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What is Cryptocurrency
A cryptocurrency is a digital asset with the primary function of working as a medium of exchange value within a peer-to-peer economic system that uses cryptography to verify and secure transactions and control the creation of additional units. This is little complicated answer of What is Cryptocurrency. Let find out in details and simple way what is cryptocurrency.
Unlike centralized banking systems, most cryptocurrencies are decentralized by a distributed network of computers spread worldwide, also known as nodes. Anyone with internet or weak-signal radio access can exchange valuables across continents with a button click.
The costs for cryptocurrency transactions are low compared to intercontinental bank transfers, and the transactions are irreversible unlike in charge-back transactions permitted by credit card companies. The network architecture determines the issuance and management of cryptocurrency units, which is based on programmed algorithms and cryptographic proofs.
These can be considered as a predefined set of rules, also known as the protocol, that defines how the cryptocurrency system operates. Being decentralized means that a single entity cannot control cryptocurrencies, and transactions may occur directly between users without the need to rely on a third-party intermediary.
However, private companies and foundations manage and develop many cryptocurrencies, so there are varying degrees of decentralization. Some cryptocurrencies can be considered more centralized than others depending on network structure and node distribution. The core component for most cryptocurrencies is a technology called Blockchain.
It consists of a linear chain of multiple linked blocks that are cryptographically secured. Each block contains, among other things, a list of recent transactions and a reference to the block that came immediately before it. Blockchain is responsible for keeping a permanent record of all confirmed transactions, working as a decentralized digital ledger. This ledger is distributed across all the nodes in the network, making it highly resistant to modification.
The first decentralized cryptocurrency, Bitcoin, was created in 2009 by pseudonymous developer Satoshi Nakamoto. The main idea was to create an independent and decentralized electronic payment system based on mathematical proofs and cryptography. Like most cryptocurrencies, Bitcoin has a limited supply, meaning that the system will generate no more Bitcoins after the maximum supply is reached.
Usually, the total supply is public information defined when the cryptocurrency is created.
Among Bitcoin today, there are over a thousand different cryptocurrencies, also called altcoins or alternative coins. All with different properties and use cases. To get a more in-depth look into the world of cryptocurrencies and the technologies behind them, read other articles on Binance Academy. I think you might have a clear idea in your head what is cryptocurrency.
Some popular cryptocurrencies
- Bitcoin (BTC) Market cap: $377 billion.
- Ethereum (ETH) Market cap: $165 billion.
- Tether (USDT) Market cap: $67 billion.
- U.S. Dollar Coin (USDC) Market cap: $47 billion.
- Binance Coin (BNB) Market cap: $46 billion.