anti-tampering on cryptocurrencies that you won’t find on other fiat currencies. It would be hard to explain it all here but because crypto is built on chained data on the blockchain, it would be incredibly difficult for tampering to happen or succeed.

Are there downsides to cryptocurrencies?

The one cautious characteristic of crypto is its volatility. This means that there is a big tendency for cryptocurrencies’ value to rise or fall over short periods of time. Why is this? As a relatively novel form of currency, there is still a lot we don’t fully understand about its nuances. There is also the lack of having a central bank to oversee the increase or decrease of supply and demand.

All this adds up to a relatively volatile currency that can scare people away from making the jump to cryptocurrencies.

What should you do then, if this is the case?

While the volatility of cryptocurrencies is a valid concern, they still present a lot of opportunities for how we can revolutionize our means of exchange. The best thing to do now is really to read and research about crypto to put yourself in a more informed position on whether or not crypto would be the right  move for you. What’s great is that there are numerous resources that are mostly free, online!

Be it this article or the next, it would simply be a waste if one would not at least take a look at cryptocurrencies and give it a serious chance. You never know, it might be your ticket to becoming the next big crypto investor!