For Starters, Part 1: Crypto? What’s that?

Not that we only deliver you earning possibilities, we also want to convey knowledge. In this first part of a multi article series we want to explain Cryptocurrencies in general for you. Take a cup of your preferred hot beverage (or eat, drink or smoke whatever you like), lean back and do a little reading.

To make this text a little more accessible I divided it in seven parts. Each of them can be read by clicking one of the links down below:

Introduction

Cryptocurrency, also known as crypto, is a digital currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions, as well as to control the creation of new units of a particular cryptocurrency. 

No! Not Krypto. I meant Crypto. Image via GIPHY

A beginner may feel like the countless currencies sprung up overnight. I often feel the same. At the moment there are thousands of different cryptos out there and to be honest it is hard, if not nearly impossible, to keep overview of them all. Want an example? Well, then have fun scrolling through the overview of ‘All Cryptocurrencies’ on CoinMarketCap. Take your time. This can take a while. ????

But hey, that’s the internet’s ‘nature’: The ability to transfer information and data became quicker than historically possible. Email took physical mail digital, paving the way for typed interactions and document transfers between parties within seconds.

Cryptocurrency is a similar concept, except it’s regarding value and money. 

So online banking, internet payment platforms and credit cards function with considerable speed in the digital world. However, they often involve third parties, are censorable and sometimes must settle on the backend during weekdays, depending on the banks involved, etc.

Efforts toward online monetary solutions, including DigiCash, surfaced prior to the year 2000, but the first modern-area cryptocurrency to gain significant viability did not emerge until 2008. Pseudonymous creator Satoshi Nakamoto published Bitcoin’s (BTC) white paper, to describe the written concept of the asset, in 2008. 

This was quite clever: Bitcoin solved the issue of users spending the same asset more than once, known as double-spending. Built using blockchain technology, Bitcoin is run by numerous computers across the globe that collectively verify transactions and protect the network against hacking.

Bitcoin launched on its blockchain network in 2009. Since then, other people and companies have built numerous additional crypto assets. Other blockchains, such as Ethereum, were created, giving developers a platform on which to build various additional assets. 

Over the years, cryptocurrency has gone from Bitcoin, its pioneer asset, to an industry filled with numerous blockchains, solutions and assets. Subcategories within the industry have also formed, such as the decentralized finance niche. DeFi strives to provide individuals with versions of the same financial tools they’ve grown accustomed to, but with the added benefit of no trusted third parties. This includes lending and borrowing. Capitalism, yay!

What can one do with cryptocurrencies?

Quite many things. Mostly, the definition of a cryptocurrency asset is that it can be used to send value from one person to another, or to pay for goods and services. Like online banking. You get it.

Each asset holds a value, often priced in U.S. dollars, which leads to another use case: trading and investing. Aside from so called stablecoins — which seek to stabilize the instability of cryptocurrencies by pegging an asset to something else, such as the U.S. dollar — most cryptocurrencies constantly fluctuate in price. You can trade between cryptocurrencies and national currencies (called fiat currencies) on exchanges, depending on the trading pairs available on the platform of choice. 

Image of some dude trading cryptocurrencies.
Some dude trading cryptocurrencies.

You can also accept digital assets as payment, directly or through a service that is more convenient and adds capabilities. Some services give the option to convert paid cryptocurrencies into cash automatically on the back end, while there are also some companies that offer crypto top-up debit cards that are indistinguishable from any other plastic card to pay for goods or services. 

Additionally, you can mine cryptocurrencies. Mining uses your computer or designated hardware to help run the networks that back crypto assets. Running a function on your computer or hardware automatically and continuously after it’s set up, mining generates revenue and helps to validate the transactions that are carried out on the blockchain, depending on the computing power designated.

I will write an dedicated article about mining soon.

Some guy at a mining farm. Sunglasses added. ???? Source: BitcoinWiki

People can also borrow crypto assets on various platforms, and earn interest for loaning out assets. This niche of the cryptocurrency space is what is known as decentralized finance, or DeFi. Based on distributed ledger technology, various platforms facilitate the lending and borrowing of crypto without requiring the user to submit to the control of a bank. DeFi also includes other aspects as well, such as decentralized exchanges, or DEXs.

How do cryptos work?

Most cryptocurrencies work by operating on a blockchain. Essentially, a blockchain is a network of many computers around the world that pool together computing power to validate the network operations.

An example on how a blockchain works. Source: Wikipedia

As a part of the mining process, the first one to solve a puzzle gets a reward for helping the network function. This is called mining. Mining is necessary for putting more of any given asset into circulation from its related maximum supply. Blockchain helps decentralize assets, holding significant security benefits over centralized systems with one point of failure.

Blockchains typically function via proof-of-work (PoW) or proof-of-stake (PoS) consensus algorithms. PoW operates based on miners, who often designate specific computing machines for the process. 

PoS, on the other hand, runs on staking. In the staking system, rewards are distributed to help run the network by holding assets in certain designated wallets. A number of PoS assets also allow for masternodes — a more complicated staking process that usually requires a certain minimum number of coins.  

How many are out there?

Although the cryptocurrency space began with just Bitcoin, the industry has since flourished into countless other assets, projects, companies and concepts. Several categories emerged as the years passed.

Bitcoin initiated as more of a currency, noted in its original white paper. However, the asset has taken on more of a store-of-value role, similar to the public’s view of gold. 

Other crypto assets position themselves more as transactional assets, capable of fast payments and transfers based on blockchain tech. Utility tokens exist as another faction within the crypto space. Utility tokens each play a role within a larger project, serving a function within an ecosystem aimed at a particular solution. 

Stablecoins peg their values to various national currencies or assets, such as gold. Most often pegged one-to-one with the U.S. dollar, stablecoins give users a way to sell into an asset carrying the same value as a national currency, but one that can still be transacted and stored in a crypto-esque fashion within the ecosystem.

Nonfungible tokens, or NFTs, are yet another type of cryptocurrency. NFTs are typically each unique in value and likeness, whereas other crypto assets can usually be swapped one for one with another of the same type. For example, you can generally trade 1 BTC for 1 BTC, although doing so would not make sense in many cases. Digital artwork is one example of a type of NFT. 

Before interacting with any given asset, it may be important to look up the asset’s type and function, depending on your goals. Not all digital assets were created for investment purposes.

Best cryptos by market capitalization

These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data and analytics provider.

CryptocurrencyMarket Capitalization
Bitcoin$740 billion
Ethereum$315.4 billion
Tether$62 billion
Binance Coin$56.2 billion
Cardano$44.4 billion
XRP$33.9 billion
USD Coin$27.5 billion
Dogecoin$26.2 billion
Polkadot$19.1 billion
Uniswap$13.7 billion

How to buy

Given the pace of crypto adoption, there are a number of ways to buy cryptocurrency. Crypto-native exchanges offer a plethora of different digital assets for buying and selling. In the mainstream world, PayPal serves as one example platform on which participants can buy and sell certain digital assets. Crypto ATMs also exist in various parts of the world. 

To the moon!

Cryptocurrency has come a long way over the last decade, advancing at a lightspeed pace. Value can be stored, transferred and spent in different ways through various assets and solutions, while DeFi has pioneered the way for new borrowing and lending avenues. 

Some mainstream companies also view blockchain technology itself with interest, evaluating various uses, such as supply chain. The future of cryptocurrency and its associated technology appears bright, judging by the growth and adoption seen since 2008 when Nakamoto published the framework for a little asset called Bitcoin. 


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