Every day you hear some of the latest cryptocurrency news. But what are the cryptos? Is it tangible? Now like regular currencies cryptocurrencies also come under multiple names. Each type of cryptos has different values.
You probably hear about some of the most popular cryptos names like bitcoin, lite coin, and Shiba inu cryptocurrency. Apart from these, there are many other cryptos in the market. Even I can say every day some of the cryptos are generated, and within 24 hours these are getting destroyed.
Let’s start with the proper definition of what is cryptocurrency and then go for the other information like types of cryptocurrencies.
What Is Cryptocurrency?
Cryptocurrency is digital money that doesn’t require any bank or financial institution. Usually, we save money in any bank or financial institution, and for every transaction you will require permission from the bank. But for crypto transactions, things are getting different.
A cryptocurrency is a digital currency. This digital currency uses encryption technologies for each transaction. Cryptos use the virtual accounting system. cryptocurrencies are more like a virtual payment system.
For doing the crypto transactions you need to have a crypto wallet. The wallets are the tools where you can store the encryption keys that confirm your identities and link to your cryptocurrencies.
How do Cryptocurrencies Work?
Cryptocurrency works based on blockchain technologies. Each transaction is then verified and recorded in the blockchain. Every transaction record is kept in a ledger that tracks and records each of the trades and assets.
These records are the same for everyone and blockchain is the safest mechanism for keeping the data secret. Any third party can’t get a hint of who is the sender and who is the receiver of the money.
That’s why each transaction remains safe and free from any hacker’s interference.
What Is Blockchain Technology?
For understanding the cryptocurrency’s security aspects you have to understand first what the blockchain is and how the blockchain technology works.
Blockchain is a technology that enables secure information sharing. Every data is stored in some kind of database. For cryptos, the blockchain keeps the ledger where every transaction details and data is put in.
The power of data is there when blockchain is distributed between the nodes. The participants of the public and private computer networks are known as DLT or distributed ledger technology.
Each of the nodes is responsible for updating the blockchain data.
What Are Blockchain Attributes?
Blockchain keeps the permanent, unchangeable, and evident recording of data of each transaction. This makes everything possible while exchanging anything with value, physical items, and other tangible items.
Blockchain has three attributes. These three parts are cryptographic keys, a simple peer-to-peer network, and a digital ledger. For adding or subtracting the data from the databases you require two cryptographic keys.
Public keys which is the address of the database. Then the private keys have the personal key for authenticating the networks.
I hope now you get the ideas by which process the cryptocurrency is performing. And why cryptocurrencies are safe.
What Are The Types Of Cryptocurrencies?
You can see cryptocurrency prices are different. Even one crypto has different prices within 24 hours. The four major types of cryptocurrencies are utility, payments, security, and stablecoins.
Like the other currencies, cryptos also have different types. For example DeFitokens, NFTs, and another asset-based token. But among these, all types of tokens the utility and the payments tokens are the most popular ones.
Here are three common types of cryptocurrencies.
1. Coins
Coins are the most common type of cryptocurrency. Coins are working as native tokens for gas or fuel payment tokens. Through blockchain, you can pay any of the bills like regular payments or car gas bill payments.
The best example of crypto coins is Bitcoin or ETH. These coins’ functions are different from the altcoins.
2. Altcoins
Altcoins sound similar the cryptocurrency. There are multiple types of coin alternatives. theses alternative coins are altcoins. Such as the Bitcoin is a coin.
There are many Bitcoin alternatives like Ethereum, namecoin, peercoin, dogcoin, etc. These Altcoins are an alternative to the digital currencies of Bitcoin.
This refers to a group of cryptocurrencies that have the qualities same as bitcoin but they are bitcoin.
3. Tokens
Tokens are the digital representations of any assets or utilities in a blockchain. All of the tokens can be termed altcoins. They are coded and facilitate the smart contracts on the blockchain networks.
We can transfer some of the chains to others. Tokens embedded through self-executing computer programs. When designing and coding a token the developer requires standard templates first.
Bottomline:
Cryptocurrency is a new concept. Still, the digital currency market is pretty volatile. Cryptos don’t need banks or any third-party help to regulate the transactions. So if you are thinking of investing in cryptos.
Better know all about the cryptos and their value first. Then your investment ideas are going to be far more accurate.
There is always a certain risk related to crypto investments like other money investments. Remember these points before starting your crypto investments.
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