In the current time frame of history that we are living in, digital technology is becoming more prevalent throughout the world. With only less than 8 percent of the world’s money being represented in physical units, we seem to be progressing toward a cashless economy.
With the rapid, widespread internet use, everything around us is slowly turning from physical to digital, even the paper dollar bill in our pocket. As a result, many countries are continuously getting closer and moving towards a cashless economy that once sounded like fiction. In fact, in some cities in Asia like Shanghai, Singapore, and Hong Kong, cash is considered inconvenient, and almost all transactions are done cashless.
Considering the rapid changes and the increasing number of people adopting and educating themselves about digital currencies. Therefore, it is crucial to learn about cryptocurrencies and their advantages.
So What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency designed to work as a medium of exchange that uses cryptography to secure and verify financial transactions and control the creation of additional units.
Unlike the current centralized monetary system requiring a middleman like banks and financial institutions to complete and verify every transaction, cryptocurrencies are decentralized and work through distributed ledger technology, typically a blockchain, that serves as a public financial transaction database.
To put it differently, cryptocurrency is an alternative form of payment to fiat currencies (cash), credit cards, and checks. The technology behind it enables us to send it directly to others without a third party like a bank.
In other words, cryptocurrencies are like virtual accounting systems that keep a record of all transactions conducted. The transactions are bundled into blocks, which are cryptographically signed. The person doing the signing, who is called a miner, gets some number of units of virtual currency (and potentially transaction fees) as a reward for doing the work of calculating the cryptographic signature.
The first decentralized cryptocurrency is Bitcoin that was first released as open-source software in 2009. Since the release of bitcoin, more than thousands of other cryptocurrencies have been created that are usually referred to as alt-coins
(alternative variants of bitcoin).