A one time read to know everything about Cryptocurrencies
News about cryptocurrencies popping out on notifications and having people around you talk about the same is becoming the new normal now.
Feeling outdated on hearing about cryptocurrencies everywhere? Well, there are a lot of people out there like you, who have no idea what they are. But they are buzzing, aren’t they? If you’re here as a reflection of your curiosity, keep reading to learn everything about crypto.
Cryptocurrencies are explained in simple terms
Cryptocurrencies are digital money with no physical existence. These currencies are made of computer files instead. They are encrypted by cryptography, that is, the science of hiding something. So cryptos have these computer files hidden behind them. And that is why they are completely safe to use as fake cryptos.
Unlike the hot cash we use, cryptocurrencies are decentralised. That is, they are not controlled by banks or any mediating platforms. With cryptos, you own the money, you completely own them!
Some of the known Cryptocurrencies are Bitcoin , Ethereum , Dogecoin , Chainlink, PolkaDot and many more…
Are blockchains and Cryptocurrencies the same?
Anyone who has no idea of what a cryptocurrency is but often hears it will wonder if blockchain and cryptocurrencies are the same. If you’re one among them, then our answer to you is, No. Blockchains are completely different from cryptos but both are interdependent.
A blockchain is a place of data storage, in simple terms. The transactions that happen with cryptocurrencies are data as well. So a blockchain is where these data will reside. But the thing about blockchain is that it is an open public ledger. That goes without saying that anyone on the internet can view the information on a blockchain.
Blockchain technology is also commonly called the Decentralised Ledger technology, DLT. As already said, cryptocurrencies are decentralised and do not involve a central authority. The thing with DLT is that they maintain the data on the blockchains decentralised and secure at one go. The information stays secure though open to all with the help of Cryptography.
But these data can be accessed by people with the help of keys. When it comes to keys, they are of two types- Public and private keys. A public key is used to encrypt the data on a blockchain whereas a private key is a unique key given to a user to decrypt the data.
Working of a blockchain
So now you know that the data related to crypto transactions can be stored on a blockchain safely, would you not want to know how they work?
Blockchains are actually by their name, chain of different blocks. There are separate blocks on a blockchain where one can store the data.
Now imagine you want to store data on the blockchain.
You must first generate a new block to do so. After a new block is formed, it is here that you will have to enter your information. Each block has a particular holding capacity. After the limit is reached this block will be tied to the chain which has other blocks.
Knowing more about cryptocurrencies and their formation
Another synonymous term we hear with cryptos is Bitcoins. They are worth the buzz, because it is the first ever crypto currency that came to existence. But you must have also heard about Altcoins, haven’t you?
Well, Altcoins refer to all other cryptocurrencies other than Bitcoins. They are considered as alternatives to bitcoins and so got their name as Altcoins. They have some similarities to that of Bitcoins, but they are said to work in a more smarter and beneficial way. Some of the famous altcoins are Litecoin and Namecoin.
When everybody around you is trading and investing in cryptocurrencies, you might wonder how these currencies come into existence. One can get cryptocurrencies by the process of Crypto mining. Here, you will have to crack the most difficult mathematical sums using computer hardware. To do this, you must first register on the official ICO site. ICO stands for Initial coin offering. They are the key fundraisers of cryptos.
Though it sounds hard, a lot of people have cracked these and earned some amount of cryptos as incentives. You could be one of them too, just give it a try!
So what can you do once you’re rewarded with some crypto coins?
You can have your cryptocurrencies safe in a Digital Wallet. A wallet is a medium or platform that helps for encoding your cryptos into secure keys.
As an alternate, you can also exchange your
cryptocurrency for another in coin exchangers. Imagine you’re having some Bitcoins and want to exchange them for Namecoins. Exchanges will be the right option to do this. The IEO, Initial exchange offering is similar to that of ICO, but helps in crypto exchanges instead.
Crypto- The fears and benefits
A lot of people are worried to do crypto investments. This is because of the fact that Cryptocurrencies have values that are highly Volatile. It means that the price of these currencies keep fluctuating often in the market. It is usually measured by the Volatility Index, which represents the volatility predictions for the next 30 days.
This is why FUD is becoming a common problem among crypto investors. FUD stands for Fear, uncertainty and doubt. When the prices keep fluctuating, one can definitely have FUD.
On the other hand, a lot of people have FOMO, fearing of missing out. Through,the crypto prices are volatile, people with FOMO do not want to miss out on anything and would begin to try out everything people are buzzing about.
At the same time, cryptocurrencies and blockchain are completely safe because it involves a PoW mechanism. It is the power of work, which is a decentralized method where users put effort into solving mathematical problems during mining. Which means that you get power for your work only!
Cryptocurrencies are even believed to be the future money. That is because a lot of people wish to go cashless. It is a growing trend and knowing about it is almost becoming a necessity now. With this article that has put down all the buzzwords related to cryptos in simple terms, you will not feel intimidated the next time someone talks about crypto currencies to you. After all you will not have FOMO, will you?