Cryptocurrencies have become increasingly popular over the last few years, however, most people still don't know exactly what they are or how they work. In today's article, we are going to discuss the nature of cryptocurrencies, how they work and what's their use.
Bitcoin was the first-ever cryptocurrency. Bitcoin was created back in 2009 by someone named 'Satoshi Nakamoto', most likely an alias. Cryptocurrencies, in general, are digital assets that use cryptographical functions in order to be decentralized, immutable and transparent.
Every single cryptocurrency uses what's known as a Blockchain. This term basically refers to a digital ledger that is immutable. Every transaction on a blockchain is recorded forever, meaning that no one can ever modify it or delete it.
The blockchain is usually public which means that everyone can check any transaction at any time. Cryptocurrencies can be sent directly between two peers, there is no need for a third-party and the fees are minimal.
Most cryptocurrencies are extremely volatile because of low liquidity, a problem that makes it really hard for any cryptocurrency to become widely adopted as a form of payment.
Bitcoin has now become kind of like 'digital gold'. It is now mainly used as a safe haven (An investment that is expected to retain or increase in value during times of market turbulence). Bitcoin has shown that it's able to outperform the rest of the market in times of economic crisis or uncertainty.
Cryptocurrencies can be used to solve all sorts of problems. They are great for low-cost money transfers as the fee is always the same no matter how big your transaction is. For example, recently, we have seen a $99 million Litecoin transaction that took only 2:30 minutes to process and cost $0.4 in fees.
Other cryptocurrency uses include, wealth management, social media or battling electoral fraud thanks to blockchain technology.
Stablecoins are able to maintain the same value no matter what by using smart contracts or other systems that will automatically trigger when needed to keep the price at $1 or whatever the value is.
Privacy coins basically obscure the sender's address as well as the receiver's address and the transaction amount.
