Unless you've been holed up in a Tibetan monastery in the Himalayas for the past 6–8 years, chances are you've heard about cryptocurrency. But hearing about it and knowing what it is are two different things.
If you ever wanted to know what cryptocurrency actually is and how it's used, this post will help. So let's start.
What Is Cryptocurrency?
In plain English, cryptocurrency is a virtual currency traded on a decentralized network. However, the terms "virtual currency" and "decentralized network" demand further explanation.
A virtual currency is a sort of digital currency available in an electronic form instead of a physical one. Because it's available in electronic form, you can purchase or sell it only through the internet.
To complete a monetary transaction using cryptocurrency, you need a network. Conventional networks are centralized, which basically means that a central authority checks and approves the transaction.
The prime example of this is when you send money to someone else's account through online banking. You log in to your bank account to initiate the transaction, but it gets completed only when your bank approves it.
However, in the case of cryptocurrency, the network is decentralized, meaning there's no central authority. In other words, you can complete monetary transactions without a middleman.
What Was the First Cryptocurrency?
Bitcoin, which launched in 2009, was the first cryptocurrency. It allowed people and institutions to send and receive money without a central authority.
Is Cryptocurrency Used Only for Completing Monetary Transactions?
Well, that's how it started. However, its scope widened with the introduction of Ethereum in 2015. It had programming language built into its chain, allowing developers to create apps and contracts that can be executed automatically.
Apart from using Ethereum for sending and receiving money, businesses used it to fund new projects, and investors used it to earn handsome returns on their investments in a short period of time.
Have All Cryptocurrencies Been Successful?
No, not really. The cryptocurrency world has seen more failed ventures than successful ones. However, what's important is that the successful ones have left a huge mark. For instance, Ethereum's total market cap is more than $21 billion. Likewise, Litecoin, which is just about a year old, is worth $3 billion.
Want to know which other recently launched cryptocurrencies have an impressive track record? Check out this interesting and informative infographic.
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