Cryptocurrency - what is it in simple words and why is it needed + list of cryptocurrencies (review of TOP-6 types)

Hello dear readers of the magazine Rich Pro! Today we will tell you what cryptocurrency is in simple words, how it works and why it is needed, what types of cryptocurrencies are (we will give a list of the most promising ones).

Also from the presented article you will learn:

• How to use cryptocurrency and is it possible to make money on it;
• What is provided with digital money;
• What can I buy for cryptocurrency.

And at the end of the publication you will find answers to the most popular questions on the subject of cryptocurrencies.

Go!

In this issue, we will talk with simple and understandable words about cryptocurrency - what it is and what it is for, what cryptocurrencies there are other than bitcoin, how to use them in everyday life

1. What is cryptocurrency in simple words - a concept overview for dummies

Before using cryptocurrency, you should first understand what it is and how it works. First of all, you need to find out where this concept came from. First term "Crypto currency" was used in 2011 year in an article by Forbes magazine. From this moment on, the term has become firmly established.

What does “cryptocurrency” mean - the definition and meaning of the term

Cryptocurrency(from English cryptocurrency) - This is a special type of electronic means of payment. At its core, it is a mathematical code. The term reflects the principle of the currency, namely the use of a cryptographic code. When circulating cryptocurrencies, electronic signature.

The unit of measure in the system of digital money are coins "Coins" (translated from English this term literally means "Coins") But we should not forget that the physical expression in the form of banknotes and metal coins of cryptocurrency Dont Have. Such funds exist only in digital format.

The fundamental difference between cryptocurrencies and traditional (fiat) money is that they arose in digital format. To use real currencies in cashless payments, you first have to deposit them into a special account or in an electronic blockchain wallet. In contrast, cryptocurrencies are already being generated in electronic format.

There are several ways to “issue” digital money:

1. ICO- initial placement of money, which is essentially an investment system;
2. mining- maintaining the performance of a special platform in order to generate new money;
3. forging- Creation of new blocks in existing money.

Creation methods prove that cryptocurrencies are formed directly on the Internet.

Another important difference between electronic digital money and fiat money is the decentralization of emissions. The release of cryptocurrencies is the generation of mathematical code followed by an electronic signature.

Fiat funds are issued exclusively by central banks of various states. At the same time, they have the right to issue cryptocurrencies absolutely any person. To make transactions using electronic money, you do not need to contact any financial companies, including banks.

Payments using cryptocurrencies are carried out according to the same principle as traditional electronic transfers according to the principles of cashless payments.

An exception is exchange trading, which allows transactions with digital currencies, that is, translate them into traditional means of payment, buy and sell them. About how to trade on the cryptocurrency exchange, read the article here.

Cryptocurrency circulation is carried out according to the blockchain principle. Translated from English, this concept means "closed circuit". Such a system is a database distributed across a huge number of computers worldwide.

In this case, storage, as well as recording information during the circulation of electronic currencies, is carried out simultaneously on all devices. This allows us to guarantee transparency, as well as the openness of all ongoing operations. You can read more about blockchain technology in one of our publications.

2. Why cryptocurrency has become so popular

The popularity of electronic money is determined primarily by the requirements of the time. The century of global spread of information technologies has come📡🌏. In such a situation, universal means of payment, which are accepted for making payments in digital space, have become especially popular.

It is important that there was no binding to a specific country or financial institution. It is this tool that cryptocurrencies have become.

To carry out calculations with such "crypto money", only the wallet number is required. That is why cryptocurrency does not require real expression. Digital money protected by cryptographic code. As a result, they become more reliable than fiat products.

❗Absolute decentralization of the issue of cryptocurrencies leads to the fact that their impossible fake or to ban.

Another characteristic that contributes to the growing popularity of electronic digital money is its complete anonymity. When performing operations with cryptocurrencies, information about the parties to the transaction is not transmitted anywhere. The only information that is used during their performance is the numbers of blockchain wallets.

Attention to cryptocurrencies also attracts the opportunity to create them yourself. In fact to get (mine) Digital money can be practically out of nowhere. At the same time, investing in cryptocurrencies, as well as their trading, can also make good money.

Moreover, the extracted electronic money is easily exchanged for real money. The result is a good regular income.

3. Pros (+) and cons (-) of cryptocurrency

Electronic money is significantly different from fiat. As a result, a huge number of not only the advantages of cryptocurrencies arise, but also their disadvantages.

The main advantages of cryptocurrency:

1. Anyone can engage in cryptocurrency mining (mining). The absence of emission centers, as well as regulatory bodies, entails the absence of a ban on the extraction of digital money to any citizens.
2. Decentralization of the issue entails not only the possibility of independently issuing cryptocurrencies to anyone who wants it, but also the lack of control on the part of states and financial bodies.
3. Protection with a cryptocurrency code allows you to save electronic money from copying and counterfeiting.
4. Absolutely all transactions are conducted anonymously. In this case, the only available information is the electronic wallet number. Other information about the payer and recipient of funds is closed.
5. For each type of cryptocurrency, the maximum emission volume is determined. Therefore, excessive release is not possible. As a result, there is no cryptocurrency inflation.
6. When conducting transactions with electronic money, there is almost never a commission. This is due to the lack of the need to involve a third party in the transaction, such as a bank or other financial institution. As a result, the cost of transactions with cryptocurrencies is much lower than with fiat money.

