What are crypto? – Know your crypto
Are you new to the subject of crypto or do you want to get more information about them? More and more people are interested in Bitcoin, Ethereum and other cryptocurrencies. All this is due to the changing world and the relentless search for new and better solutions. However, to start investing in cryptocurrencies, you need to have a basic knowledge about them – what they are, how to use them, and how their market changes depending on various events.
Let’s get started!
What are cryptocurrencies?
More and more people are talking about cryptocurrencies, but what exactly are they and what are their characteristics?
Crypto can be described as virtual money whose value cannot be influenced in advance. They are independent and uncontrolled by governments, organizations, or private companies. Very often they have a predefined supply (maximum number of units). As far as Bitcoin – the leading representative of the cryptocurrencies – is concerned, a maximum of 21 million coins will be in circulation. Additional Bitcoins cannot be “printed” in any way. This makes it deflationary.
A cryptocurrency is a unit of value exchange that is in a virtual form. It can be freely transferred between network users and can be divided up to a certain number of decimal places. For example: Bitcoin is divided into miliBTC (0,001 BTC); microBTC (0,000001BTC) and satoshi (0,00000001BTC).
Cryptocurrencies are legal means of payment, which can be paid almost anywhere in the world. However, taxes cannot be paid via crypto.
Cryptocurrencies work in a distributed network, based on a decentralized register – usually operating on blockchain technology. This means that there are independent nodes in the network that store constantly updated transaction history and there is no central server that maintains it. A node can be created by any user with Internet access and appropriate disk space. Each node in the network is as important as the others. To stop the network, all its nodes should be removed, so the more nodes there are, the safer the network is.
Cryptocurrencies use asymmetric cryptography to ensure the security of transactions, secure their resources, and prevent fraud. It also protects the process of mining new cryptocurrencies blocks.
The crypto blockchain network is most often public and anyone can check the transaction and the balance of the selected public address. Users do not need to verify their identity (unlike banks) if they want to join to the crypto network. This means that it is possible to check between which addresses and when the digital money was transferred, but it is not known who owns the address, because creating a crypto wallet does not require verification, and additionally, one person can have any number of wallets. This provides a degree of anonymity. There are also cryptocurrencies that allow users to remain fully anonymous, hiding their data, and transaction value.