How cryptocurrency works, where to buy it, and which ones you should invest in
Cryptocoins, also called cryptocurrency or crypto, are a form of digital currency powered by blockchain technology. Cryptocoins do not have a physical, real-world equivalent. There are no actual coins that represent cryptocurrency value, however, some replicas have been made for promotional purposes or as a visualization tool. Cryptocoins are purely digital.
How Many Crypto Currencies Are There?
There are literally hundreds of cryptocurrencies that have been created since the debut of Bitcoin in 2009. Some of these have spun-off of the Bitcoin blockchain such as Bitcoin Cash and Bitcoin Gold. Others use the same technology as Bitcoin such as Litecoin, and many more are based on Ethereum or use their own unique programming language.
Like traditional fiat currencies (currency not backed by a physical commodity), some cryptocurrencies are more valuable and practical than others and most have a very limited use case. Given that anyone can make their own cryptocurrency, it’s likely that most will remain niche while only a few popular cryptocoins will achieve mass adoption through mining or investments and go mainstream.
What’s The Most-Popular Cryptocoin?
The number one cryptocurrency by ownership, price, and usability is undoubtedly Bitcoin. Bitcoin’s popularity is mostly a result of it being the first cryptocoin on the market and its unmistakable brand identity.
Everyone’s heard of Bitcoin and very few people can name another cryptocurrency. Many online and offline stores accept Bitcoin and it’s also accessible via the growing number of Bitcoin ATMs popping up in major cities around the globe.
Major rivals to Bitcoin include coins such as Litecoin, Ethereum, Monero, and Dash while smaller cryptocurrencies like Ripple and OmiseGo also have potential for larger adoption in the future due to their backing by major financial institutions.
Despite using the Bitcoin name, these coins are very much separate currencies from the main one even though they use similar technology. New investors are often tricked into buying BCash, thinking it’s the same as Bitcoin when it’s not.
How Do Bitcoin, Litecoin, and Other Coins Work?
Cryptocurrencies use a technology called blockchain which is essentially a database that contains a record of all of the transactions that have taken place on it. The blockchain is decentralised, which means that it isn’t hosted in one particular location and therefore can’t be hacked.
Each transaction must be checked several times before it’s approved and published on the public blockchain. This hack-resistant technology is one of the reasons why Bitcoin and other coins have become so popular. They’re typically incredibly secure.
Cryptocoins are assigned to wallet addresses on their respective blockchains. Wallet addresses are represented by a series of unique letters and numbers and currency can be sent back and forth between these addresses.
To access the wallets on the blockchain, users can use a special app or hardware wallet device. These wallets can display and access the contents of the wallet however they don’t technically contain any currency. Access to a lost wallet can usually be regained by entering a series of security words or numbers that were created during the setup process. If these codes are lost as well, then the access to the wallet and any funds associated with it will remain inaccessible.
Due to the decentralised nature of cryptocurrency technology, there are no customer service contacts that can reverse transactions sent to an incorrect address or gain access to a wallet if a user is locked out.
Owners are completely responsible for their cryptocoins.