Despite the huge number of advantages of cryptocurrencies over real money, electronic money has a number of disadvantages.

The main disadvantages of cryptocurrency:

1. Many states still do not accept cryptocurrencies as legal tender. Moreover, often government bodies try to negatively affect such funds.
2. Recover password, as well as code from electronic wallet impossible. Therefore, the loss of access to the repository means the loss of funds placed in it.
3. Recently, there has been a trend towards the complication of cryptocurrency mining. Today, obtaining digital money for an individual user is becoming less and less profitable.

Another feature of cryptocurrencies is the high volatility level. This means that the course is in continuous motion. During the day, the change in the value of the currency can reach tens of percent. This feature can be perceived as advantage, And How disadvantage. On the one hand, high volatility allows you to make good money, on the other hand, if the price goes in the wrong direction the trader expects, losses can be huge.

For each type of cryptocurrency, the listed advantages and disadvantages are characteristic. Before using any digital money, it is important to carefully study all the pros and cons. Also, cryptocurrencies have all the main features of traditional cash:

• calculation tool;
• universality;
• medium of exchange;
• means of accumulation.

The cost of electronic currencies is determined by the interaction of supply and demand for them.

List of popular types of cryptocurrencies

4. Types of cryptocurrencies - list + review of the TOP 6 most promising

So what cryptocurrencies are there? Below is presented list of 6 cryptocurrencieswhich turned out to be the most promising:

1. Bitcoin
2. Litecoin
3. Ethereum
4. Monero
5. Ripple;
6. Dash

A brief overview of the aforementioned cryptocurrencies is discussed below.

Cryptocurrency No. 1: Bitcoin

Bitcoin became the first cryptocurrency in the world. Since its inception, its popularity has grown so much that it is accepted for payment on many service sites, as well as in online stores. In a situation of continuous growth in the value of this currency, owning it becomes the most profitable.

Cryptocurrency No. 2: Litecoin

Litecoin was created as a peer-to-peer network. It was she who formed the basis of the new cryptocurrency. Litecoin appeared in 2011, it is one of the first forks of Bitcoin.

Among the advantages of this cryptocurrency, the following can be distinguished:

• higher emission level compared to bitcoins;
• rapid block formation - in just two and a half minutes, which is about four times less than for bitcoin;

For investors, another advantage is the lower cost of lightcoin compared to bitcoin, which allows you to enter the market with a much lower amount.

Cryptocurrency No. 3: Ethereum

The source code for Ethereum was developed by a native of Russia, Vitalik Buterin, who lived most of his life in Canada. The launch of ethereum came in 2015. Two years later, this cryptocurrency entered the top five electronic currency units with the largest volume of capitalization, that is, the funds invested in it.

Many experts call ethereum the only real alternative to bitcoin from existing ones.

Cryptocurrency No. 4: Monero

When creating the Monero cryptocurrency, emphasis was placed on security, as well as user privacy. The system was so effective that a hacker attack in 2014 was successfully repelled.

Monero emission volume is not limited. Cryptocurrency is popular in online casinos and gaming sites.

Cryptocurrency No. 5: Ripple

The Ripple project was originally conceived as a trading platform for trading electronic currencies and various goods. When the exchange needed its own currency, they named a new currency unit by the name of their project. Today, Ripple has reached the third place in the world in terms of capitalization.

Cryptocurrency No. 6: Dash

The Dash cryptocurrency was created relatively recently - in 2014. Its main difference from Bitcoin is the need for less energy for mining. It turns out that the process of issuing a Dash currency is much simpler. In addition, several cryptographic algorithms are used for this cryptocurrency, and not one.

If you carefully study the features of the main cryptocurrencies, choosing the right one for work will be much easier.

5. What can I buy for cryptocurrency in Russia and the world

Many do not take seriously money that cannot be held in their hands. Moreover, it is surprising for them that digital monetary units, like traditional ones, have purchasing power.

Cryptocurrencies today can be exchanged for almost any goods and services. In some countries of the world they are accepted for payment not only on Internet sites, but also in offline stores. Moreover, if desired, cryptocurrency can be easily exchanged for fiat money 💱.

Note! Not all experts recommend spending digital money, the value of which is constantly growing ⬆. Financiers are aware of many cases where those who spent several units of cryptocurrencies later regretted that they did not leave them at home.

In Russia, legislation regarding cryptocurrencies has not yet been properly regulated. That is why there are certain problems with the exchange of digital money for goods and services.

Experts recommend considering cryptocurrencies primarily as way of investing. Today, this direction is quite promising, because the rate of most digital currency units continues to grow steadily↗.

But do not forgetthat the most profitable are such investment methods that are associated with the highest risk. Therefore, before investing in cryptocurrencies, it is worth evaluating the ratio of profitability to riskiness for yourself. Once touched on the topic of investing, we recommend that you also read the article - "Where to invest money?".

