A Basic Summary of Cryptocurrencies

Introduction

Cryptocurrencies are a novel form of assets brought about by the introduction of blockchain technology and secure unalterable coding methods. They are "digital currencies used to generate money and enable transactions". They are meant to serve as a medium of exchange by mimicking or emulating the conventional characteristics of money, which is portable, durable, divisible, and fungible. Cryptocurrencies' popularity surged towards the end of 2017 on fast-rising prices across the cryptocurrency market, which has since declined to and has remained below levels at least 50% lower than the peak achieved between late-2017 and early-2018. The article below describes the basics of investing and the mechanics of cryptocurrencies.

Blockchain Technology

The building block of cryptocurrencies is the blockchain decentralized/distributed ledger technology, which is the fundamental security feature of the mechanism of cryptocurrency storage and transaction. According to an introduction to cryptocurrency trading, it is a ledger like a master log that records and stores all recent transactions and monetary activities while validating ownership of all units of a given cryptocurrency at any time. The blockchain is finite, according to the same source, which means over time, the number of blocks on the blockchain increase, and each block is different from the previous block.

The Cryptocurrency Market

There are innumerable coins that are out there on the market for any kind of investor. However, most of the coins (known as "alt-coins", an abbreviation for "alternative coins") listed on exchanges are off-shoots of or build their fundamental mechanisms taken from the most popular cryptocurrency - Bitcoin, the first decentralized digital currency. It has several benefits that has bolstered its popularity which will be discussed later. Other cryptocurrencies include NEM, Tron, Dash, Ethereum, and Cardano, just to name a few.

One can purchase cryptocurrencies using conventional currencies such as the United States Dollar by trading conventional currencies for cryptocurrencies on a cryptocurrency exchange, such as BitForex, Binance, BCEX, and HotBit. A full list of cryptocurrency exchanges can be found here. However, one must be aware of crypto taxes that will be imposed on one who trades central bank-issued currency, such as the United States Dollar, Japanese Yen, or the British Pound, and it is advised to be aware of these before investing. One can also trade goods and services for bitcoins just as one would purchase a cup of coffee for a fixed quantity of conventional central bank-issued currency.

Benefits of Using Cryptocurrencies

Since most cryptocurrencies are built on or are similar to the bitcoin software and transaction system, we will discuss the benefits of using bitcoins as a benchmark for all cryptocurrencies. These benefits can also be found on the official bitcoin website. Bitcoins can be transferred directly from one person to another with little-to-no fees as compared to conventional money transfer practices that utilize clearing houses such as big banks. This is also where crypto tax software can come in handy.

Owing to their ability to be transacted over the internet and their origin from open-source software released to the public, bitcoins can be sent from anyone to anyone anywhere in the world, and this applies to almost all cryptocurrencies created after bitcoin. There are also no pre-requisites or arbitrary limits to the amount of bitcoins one can transfer, and consequently, there can be no freezes on your account.

Conclusion

Cryptocurrencies have been present and used in the global economy since the beginning of the 2010s. It began with the invention of bitcoin after the publication of Satoshi Nakamoto's white-paper detailing a decentralized digital ledger-based transaction mechanism that cuts out the middle-man, or a clearing house such as a big bank, and proposed open-source software for enabling this invention to take form.

Since then, many coins have emerged as off-shoots of bitcoin with their own niche characteristics tradable on various cryptocurrency exchanges or between people themselves for goods and services. It surged in popularity as its price rose in late 2017 to unseen levels, and cryptocurrencies continue to remain popular within the global economy. Cryptocurrencies promise a bright future with the right implementation and regulatory measures taken to ensure personal and economic security.