After the 2024 U.S. election and the emergence of a crypto-friendly cabinet under Donald Trump, the global cryptocurrency space witnessed a massive surge. Countries began revising regulations, adoption rates soared, and major corporations started investing heavily in digital assets. But what exactly is cryptocurrency? This guide breaks it down in simple terms.
What is Cryptocurrency?
Cryptocurrency is a digital currency that is not controlled by any central bank or financial institution. All the transactions are recorded publicly on ledger within blockchain. You don’t need banks to verify your transactions as they verify transactions through Proof of work.
The value of cryptocurrencies is driven by the supply and demand of the circulating supply of coins or tokens. This decentralized system is fast, secure, and cheaper than the traditional banking system.
Cryptocurrency vs. Traditional Currency
- Traditional Currency : Government produces paper currency in paper bills or coin. That we used for buy or sell goods in daily life backed by government. You secure your money by keeping it in banks. The banks and government provide coverage in case of loss.
- Cryptocurrency : produced or controlled by the government.The banks and government provide coverage in case of loss. But cryptocurrency is stored in a hot or cold wallet, and the loss or theft is not covered by anyone.
Why is Cryptocurrency So Popular?
In the traditional banking system. Banks control money, and a person needs proper documentation and needs to provide reason and identity to add or withdraw money from their accounts. The government and banks freeze your assets whenever they want for any reason. Banks take time to send money from one country to another. With cryptocurrency.
- You own your assets completely
- You can transfer funds globally in mintutes.
- Lower fees and fast transfer.
Financial freedom attracts people extremely toward crypto. and transparent transaction systems build trust on crypto usage.
How Does Cryptocurrency Work?
Cryptocurrencies work on technology called blockchain. All the transactions are recorded in the form of ledgers in blocks. It’s like a public ledger record of all the transactions. The ledger is decentralized. This means data is not stored in a single location but across different locations. Every blockchain has its way of validation. Like.
- POW ( Proof of Work ) : Bitcoin works on POW. Where each transaction is validated by several computers called miners. Every miner gets a reward in return for validating the transaction. All the transactions are public and anyone can see that.
- POS (Proof of Stake): Validator are selected on the number of coin they stake. and get reward in the foam of coins.
Types of cryptocurrencies:
Now a days there are thousand of cryptocurrencies listed on different exchanges. Each cryptocurrencies have their own use case and types. there are few types of cryptocurrencies
1. Bitcoin (BTC) : The first and most popular cryptocurrency, with limited supply of 21 million coins, consider as a reserve assets.
2. Altcoin : Any coin except bitcoin is called Altcoin. There are following below
- Ethereum (ETH): 2nd largest cryptocurrency and support smart contracts and decentralized app (dApps)
- Solana (SOL): Used for there minimum transaction time and small fee.
3. Stable coin : Due to highly volatile nature of cryptocurrencies. these coin represent stable prices like USD fiat currency.
Conclusion
cryptocurrency is changing the way we think about traditional currency. Due to financial freedom, fast speed and low fee and you own your assets. Cryptocurrencies come with many security challenges. Many loss their life saving due to hack and theft. Before start investing in cryptocurrency make sure to research, address security protocols and protect all your coins.