Cryptocurrency is still quite a new thing for the general audience. We have all heard of Bitcoin about 10 years ago, but most people left it in the news of that time as another fast trend. Well, it’s still around, and more users are interested in investing in it now more than ever.
Here we’ll show every beginner what is cryptocurrency, what does crypto mean, and the different types of cryptocurrency. If you begin your journey here, going to the next level of knowledge, proceed to mining and investment won’t be a problem!
Now, please, switch on the mind of a student as they call it. Forget everything your friends told you months ago about trading and market forecasts and such stuff. Read carefully and remember the key information.
What Does Crypto Mean: All the Needed Answers Are in the Word Itself
We all know what a currency is, right? A lot of us kind of know what a digital currency might be. But crypto? This part of the word contains the main information about the cryptocurrency meaning.
Crypto is short from cryptography – the main process behind the whole industry. All the transactions are protected using strong cryptography. That’s why you can’t reverse the payment, so to buy or send virtual assets, always double-check your bank card info and wallet address. It’s better to copy and paste those.
Such an algorithm helps the industry stay independent from any major bank. The creation of new units and all the transactions are secured and almost no cryptanalysis can be made to see where the assets were sent from and where they went.
So, the word structure itself can define the term, so it’s best to start with that. Now, to the definition!
Cryptocurrency Definition: The Easiest Way to Understand the Term
The question “What is cryptocurrency?” can be answered in different ways, depending on what you want to know about it.
First of all, it’s a digital asset very close in function to traditional money. It’s used to get goods and services from companies, as well as to exchange from one type to another and the fiat currencies. Every company can create its own currency (also called tokens) that can be purchased for the traditional money and used to buy goods and services.
If you’re more interested in the operational part of these units, there’s another cryptocurrency definition. It is a digital asset that can be worked with using the blockchain technology. It creates a hard-to-trace path when the transaction is made, helping improve the security of these decentralized currencies.
“Decentralized” means their value or count does not depend on any central bank of any country.
Types of Cryptocurrency: The Main Players of the Encrypted Game
Now that we’ve learned the cryptocurrency definition, let’s get to know what major players of the game – types of cryptocurrency. There are 7 main kinds, and here they are in a list:
This is the main information everyone needs to know, even if they don’t plan on using crypto. The world is evolving and changing every day, and soon enough, this type of currency will become as popular as a simple bank card payment. It’s better to find out all the intricacies about it now than hurry and try to read tons of material later on.
• Bitcoin (BTC)
This is the original crypto that made a breakthrough in 2009. It uses blockchain to secure payments. Everyone can see them as the system is totally transparent, but nobody knows from and where the assets go. Only the sender and the receiver see their own transactions because they have private keys that were created for this anonymous operation. It’s still considered one of the best crypto types to work with.
• Litecoin (LTC)
Coming to the picture a little later, in 2011, Litecoin was initially created as an alternative to BTC. It’s also transparent and decentralized but works with a different algorithm than Bitcoin.
• Ethereum (ETH)
It’s an open-source platform that also works using blockchain. Ethereum was launched in 2015 and can be used to pay fees and commissions within the ETH network. Also decentralized and completely safe.
• Ripple (XRP)
Ripple is two things at once: a stable cryptocurrency and a network for low-cost financial operations. It’s speedy and safe, can be exchanged from and to anything, including dollars, euros, BTC, and even gold. However, unlike the first three currencies, XRP is connected to central banks. Its main focus isn’t interpersonal payer-to-payee transactions but rather money movement on a big scale.
• Bitcoin Cash
This is a sub-type of Bitcoin that has a few improved features. Due to its mother currency, Bitcoin Cash is quite popular. There are more blocks, meaning the operation time is much faster.
• Ethereum Classic
This is another version of Ethereum with tokens called “classic ether”. It works using smart contracts which are programs that operate using a standard algorithm that can’t be intervened with in any way. To explain easily we mean there’s no fraud or third-party intervention possible in this scheme.
• Zcash (ZEC)
Zcash is a currency created on the base of BTC. However, it has one major difference and it’s transaction privacy. The users can use the assets without disclosing the amount sent/received, and the sender/receiver. It’s not available on all platforms, though.
In closing, it’s worth recalling that cryptocurrency is digital money, the fiat analog of which doesn’t exist. Today, more and more people wonder what cryptocurrency is, as well as how it works. Hope we’ve helped you to find out!
Besides, investing in a cryptocurrency like Bitcoin or Ethereum can help you increase income, so why not try it out? Prices change all the time for all types of cryptocurrency, we never know when the big leap might be.