Cryptocurrency: Definition and Fundamentals

Cryptocurrencies and decentralized finance will play an important role in the future global financial system. It is time to break down the fundamentals the crypto world relies on.

What Is Cryptocurrency?

Cryptocurrency is decentralized digital money, plus, a fully autonomous payment system that encrypts transactions. Digital money has no physical form — it is lines of code.

The first digital coin was bitcoin; all other cryptocurrencies are generally referred to as altcoins. Today there are more than 20,000 of them, with the most famous being ether, BNB, tether, and USD Coin.

Where Is Crypto Stored?

In blockchains that follow Proof-Of-Work principle (bitcoin), cryptocurrency can be mined. The essence of mining is to solve a cryptographic problem and add a new block of transaction to the blockchain. The task is solved by a computer, its processor, video card, RAM. After that, the system grants you coins.

Alternatively, crypto can be bought on cryptocurrency exchanges and stored in wallets: hot (permanently connected to online) or cold (physical, without permanent access to online). On exchanges, traders swap currencies, fiat to crypto, crypto to fiat, crypto to crypto. For that, they pay fees that form the greatest revenue source for providers.

How To Earn With Crypto?

There are 2 groups of people who profit on exchanges, investors who ride rate swings and business owners that make the lion’s share of money from their services: fees, listings, brokerage, etc. While it is desirable to have trading background for investing, you need not be a coder to have your own platform: just buy crypto exchange software Merkeleon builds.

Final Word

Fair enough, cryptocurrencies are more than that. There are many more notions to discover, like consensus mechanisms, the difference between coins and tokens, crypto’s younger brother NFT, and so on. Be sure you will be surprised about the potential of crypto.