What is cryptocurrency and what are its features ?
Cryptocurrency: what is that?
In recent years, the cryptocurrency has become quite popular among users. It is bought, sold, exchanged. But many still do not know what a cryptocurrency is and what its features are.
The history of this virtual currency began with Bitcoin. To this day, this type is considered the most popular. Although today there are enough other currencies that are also actively used by Internet users.
The concept of cryptocurrency
Cryptocurrency is a virtual digital currency protected by cryptography. Such an electronic coin does not exist physically and is not even expressed in a certain number, it is presented in the form of encrypted information, which is almost impossible to copy. Because the data changes every time a digital currency is transferred to a new owner (a new transaction is added to the existing chain).
Features of the cryptocurrency and its release
If we talk about comparison with the usual electronic money, then this is a fundamentally new phenomenon. And if the replenishment of the wallet with electronic money is preceded by depositing them to the account in a physical sense, for example through an ATM, then the cryptocurrency immediately appears on the network. It is not individuals or the state that can control its emission and movement. It has no decentralized governance.
The release of cryptocurrency, more precisely, its extraction, occurs through mining. Access to it is open to all users. The main condition is the availability of powerful computer equipment with special software installed on it.
The essence of mining is that computers around the world, set up for the extraction of cryptocurrencies, solve mathematical problems by a complete search. The essence of the whole process is to find a number using special algorithms, in the language of cryptocurrency it is called “solve the block”. In case of a successful outcome of events, a certain amount of electronic coins (encrypted data) is released.
Blockchain (a chain of blocks) is a proof of the presence of a coin in the network, acts as a digital registry.
Initially, personal solo mining was popular, when everyone was engaged in mining independently. Recently, miners have begun to unite in groups (pool mining), combining the computing capabilities of their computer equipment. It is much easier and faster to solve the block together, but the extracted asset is also divided into all members of the group.
Advantages of cryptocurrency
- The possibility of mining for any user, the main thing is the availability of suitable equipment;
- Anonymity. There is no information about the owner of the wallets (only a digital combination). To perform the operation, you do not need to enter your personal data, this increases the attractiveness from the point of view of taxation;
- The lack of control over operations and a single digital bank. Ie, no body alone can manage the cryptocurrency, the network is distributed to all participants of the system;
- There is no threat of inflation. Mining takes place in limited quantities;
- High degree of protection.
Disadvantages of cryptocurrency
- Uncertain legal status. Due to the lack of confirmation of personal data, in case of loss of the wallet or violation of its operability, its owner will lose all the extracted cryptomonets;
- Mining requires special computer equipment with high technical characteristics;
- The inability to cancel the payment. After the transaction is completed, it will not be possible to cancel it, even in the case of fraudulent actions on the part of the recipient;
- Due to the specifics of its use, it has a high price variability.
The first cryptocurrency is BitCoin
The first and by far the most popular cryptocurrency is BitCoin (bitcoin). Its emission and production in the network began in 2009. On the open algorithm of this cryptocurrency, other types were subsequently created. To date, there are more than 150 of them.
The process of introducing Bitcoin had no strategies, no one controlled it, so it was a slow stage. At first, the miners of this cryptocurrency were mainly only IT specialists. Because even for them it was not entirely clear what the Bitcoin cryptocurrency is and how it can be used. And the starting price was low – from $ 0.1 per coin.
Popularity came in 2010. When one of the exchanges introduced the possibility of exchanging this cryptocurrency for real money. In addition, the transaction was anonymous. With the growth of interest, the value of mined cryptomonets began to grow rapidly, in the flesh to $ 1100 in 2013. At the moment, the price for 1 BTC exceeds 500 US$
How can I use cryptocurrency?
The owners of this modern digital currency, in particular Bitcoin, have the following opportunities available today:
- Perform mining, storage, and exchange operations;
- Sell to users who do not have the ability to mine;
- Pay for services on various online services, gaming portals and goods in online stores;
- Trading and investing in various projects;
- In developed countries, there are also ordinary retail outlets with POS terminals, where they accept cryptocurrency as payment, terminals for performing various operations, hardware wallets.
In conclusion, it is worth noting that theoretically, anyone can not only mine, but also create their own cryptocurrency (for example, for their gaming portal). Despite the fact that the attitude of many states to it is ambiguous, according to many experts, it is the currency of the future.
Published: 19 March, 2017
