If you are new to the crypto universe, starting with a general introduction to digital currencies is probably the best way to go. In this first article, you will learn what the concept means, what it is for, and what are its general features.
A cryptocurrency is like a digital form of cash. It is a form of payment that can be used online to buy goods and services, although many people invest in crypto as they would in other assets, such as stocks or precious metals. It also means it can be sent to friends and family anywhere in the world.
Cryptocurrencies are wholly digital, which means there is no physical coin or bill linked to the crypto you own. Instead, owners hold cryptocurrency in a digital wallet, and buy or sell it through an online exchange.
Crypto vs Fiat Currencies
If cryptocurrencies share similar attributes to fiat currencies, there are however 7 crucial differences between the two.
Whereas most currencies are backed by a central bank, you are your own bank. You are the only one in control of your digital assets and the only one in charge of keeping them secure. No central authority involved, no need for middlemen.
You can send and receive cryptocurrency from anywhere in the world, contrary to fiat currencies which are country-specific and require you to convert your money and pay exchange rates for worldwide transactions.
Transactions cannot be reversed, and your money cannot be spent twice. No fraud is possible.
No personal names or identifying information needs to be attached to the transactions. Like cash, crypto allows unnamed transactions.
Cheap and Fast
When you make a transaction to someone at the other side of the world, your money can be with them within seconds – at a fraction of the cost of an international wire transfer.
You do not need to provide information, nor permission, to create a wallet and own crypto, and no one can stop you from using crypto, unlike centralized payment services, which can freeze accounts or prevent transactions from being made.
Because of the way the network is designed, it is virtually impossible for hackers or other attackers to shut it down, thus advocating individual empowerment.
The name cryptocurrency is a combination of cryptography and currency. Cryptography is the practice and study of techniques used for secure communication, and encryption, the process of encoding that private information. It is about creating and analyzing codes and protocols that allow people to transmit information in a private and secure way, thus preventing third parties from reading that information.
Cryptography lies at the root of all cryptocurrencies, and that means advanced math is used to secure your funds and ensure nobody other than you can spend them. This encryption process takes place for every transaction and is made possible thanks to the decentralized (and public) nature of its underlying technology.
That technology, on which the great majority of digital currencies are based, is known as blockchain, and it is what we are going to talk about in the next article.
Keep learning from our "Starting With Crypto" beginners guide with the second article: Blockchain Basics
New to crypto? This five-step beginners’ guide to the world of cryptocurrency may just be what you need to get started!