What are cryptocurrencies?

Michael Fasogbon

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Cryptocurrencies are the new kid in town when it comes to finances. They’re revolutionizing the very notion of what money is and the way it moves around the world. This new technology has created new markets, previously unimaginable, and it’s coming up with payment systems that are cheap, fast, and reliable.

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Also, opening an account with a forex broker is exceedingly easy and convenient. Most brokers offer “practice” account, so you can learn the platform without risking or losing any money.

Bitcoin: The coin that started everything

Bitcoin In Pocket

Bitcoin was the first cryptocurrency ever to come online. That happened in 2008 when the legendary Satoshi Nakamoto (whose real identity remains unknown until this very day) invented a new kind of cryptography-based technology.

He called it a blockchain. This blockchain thus became a decentralized electronic cash system based on p2p distributed timestamps so that every token can be spent once only. The decentralized system thus creates computational proof in which the history of every coin in the network is thoroughly documented. That’s called a “distributed ledger.”

And that’s how Satoshi created and launched the first blockchain network in human history. Since then, many other developers have forked new projects from the original Bitcoin or created their own blockchains from scratch. Blockchain is at the heart of cryptocurrencies; it’s what’s under the hood. Every cryptocurrency in the market is based directly or indirectly on Bitcoin, and it’s built on a blockchain of some kind, according to Mr. Nakamoto’s ideas.

The fantastic thing about blockchains is that they can be so versatile and useful. Yes, the initial idea was to create a payments system and a new form of money, but the fact is that that very same technology can improve things in lots of industries in processes that have nothing at all to do with coins.

So what is a cryptocurrency, then?

Bank Bitcoin Change

It’s a currency, as the name implies. It’s a new form of money because it’s not physical but digital. The network’s work supports the system. It consists of calculating the right answer to a very complicated cryptographic problem known as “SHA256 collision”. By solving this problem, which takes a lot of time, the Bitcoin network turns electricity into value. This process is known as mining.

Not every cryptocurrency needs mining. Some of them (XRP or Tron, for instance) were premined in full before going online. But most of the prominent coins, starting with Bitcoin, do need mining.

The mining protocols ensure that the supply of tokens remains limited and that it’s progressively harder to mine new coins. The idea is to create deflationary pressure, so the coin’s market value improves as time goes on.

So how is it like to pay for something with Bitcoin? Well, there are several features. It’s irreversible, cheap, fast, and global. Let’s explain. Once the Bitcoin network reaches consensus about a payment, every node accepts that information, and it’s recorded in the layer. From that moment on, it’s irreversible.

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The next thing you need to know is that completing transfer is very cheap. It usually depends on the required speed, but you can move thousands or millions of dollars over the BTC network for fees that average less than a single USD. Then comes speed.

The network’s speed depends on the currency’s liquidity as well as the number of active miners at a given moment. They’re usually settled in a matter of minutes. Last but not least, because Bitcoin runs on the Internet, it’s 100% global. Every single person in the world can have access to Bitcoin as long as they can access the Internet.