No, Bitcoin is not synonymous with cryptocurrency. In fact, there are actually dozens of cryptocurrencies and each has its own unique name. In the last few years, and has become a household name.
But still, not many people fully understand what it means, how it works, how to buy it, or what they’re going to do after buying it. Cryptocurrency, as many people wrongly assumed, is a lot more complete than buying stocks or exchanging money for a different currency.
- 1 Brief History
- 2 What is Cryptocurrency?
- 3 Properties of Cryptocurrency
- 4 How Does Cryptocurrency Work?
- 5 Components of Cryptocurrency
- 6 Cryptocurrency Companies
- 7 The Future of Cryptocurrency
In the old days, essential commodities used in daily life were traded in microeconomics. When modernization began, the need to store and track money accurately forced the creation and adoption of the coin and paper money, normally issued by the government.
Then came the invention of the World Wide Web which completely upended the idea of traditional banking. Now, people exchange goods and services without the need for a physical medium of exchange.
As we dive deeper into the 21st century, we begin to see an emerging form of transaction that’s completely different from the ones that we’ve seen before; cryptocurrency. This new form of money is native to the internet and many have predicted it will take over all other types of medium for exchange in the coming years. Let’s explore what cryptocurrency is, its inner workings, and how people like you can get involved.
What is Cryptocurrency?
Also called crypto-coin or crypto-money, cryptocurrency is an internet-based medium of exchange that makes use of cryptography in order to secure digital transactions. It uses blockchain technology in order to decentralize the whole infrastructure, makes it more transparent, and immutable.
Cryptocurrencies are touted to be decentralized and digital because the transfer between users is peer-to-peer and is confirmed through a process called mining. They can be used to exchange daily goods and services just like any traditional notes and coins. The populace considers it to be the next evolution of money.
The cryptocurrency rose to prominence because of the meteoric rise of the internet which made it easier to do digital transactions. The main difference between cryptocurrency and the digital dollar is that cryptocurrency has no governing entity that monitors transactions. Cryptocurrency can be used by anybody, anywhere, and is able to self-manage the entire ecosystem, from the creation of new currencies, distribution, to make sure that each transaction is legitimate.
Simply put, cryptocurrency is paperless money.
It is also possible for anyone to develop their own type of cryptocurrency – it is not just limited to Bitcoin and its other associated platforms like the Bitcoin Aussie system. Different currencies can also be used by anyone, anywhere, and at any time. It derives its value from the perception of the public market.
For example, if enough people believe Bitcoin’s value and trade with it enough, the currency will increase its value, meaning cryptocurrencies always have a spot or floating price.
Properties of Cryptocurrency
There are many similarities between cryptocurrency and cash-money. In the same trend, they also have significant differences. Below are some of the defining properties of a cryptocurrency. Some might not apply to certain kinds of cryptocurrency as they can be modified and customized to fit specific purposes.
|Fungible||coins can replace and be replaced by other similar currencies|
|Divisible||coins can be broken down into smaller units of value|
|Acceptable||coins are accepted widely and are used in many transactions like in the case of aussie bitcoin system|
|Limited supply||supply of coins are capped and constant to limit inflation|
|Uniform||different versions of the same currency have the same value|
|Portable||it can easily be transported and used for exchange|
|Durable||coins can be reused multiple times without deteriorating|
How Does Cryptocurrency Work?
In a typical transaction, the exchange is facilitated with the exchange of cash or electronic transfer. Electronic transfers are managed by banks that the population trust to keep their money safe and to police transactions to make sure that they are honest.
In the case of cryptocurrency like Bitcoin, the responsibility of tracking every transaction doesn’t fall into the hands of banks but in the users themselves.
According to a Bitcoin Aussie system review, the use of blockchain allowed cryptocurrencies to be self-contained systems that are able to control and keep track of each coin independently. This is why you will often hear the term „self-regulation“ when talking about cryptocurrency. Meaning, there is no third-party entity monitoring the activities and sometimes exert influence over certain transactions.
Components of Cryptocurrency
Now that you understand what cryptocurrency is, let’s dive deeper into the many components that work together to make it the medium of exchange it is today.
The components of blockchain can be divided into either technical or non-technical components. Just like earlier, it is worthwhile to mention that not all components discussed will apply to all types of cryptocurrencies. By its very nature, cryptocurrencies are flexible and able to adapt depending on the specific needs of the organization that created it.
This technology is considered to be the backbone of cryptocurrency. It holds the permanent records of all the activity in the cryptocurrency. Each blockchain of a cryptocurrency contains all the information about transactions in the past, the addresses, wallet, balances, and so much more from beginning to the present.
