Cryptocurrency is a secure digital or virtual currency protected by cryptography, which prohibits users from counterfeiting or double-spending it. Decentralised networks such as bitcoin and many other cryptocurrencies are built on blockchain technology — a distributed ledger enforced by a large number of computers all around the world.
Cryptocurrencies are identified by the fact that they are generally not issued by a central power, and for that reason, they are theoretically immune to government control or manipulation of their value. Central banks are able to print fiat currency that is based on faith and not backed by commodities, such as the US dollar, the euro, and the British pound, in unlimited quantities.
Throughout history, all fiat currencies have eventually failed, as governments tend to overprint them. Since cryptocurrencies are not controlled by authorities, they do not suffer from this problem.
TYPES OF CRYPTOCURRENCY
Bitcoin is the best-known cryptocurrency and the largest by market capitalisation (i.e. total equivalent value in USD). It was launched in 2009 by an individual or group known by the pseudonym Satoshi Nakamoto. The original Bitcoin white paper is available in open access. Although it is not legal tender, Bitcoin is extremely popular and has sparked hundreds of other cryptocurrencies, collectively called altcoins. “BTC” is the symbol used for Bitcoin. There have also been spinoffs or forks from the original Bitcoin, such as Bitcoin Cash. However, whilst the names are similar, they are priced very differently and should not be confused. At the time of writing this book, Bitcoin is trading at over $40,000, making owning 1 Bitcoin unaffordable for many. Fortunately, Bitcoin is divisible into Satoshis, and you can buy as little as $5 worth of Satoshis with many online brokers. What makes Bitcoin unique is that only 21 million Bitcoins will ever be available. Each Bitcoin is divisible into 100 million units, or Satoshis, and one Satoshi is worth $0.0004 as I am writing. Bitcoin can be accessed using a private key which is a series of numbers and letters. If you lose this key, you lose access to that amount of Bitcoin. Whilst still relatively new, Bitcoin is building up momentum with more and more financial institutions seeing the potential and a growing number of companies and respected investors announcing that they have large holdings in Bitcoin. Compared to other financial markets, the cryptocurrency market is still in its infancy, which opens up many opportunities. However, you will also notice that these markets can be very volatile.
Another popular cryptocurrency is based on the Ethereum blockchain system, a decentralised open-source ledger. It’s worth noting that this digital coin is sometimes called Ethereum, but the correct name for the cryptocurrency is Ether; Ethereum is the name of the network. Ether is commonly abbreviated as ETH. At the moment, Ether is the second-largest cryptocurrency after Bitcoin. It was first described in a 2013 white
paper by Vitalik Buterin. The Ethereum platform, first described in a 2013 white paper by Vitalk, has been a launchpad for many other cryptocurrencies. It is currently working on ETH 2.0, which is aiming to make processing faster and less power-intensive. More information about ETH 2.0 is available in detail.
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