A cryptocurrency is a digital or virtual 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. Cryptocurrency is a form of payment that can be exchanged online for goods and services. Essentially, cryptocurrencies are limited entries in a database that no one can change unless specific conditions are fulfilled. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. You’ll need to exchange real currency for the cryptocurrency to access the goods or service.
Cryptocurrencies work using a technology called blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. Part of the appeal of this technology is its security. A cryptocurrency is the same in every country. They can be used freely between countries and across borders.
The story of cryptocurrency
In the 1990s, lots of different people tried to build cryptocurrencies. The ones that came closest were DigiCash, HashCash and B-money. None of them got the technology quite right or the support they needed to succeed. The story of cryptocurrency really gets started with Bitcoin. Bitcoin was the world’s first real cryptocurrency, and is still the most famous. Bitcoin’s creator is called Satoshi Nakamoto, but no-one knows who that is! No-one has ever met Satoshi in person. They could be a man, a woman or a whole group of people!
On January 12, 2009, Satoshi’s Bitcoin blockchain went online. The first trade of Bitcoin was for 10 BTC (Bitcoins). Satoshi sent it to a coder called Hal Finney. Satoshi only ever spoke on internet message boards and in emails. By April 2011, Satoshi was gone. All that’s left of Satoshi Nakamoto is Bitcoin — and the name.
Features of cryptocurrency
Peer-to-Peer: Cryptocurrencies are passed from person to person online.
Global: There isn’t one cryptocurrency for Nigeria and another for the USA, for example. A cryptocurrency is the same in every country. They can be used freely between countries and across borders.
Encrypted: There are no rules about who can use cryptocurrency, and what they can use it for. Real names aren’t used for accounts. Each user is given codes instead. This is where we get the crypto part of the cryptocurrency definition. Crypto is Latin for “hidden”. So, cryptocurrency translates as hidden money.
Decentralized: In the cryptocurrency world, there are no banks. Everyone is in charge of their own money, it isn’t kept in a bank. A bank is a center where lots of people keep their money. Cryptocurrencies are not managed by a central server, that’s why we say they are decentralized.
Not trust-demanding: The way cryptocurrencies are built means that you don’t have to trust anyone in the system in order for it to work.
Best cryptocurrencies by market capitalization
More than 6,700 different cryptocurrencies are traded publicly, according to CoinMarketCap, a market research website. And cryptocurrencies continue to proliferate, raising money through initial coin offerings, or ICOs. The total value of all cryptocurrencies on Feb. 18, 2021, was more than $1.6 trillion, according to CoinMarketCap, and the total value of all bitcoins, the most popular digital currency, was pegged at about $969.6billion.
These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap, a cryptocurrency data and analytics provider.
Data current as of Feb. 18, 2021.
How To Buy Cryptocurrency
While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, and fiat currencies, others require that you pay with bitcoins or another cryptocurrency.
To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum. Here’s more on how to invest in Bitcoin.