Cryptocurrency is a term that you must have heard a lot in recent years. However, do you know what cryptocurrency is?
Since 2013, he began to receive attention from the world community. This is because many media have started reporting on this digital currency. However, the presence of cryptocurrencies has raised pros and cons from many parties.
Then, what exactly is cryptocurrency and why is it so popular with the public? How does it work?
Come on, look at the following explanation, which will thoroughly explore what cryptocurrency is!
What is Cryptocurrency?
Simply, cryptocurrency is a digital currency. It is not available in physical form like coins or cash which are commonly used around the world.
Launching Investopedia, in cryptocurrency, everything is completely virtual. Nevertheless, the digital money has a fairly high value.
It can also be stored in a 'digital wallet' available on a smartphone or other computer device.
In addition, cryptocurrency owners can also use the digital currency for buying and selling transactions.
BitDegree explains various definitions of cryptocurrencies from their characteristics and uses, which are as follows.
1. Digital
Cryptocurrency is a digital currency which means it is only valid on a computer. Cryptocurrencies do not exist in a physical form that we can hold everyday.
2. Peer-to-peer
Cryptocurrencies can be used for transactions from one person to another online.
3. Global
Cryptocurrencies are the same in every country. Thus, transactions can be carried out freely between countries without being affected by exchange rates.
4. Encrypted
Each user has its own code to transact with cryptocurrencies. Every time a transaction is made, the user cannot see who the transaction was made by.
No real names appear in any cryptocurrency transactions. Moreover, there are no rules about who can use cryptocurrencies and for what purposes.
5. Decentralized
Money transactions in general always involve parties who mediate each transaction, such as banks.
But in the world of cryptocurrencies, there is no such bank or party. Everyone is responsible for their own money.
6. Truthless
In using cryptocurrency, you don't need to trust anyone in the system.
From the explanation above, it can be concluded that cryptocurrency is a digital currency that can be used for transactions between users without the need to go through a third party.
In addition to using it as a transaction tool, many users use cryptocurrency as an investment instrument.
This is due to the fluctuations in the value of cryptocurrencies. The more people who believe in cryptocurrency, the higher its value will be.
Cryptocurrency Functions
1. Buying goods or services
Currently, there are many shops that have started to use cryptocurrency as a means of payment, including two well-known companies Overstock and Newegg.
You can also use cryptocurrency in many restaurants, hotels, flights, apps, and bars. In fact, quoted from Cointelegraph, there are universities that have also implemented cryptocurrency.
However, most of these companies are new to accepting Bitcoin.
2. Investment
Another function of cryptocurrencies is investment.
At the beginning of the popular cryptocurrency, its price continued to rise sharply. No wonder many people are 'suddenly rich' after investing through cryptocurrencies.
The principle is more or less the same as the principle of economics, namely the price will rise when there is a lot of demand.
The more people invest in cryptocurrencies, the higher the price will be. However, lately the price increase of digital currency is not as significant as a few years ago.
Investments with cryptocurrencies are also included in the high risk category.
3. Mining
Mining or mining is an important thing in cryptocurrency.
Basically, users have to solve complex cryptographic puzzles to confirm transactions and record them in the blockchain.
These puzzles can be solved by mining. The greater the user's computing power, the greater their chances of solving it.
If you successfully solve the puzzle, you will receive a reward as a transaction fee.
Types of Cryptocurrencies
Quoting from NerdWallet, there are more than 2,200 types of cryptocurrencies that are publicly traded.
As of this writing, the total cryptocurrency market cap has reached US$266,172,890,753, as stated on the Coin Market Cap website.
This shows that there are so many types of cryptocurrencies that have won the public's trust.
Here describes some of the popular types of cryptocurrencies traded.
1. Bitcoin
Bitcoin is the first type of cryptocurrency that is still very popular.
This type of cryptocurrency first appeared in 2009 by a party named Satoshi Nakamoto. No one knows if it's the name of a person, group or company and where they came from.
As of November 2019, there were more than 18 million bitcoins traded with a total market value of around US$146 billion, Investopedia wrote. In fact, as of now, around 68% of cryptocurrencies are bitcoins.
Seeing this, of course, isn't it evocative for bitcoin investment? Don't worry, if you are interested, first read more about these types of cryptocurrencies in this article.
2. Litecoin
Litecoin is a type of cryptocurrency that was also present when the digital currency was launched.
This type of cryptocurrency came into existence in 2011 as a peer-to-peer (P2P) digital currency that generates new blocks (which make up the blockchain) at a faster rate.
Therefore, Litecoin allows users to make transactions faster without the need for a powerful computing system.
However, that's not all Litecoin's strengths. Come on, learn more about everything in this article.
3. Dogecoin
Dogecoin is a derivative of Litecoin which appeared in December 2013.
As the name implies, dogecoin is a cryptocurrency that makes the Shiba Inu dog its mascot.
This type is known as the friendliest cryptocurrency, because the community often makes donations, charities, and other positive activities.
Dogecoin has a much lower value than bitcoin. So, it is not surprising that users usually use this type of cryptocurrency for small transactions, donations, and giving tips.
However, it also has a number of advantages that other cryptocurrencies don't have.
4. BitcoinCash
BitcoinCash was only launched in August 2017, but is currently in the top five cryptocurrencies.
This type was launched because a group of Bitcoin users did not agree with some applicable rules.
They then broke away and formed their own digital currency called BitcoinCash.
The group also made some improvisations which they think are better than the first cryptocurrency.
Well, you can learn more about Bitcoin Cash in the article Glints has prepared. In it, there is an explanation of the definition and advantages.
5. Feathercoins
Feathercoin is a type of cryptocurrency that is open source. This type was created by Peter Bushnell, an IT officer at Brasenose College, Ofxord University in April 2013.
Feathercoin bears some resemblance to Litecoin and is under the MIT/X11 license.
Strengths and weak1. Advantages
a. Universal
The whole world can use cryptocurrency. Meanwhile, not everyone is eligible to register as a customer at a bank.
Therefore, cryptocurrencies are considered universal because there are no conditions to become users.
b. Fast
Transactions with cryptocurrencies are fairly fast when compared to transactions at banks. International bank transfers can generally take up to more than a day.
Meanwhile, bitcoin trading only takes about a few minutes to an hour.
c. Transparency
Every cryptocurrency user can see all the transactions that have been made. However, of course you will not know who the transaction was carried out by whom because it is only in the form of numbers without an identity.
d. Personal control
Each user is responsible for their own money.
2. Weaknesses
a. Gap for evil
No one knows who is behind a cryptographic code.
Therefore, many people take advantage of cryptocurrencies for evil. They can transact for illegal goods or things with this digital currency without being traced.
b. Once you forget your password, you can lose all your money
Because cryptocurrencies use a password system without anyone setting it up, then you risk losing all the money in your account if you forget the password.
c. There are still many who consider it illegal
Many countries still consider cryptocurrencies illegal and do not apply to buying and selling transactions in their country.
Also Read: Use These 5 Apps for Bitcoin Mining on Android
Thus an explanation of what cryptocurrency is, starting from its definition, types, to its advantages and disadvantages.
In essence, cryptocurrency is a digital currency that you can use as a transaction tool in the virtual world.
Although not present in physical form, it has a high enough value, so it is often traded by investors. Therefore, it can be the right investment instrument for you.
However, before buying, don't forget to first consider the advantages and disadvantages along with your own needs,