Many technologies use decentralized nodes and blockchain-based its currency on this ecosystem of a distributed network of nodes, quite similar to some Aussie Bitcoin system. A node is a single interconnected computer that runs an application or software specifically for the purpose of the cryptocurrency ecosystem that they wish to join in.
This allows the network to propagate by relating crucial information to other different nodes spread all around the world. The system of decentralized nodes across the globe is what creates as well as maintains the decentralized system of the cryptocurrency network.
The reason that many people are attracted to cryptocurrency is because of its security, and the reason it is secure is mainly due to encryption. Cryptocurrency’s encryption relies on private-key cryptography. Private-key cryptography has two sets of keys: a public key (also called an address) which is open to all, and a private key (called secret key) that is only known by the owner. All public key is linked to a corresponding private key.
The owner of the cryptocurrency keeps the private key secure to main ownership. The public key, however, is used openly in doing transactions. This system of private and public keys is the reason that the cryptocurrencies are able to prove ownership while having the ability to do transactions with strangers.
Timestamping, also referred to as mining, is the method that a cryptocurrency uses different timestamping schemes in order to avoid relying on a trusted third party entity to verify different transactions that are then added to the ledger. Traditionally, this verification process was handled by banks.
Below are three different types of mining:
1. Bitcoin, being the most popular cryptocurrency to date, uses proof-of-work scheme, commonly referred to as mining. This is the scheme used by the bitcoin aussie system.
2. Other cryptocurrencies use different mining alternatives such as proof-of-stake, a scheme that is used by Ethereum.
3. There are also advance mining methods to very transactions such as Consensus Protocols or Consensus Platforms.
Much like its real-world counterpart, in the world of cryptocurrency, wallets are where you store your cryptocurrencies. But since the currencies are digital, wallets are usually where public and private keys are stored. The private key gives you the ability to write in the blockchain, basically spending with your cryptocurrency.
The public key gives others the ability to send cryptocurrency to your wallet. And just like there are many different types of cryptocurrencies, there are also different types of wallets. There are those that are ultra-secure wallets used for exchanges between software.
In the field of cryptocurrency, there are countless startups and companies around the world working hard to make the system function properly. From cryptocurrency exchanges to creating new ICO tokens, the industry is rich with opportunities for success. One such example is the Australia-based Bitcoin trading company aussie bitcoin system that helps people keen on jumping into the cryptocurrency bandwagon get started.
Bitcoin spearheaded the cryptocurrency system and have proven that this new medium of exchange can work. Public money that was cryptographically supported made it possible for just about anyone to start exchanging using cryptocurrencies. From the view of market capitalization and public adoption, Bitcoin is the most popular cryptocurrency. However, other cryptocurrencies are not far behind. With over a thousand currencies currently available for trading, users have a wide range of choices.
Other cryptocurrency companies offer different benefits to people. Companies like Litecoin offer faster confirmation times. Ethereum, a new cryptocurrency, calls itself a crypto-asset and uses its built-in token to power a decentralized machine that executes the transactions.
Looking for the perfect cryptocurrency is akin to shopping for a new phone, you have to consider your needs and compare it against the offerings of a certain crypto-company.
Launched in 2011, it is one of the first to follow in the footsteps of Bitcoin. It is based on an open-source payment network independent of any central authority. It uses ’scrypt‘ as proof of work which can then be decoded using consumer-grade CPUs.
The company is a decentralized software platform that gave rise to Distributed Applications and Smart Contracts. Both these applications can be run without any downtime or interference from third-party, and it’s not susceptible to fraud. The applications on the Ethereum platform uses its own native token called ether, basically a vehicle used for moving around the platform.
Considered as a real-time global settlement network, Ripple offers users instant yet low-cost international payments. It allows cross-border banks to settle payments in real-time using end-to-end transparency at a lower cost.
The Future of Cryptocurrency
Many analysts, including those working at a Bitcoin Aussie system, predict a big change in the crypto industry as institutional money, those coming from banks, enter the market. Also, there is a big chance that crypto will be floated on the Nasdaq which will give more credibility to blockchain and its application as an alternative to traditional currencies.
Others predict that crypto needs to have a verified exchange traded fund. An ETF would make it effortless for people to invest in Bitcoin and other cryptocurrencies.
As for the future of Bitcoin specifically, that is harder to predict. Experts predict that the market capitalization of crypto could increase by as much as $5 to $10 trillion dollars in the next five years. The volatility of Bitcoin asset, they say, should not be cause for panic.
Others are claiming that, unlike gold, the value of crypto is highly dependent on transactions which makes it vulnerable to a bubble-like collapse. Also, the energy-intensive verification process used in many cryptocurrencies makes it less efficient than, say, transactions handled by banks.