How Cryptocurrencies work
Have you heard about cryptocurrencies and wondered what they are and how they work? Cryptocurrencies are digital currencies stored and exchanged online as a form of payment or means of exchanging value.
Cryptocurrencies operate over a decentralized network built on blockchain technology over which people engage as peers without relying on a central authority. The blockchain platform is decentralized in nature and supports peer-peer seamless and secure exchange. On top of facilitating interaction between the involved parties, blockchain technology records manage and keep transactional records. Transactional records are kept in multiple nodes or computers worldwide, which improve data security and integrity. A malicious person would have to alter data in all computers, not just one, making the execution of evil doings impossible.
The first cryptocurrency was Bitcoin, but others have come up over the years, making the popularity of cryptocurrencies rise by a significant margin. Based on the figures given by CoinMarketCap, we have more than 10,000 cryptocurrencies currently, and others are coming up.
Cryptocurrencies are unregulated, lacks centralized authority, and are subject to price fluctuations. The rise and fall in the value of cryptocurrencies are determined by demand and supply but no outside factors that make it easy to profit through speculation.
For instance, the price of Bitcoin at the time of its invention was USD 0, but it has risen and fallen over the years and as of now, its value is USD 42404.70 as of September 29, 2021. The price fluctuates, which means that the rise and fall in demand bring up the business model in the industry. People who purchased Bitcoin in February 2011 when the price was USD 1 are now owners of USD 42404.70.
Cryptocurrencies are stored in online wallets in place of ordinary banks. Cryptocurrencies can be bought using standard currencies, especially the U.S dollar, and received in the wallet created on a crypto exchange platform. Some of the exchange platforms include Coinbase and Binance, among others.