What is a Cryptocurrency? Crypto Explained for Beginners


What is a cryptocurrency?
A cryptocurrency is a digital representation
of something valuable, such as money,
that only exists online.
Cryptocurrencies use cryptography
to verify and secure transactions,
and are seen by many as the foundation
of a better future economy.
But what’s wrong with
how we pay for things now?
In a few words, it is too centralised.
Every purchase that we make needs
to be approved by a third party
for which they all charge a fee, adding up to
a considerable amount of money over time.
Transactions can also be extremely slow,
it can sometimes take days for bank to guarantee
that a payment has been received.
Another issue is that these companies need
to store endless amounts of personal data
about their customers to work out who is trustworthy,
but they can’t always be trusted
to keep that information safe.
If we don’t use a centralised
source of information,
how do we prove that we have paid
when we buy something,
or that we can actually afford
to pay for it in the first place?
Solving this issue is one of the greatest
achievements of the first cryptocurrency ever created,
Bitcoin.
Bitcoin uses a peer to peer payment network,
where the responsibility to maintain a trusted ledger of transactions is shared between everyone,
rather than one central body.
And, as there is no central authority needed,
there are no disproportionate fees or
personal data at risk of being compromised.
So,
Bitcoin is a cryptocurrency that solves
the issue of payment,
but what else can cryptocurrencies do?
Since 2008 countless cryptocurrencies
have been created,
many of them carrying out different functions
in different blockchain ecosystems.
Investors buy into them because they believe
in the product that the currency underpins.
Many people see cryptocurrencies as tools
that can help developing countries
by reducing fees,
offer greater access to banking,
help combat inflation
and fight corruption.
Only time will tell if they change the world
so drastically
but one thing is for certain,
the blockchain technology that
they are built on is here to stay…

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