What are Cryptocurrencies?
If you’re new to the concept of cryptocurrency, you’re in the right place. So, first of all, cryptocurrency is a digital or virtual currency that works as a medium of exchange via decentralised networks.
Perhaps, every now and then, you might have come across the term “blockchain”. What is the relationship between blockchain and cryptocurrency? A blockchain is a decentralised and distributed database shared by all of the nodes. A node is typically a computer that runs a software that “agrees” or “disagrees” to add a block to the blockchain.
Instead of a database managed by a central entity, blockchain is managed by a peer-to-peer network. It serves as a ledger. A ledger is simply a series of blocks, hence, the term “blockchain”. Another common concept is called “smart contract”. Smart contracts are often mentioned in many blockchain technologies. A smart contract is a self-executing contract that contains the terms of the agreement between buyer and seller written in the form of codes. For example, Ryan would like to buy John’s car. The agreement between Ryan and John is formed on the Ethereum blockchain with the help of a smart contract. The agreement will say “Ryan will receive ownership of John’s car after Ryan pays John 250 Ether”. Once the smart contract has been implemented, it cannot be changed. All thanks to the smart contract, Ryan and John are not required to pay a lot of fees for third party entities like the bank and a lawyer. This effectively removes the middlemen from the process. Smart contracts ensure that the transactions are traceable, transparent, and immutable.
Since they are secured by cryptography which protects data confidentiality and authentication via encryption this makes cryptocurrency nearly impossible to counterfeit or double-spent.
Today, the global crypto market capitalisation is over 1 trillion American dollars.
Bitcoin is the number one leading cryptocurrency by market cap followed by Ethereum.
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