With all of the hype and headlines of eye popping gains thus far, we thought we would highlight cryptocurrencies and focus on what they are and how they work.
What is a Cryptocurrency? In the simplest terms, a cryptocurrency is a digital/virtual currency. The digital currency is not issued by a bank and therefore not regulated or subject to any government or central bank. The first part of the word, “crypto,” comes from using cryptography in transactions, which helps to construct and analyze protocols that prevent third parties from accessing and reading the private message.
How they work? Digital currencies can be used to pay for goods/services and transferred between parties with minimal fees and time. This is a peer-to-peer payment network with no intermediary. In an attempt to help prevent fraud, each transaction uses a private key to show that it is the digital wallet that it says it is. Each transaction is entered into the blockchain, which is a public ledger of all transactions. New currency is generally issued by the network itself.
The first cryptocurrency that really came to light was bitcoin in 2009. Bitcoin’s success has resulted in over 700 other cryptocurrencies being introduced. This chart from Visual Capitalist shows the top 20 most valuable cryptocurrencies over time.
So now that you know what a cryptocurrency is, you can use it to pay for your next slice of pizza or bottle of Coke.