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What Is Cryptocurrency?

cryptocurrency

You probably have heard a lot of talk over the past few years about Bitcoin, Dogecoin, and other types of cryptocurrency. It’s growing in usage and traded publically like other commodities. There are investors who are obsessed with it. You may wonder what exactly cryptocurrency is. There are no coins or bills and you can’t hold it in your hand. Like so many things these days, it is digital and yet another virtual form of a concrete object. Since cryptocurrency is not going anywhere soon, it’s good to understand at least the basics.

Formal Definition

There are so many people trading in cryptocurrency trying to make some money. They make their purchases and constantly consult resources such as a Doge Coin price chart, anxiously hoping the price has gone up. Cryptocurrency is a digital form of money that is exchanged through a computer network. Unlike traditional forms of money, it has no central authority such as a government or bank. By formal definition, a system must meet six criteria to be considered cryptocurrency:

  • The state of the system is maintained through its distribution status and needs no central authority.
  • The system can define whether creating new cryptocurrency units is possible, and if so, how these units will be created and how to determine who owns them.
  • The system maintains an overview of all its units and who owns them.
  • The system allows the change of ownership through transactions with only the current owner able to issue a transaction statement.
  • The ownership of units can only be proved cryptographically.
  • If ownership is changed and there are two different sets of instructions regarding the transaction simultaneously entered, the system will only perform one.

The Merriam-Webster dictionary added the word cryptocurrency in March 2018.

Types of Cryptocurrency

There are several different types of cryptocurrency. Some of the most popular include:

  • Bitcoin – Bitcoin dates back to 2008 and is the first cryptocurrency in the world. It is the most well-known and has its own blockchain and a market cap. As of January 2022, that cap was $896 billion, the largest in the world.
  • Binance Coin -Binance Coin belongs to the world’s biggest cryptocurrency exchange, Binance. Users who pay for transactions in Binance Coin have reduced fees. Binance keeps the value of its cryptocurrency stable by destroying fixed percentages of currency in circulation.
  • Ether – Ether runs on its own blockchain, Etherium. Unlike other types of cryptocurrency, Ether has no cap on how much of it can be in circulation. It also features smart contracts which automatically execute under the right conditions.
  • Solana – Named for the Solana platform is native too, this type of bitcoin operates on a blockchain like Bitcoin and Ether. The network is popular with people who like to trade quickly as it can perform 50,000 transactions per second.

The world is always changing due to new computer technology. Currency is not immune to these advances. Cryptocurrency is changing the way people invest and do business. With more types available and more people buying it, cryptocurrency will keep on growing.

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