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Thursday, December 1, 2022

That’s what you’ve Googled: Your questions about crypto answered

Ever since it appeared, cryptocurrency hasn’t ceased to trigger curiosity. And it’s only normal – blockchain technology is not something that can be easily digested. Besides, cryptocurrency is still in its early stages, so questions about it are understandable.

You probably have uncertainties and doubts if you’ve just entered this financial arena. What are these digital currencies, after all? What are they used for? Are they wise long-term investments? These are only a few of the dozens of questions frequently Googled, so let’s elucidate the mystery and answer these everyday matters.

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Read on for insightful information about cryptocurrency, blockchain, Bitcoin, altcoins, and many more!

What is cryptocurrency?

The meaning of cryptocurrency is by far the most asked question on the Internet. Cryptocurrency is a decentralized, digital form of currency secured by cryptography, hence its name – it mixes “cryptography” and “currency”. Due to this security feature, cryptocurrencies can’t be counterfeit. Cryptocurrencies were initially designed as a means of exchange for individuals to purchase goods and services, but their utility has expanded throughout time. The underlying technology cryptocurrency is based on allows for safe, fast, and hassle-free transactions without the implications of a third party (financial institutions or governments). You can now buy, sell, trade, or mine cryptocurrency, which makes it incredibly attractive to enthusiasts.

What is blockchain?

In the simplest terms, blockchain technology is a publicly accessible, transparent, and highly secure ledger. It’s a permanent, unchangeable record of transactions that helps secure the transfer of assets by means of a PoW (proof-of-work) consensus. Blockchain was implemented in the real world with the development of Bitcoin, the first-ever, now the world’s largest, cryptocurrency. Nonetheless, blockchain technology doesn’t characterize only the cryptocurrency industry – it’s also present in gaming, financial services, and even healthcare.

What is a crypto wallet?  

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When it comes to Bitcoin or altcoins, you frequently hear about electronic wallets. They are applications functioning as storage places for digital assets, including cryptocurrencies and non-fungible tokens (NFTs). Nevertheless, these wallets don’t really “store” your digital currencies but rather provide access to them. This is because they hold private keys that allow users to authorize transactions.

Sending cryptocurrency is way more accessible these days than in the early times. That’s because modern software provides super-secure passkeys that are easy to enter. If you look for safe places to store your crypto assets, you have various options, from exchanges to hot and cold wallets. What do these “hot” and “cold” wallets mean? The former is a type of electronic wallet connected to the Internet, so your private keys are, in one way or another, on an Internet connection (hence more vulnerable to hacking). The latter is the safest storage option, as it’s not connected to the Internet but instead based on hardware storage. Your private keys are usually on a USB device or a paper wallet. Although these wallets are way more secure than hot wallets, they involve slower transaction processing, which is why experts recommend them for longer-term holdings.

What is Bitcoin?

Bitcoin is the first-ever virtual currency in circulation, designed to act as money by Satoshi Nakamoto. But Nakamoto is the elusive creator of Bitcoin, this only being a pseudonym. Nonetheless, specific facts strengthen the idea that he’s the inventor of cryptocurrency, as a major 1998 crypto project, “Bit Gold”, made everyone connect it with the creation of Bitcoin.

However, Bitcoin is here, and this is all that matters. The cryptocurrency has rapidly increased in value, widely adopted as a form of payment and even as legal tender – El Salvador is the first country to embrace Bitcoin. Today, Bitcoin is the safest choice for newbie investors or individuals searching for a stable store of value. Due to its high return potential, liquidity, volatility, and convenience, Bitcoin makes for a great long-term investment. Besides, factors such as limited supply (21 million Bitcoins) and worldwide adoption will always give value to this cryptocurrency, so the chances for Bitcoin to vanish are minimal. If you’ve just entered the crypto space, experts recommend looking to invest in established cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin. However, before investing, always conduct deep research that includes a crypto’s market cap, trading volume, price history, and actual uses. Apart from checking all these details on Binance, you can also stay up to date with the latest news. Reputable companies or entrepreneurs usually announce their adoption of particular crypto in public or on social media, so stay tuned.

Smart contracts and dApps – what are they?

While doing your research, you might have heard about smart contracts and dApps. Smart contracts are (Surprise!) contracts that contain the conditions established by the buyer and seller. They come in the form of lines of code on the blockchain. These pieces of code allow for transactions to be recorded, traceable, and irreversible so trusted agreements and transactions can be completed among anonymous, disparate parties. And most importantly – no legal system, central authority, or external enforcement mechanism is involved.

Decentralized applications (dApps) are digital programs or applications developed using smart contracts. They run on a P2P (peer-to-peer) or blockchain network of computers and serve various purposes. Ethereum usually supports dApps, allowing developers to create everything from financial and social media applications to games. Ethereum and its native currency ether (ETH) have thus grabbed the attention of many investors and digital creators eager for the Merge – an upgraded Ethereum version scheduled on September 15.

What other types of cryptocurrencies are there?

The Bitcoin craze has inspired the creation of other cryptocurrencies called “altcoins”. Some of the most notable ones include Ethereum, Tether, XRP, Cardano, and Solana. But there are thousands of virtual coins that exist on the blockchain, some more profitable than others. There are also the so-called “stablecoins” whose value is connected to another currency, including the US dollar.

Non-fungible tokens (NFTs) are another type of digital assets. They’ve generated a buzz lately, as they come in the form of everything from art and in-game items to music and videos. NFTs are unique, meaning there’s only an NFT designating a particular thing. You’d be surprised how many people want authentic ownership of that item, which is why an NFT sometimes reaches millions of dollars.

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