You might have heard about Bitcoin and other Cryptocurrencies. It seems to be the biggest news dominating investment opportunity, and finance discussions these days. Yes, right? Yet, anytime it catches your interest, no one seem to be giving a simple and clear explanation of what Cryptocurrency is and how it works.
Well, you’re not alone. A lot of people have had their share of confusing explanations about Cryptocurrency. There are like millions of people with misinformation about Cryptocurrency.
This article is published to provide a simple explanation of the fascinating world of cryptocurrencies. Enough of the complicated jargon!
What is a cryptocurrency?
To help you understand cryptocurrencies, let’s first explain what a currency is.
A currency is a form of money issued by a nation’s government and generally accepted and used within a specific geographic location.
Currencies are used to transfer value from one person to another and are represented in various forms (e.g. bank notes, coins, etc). Currencies are typically centralized, meaning they are controlled by one entity, such as a central bank or a nation’s government.
What Are The Basic Differences
Cryptocurrencies are digital representations of money (Digital Currency) rather than physical traditional currencies.
Unlike traditional currencies such as Euro, Pound, Dollar, Naira etc, that are issued by a nation’s central bank, cryptocurrencies are not issued or controlled by any central authority.
Cryptocurrencies are decentralized – transactions are executed and managed by technology which carries out the same functions that a central bank normally would, such as issuing new amounts of the cryptocurrency (i.e. minting new coins) and verifying transactions.
Types of Cryptocurrencies
Similar to traditional currencies that come in various forms (e.g. bank notes, coins, etc). Cryptocurrencies are broken down into two types:
The Difference Between Coins and Tokens
Coins are those cryptocurrencies that have their own blockchain and can operate independently basically as a medium for payment. For example Bitcoin (BTC) – created on the Bitcoin Blockchain,
Ether (ETH) – created on the Ethereum Blockchain,
Litecoin (LTC) – created on the Litecoin Blockchain,
Ripple (XRP) – created on the Ripple Blockchain
NEO (NEO) – created on NEO Blockchain
EOS (EOS) – Created on EOS Blockchain
And thousands of other Altcoins like Doge, Stellar, etc.
Meanwhile, Tokens are cryptocurrencies that are created on another Cryptocurrency’s blockchain. Tokens basically operate on top of another cryptocurrency’s platform. For example,
Basic Attention Token (BAT) – Created on the Ethereum blockchain
OmiseGO (OMG) – Created on the Ethereum blockchain.
Paxos Standard Token (PAX) – Created on the Ethereum blockchain
Enjin Coin (ENJ) – Created on the Ethereum blockchain
Sureremit – Created on Stellar platform
Tillbilly – created on stellar platform
Ontology (ONT) – Created on NEO Blockchain
NEX (NEX) – Created on NEO Blockchain
MEET.ONE (MEET) — Created on the EOS blockchain
HireVibe (HVT) — Created on the EOS Blockchain
Lumeos (LUME) – Created on the EOS Blockchain
Although, coin and tokens are often used interchangeably. The examples above should make the difference between Coins and tokens clearer to you by now.
What is Altcoin? Altcoins are alternative cryptocurrencies launched after the success of Bitcoin, and refers to any of the thousands of cryptocurrencies that exist that are not Bitcoin.
More Thoughts on Cryptocurrency:
Cryptocurrency is not limited to investing or speculation, it has real value as an alternative medium of exchange. There are several businesses that accept Bitcoin & other cryptocurrencies as payment.
You can also offer your services on the internet and start accepting payments in Bitcoin or other Cryptocurrencies (Click Here to Read More)
Do you now understand what cryptocurrency is? Use the comment section below, share your thoughts and questions with us.
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