Cryptocurrency Income Methods

6. How to make money on cryptocurrencies - 5 main options

We have already told you what cryptocurrency is. in simple wordsand now let's talk about how you can make money on it.

The popularity of cryptocurrencies has led to an increase in the number of ways to earn money on them. Today exists 5 The most popular options for profit from electronic money. Their main features are described below.

Option 1. Mining

Cryptocurrency mining or mining is the production of electronic money, which is carried out using special programs. However, on traditional home personal computers get a large amount impossible.

For mining really serious amounts, significant power is needed. Therefore, you have to buy additional equipment. First of all, you need very powerful video cards and processors.

For successful mining, you will have to create a so-called mining farm. Cryptocurrency mining is carried out on them using special equipment. You can read about bitcoin mining in one of our past publications.

Option 2. Cloud mining

For the extraction of cryptocurrency in this way, there is no need to purchase additional equipment. For mining, you can use special services. They allow you to buy and sell power.

In other words, cloud services allow you to generate cryptocurrency, provided that the power spent on this process is paid.

Option 3. Trade in cryptocurrency

You can buy and sell electronic money on specialized exchanges, as well as in cryptocurrency exchangers. To generate income, as in traditional trading, one rule must be observed: need to buy currency cheaperand sell - expensive.

Most of all, you can earn on bitcoins, because Bitcoin is the most popular cryptocurrency and costs significantly more than others. Read about the existing methods of making money on bitcoins in the article here.

Option 4. Investments

Investments are the transfer of any amount of cryptocurrency in trust to an experienced participant in the financial market. Most often, contracts with brokers are concluded for this purpose.

If you want to manage your own crypto investments on your own, we recommend that you familiarize yourself with our article “Investing in cryptocurrencies”, where we talked about the methods and stages of investing, and also brought promising cryptocurrencies for investing money.

Option 5. Distribution of digital money

You can get cryptocurrency while performing simple actions on the Internet. This can be attracting referrals, introducing captcha, as well as other ways to make digital money.

In order to generate income in this way, you will have to find special sites - gateways, cranes, distributors. You can also register in bitcoin faucets, games that allow you to earn cryptocurrency. But it should be borne in mind that this option allows you to get only a small income.

To compare the options considered and choose the appropriate one was easier, use the table below.

There are a lot of ways to make money. They differ primarily in the volume of required investments and the level of income received. We wrote about how to make money on cryptocurrency in a separate article, where in detail describes the main ways to earn "crypt".

7. How and where to store cryptocurrency

Cryptocurrency is stored in specialized wallets.

There are several main types of such storage:

1. Software wallets are installed directly on the computer. As a result, cryptocurrency is placed on the hard drive.
2. Mobile wallet is an application for a mobile device.
3. There is no need to download an online wallet, access to cryptocurrency is obtained directly in an Internet browser.
4. Hardware wallets are a special device. Such a physical medium is like a regular flash drive.

Cryptocurrency can be placed not only in wallets. If its purchase is carried out on exchange, can be used as a storage account opened on the trading floor.

8. How to choose the most profitable cryptocurrency exchange rate?

Finding an exchanger with the most profitable cryptocurrency exchange rate can take a huge amount of time. Significantly accelerate the process help specialized services. They collect information about the current value of cryptocurrencies in a large number of exchangers.

The problem with the independent analysis of courses on various sites is associated not only with the need to spend a lot of time. Already during the collection of information the course can change, and the data will be irrelevant. At the same time, specialized services allow you to learn the current courses in just a few minutes a huge number of exchangers.

💱 To receive data, it is enough to select from the proposed list the currency that the user has, as well as the one for which it is planned to exchange. The service selects a list of exchangers where such an operation can be performed. It remains only to sort them by rate, compare and choose the best.

If the opportunity to make the exchange of necessary currencies absent, double exchange will come to the rescue. For this you have to use any currency as transit.

If the user is not happy with the proposed course, he can set up an alert. In this case, when the currency value changes in the desired direction, the service will send a message. If you wish, you can analyze changes in the course over a period ranging from an hour to a year 🕛🕜🕟.

To make sure that the exchangers are in good faith, you can study the detailed information about them on the comparison service. Reflected here Term of the work, country of creation, reserves. Moreover, you can read reviews about the exchanger. On the service posted as negative ➖ so positive ➕ opinions. ‼ How the exchange of bitcoins is carried out can be found in a special article.

Many consider the best exchange comparison service Bestchange. It has been operating for more than ten years, it provides information only on reliable resources. Moreover, here you can monitor fluctuations in rates.

9. Cryptocurrency FAQ

Cryptocurrency- the concept is relatively new. Therefore, so far, many this financial instrument raises a huge number of questions. We help save time and provide answers to the most popular of them.

Question 1. Why and why is cryptocurrency needed for an ordinary person?

Many people wonder if they need cryptocurrency and how to use it. Answering it, first of all, we note that today digital money can be used for various online shopping. Moreover, gradually cryptocurrencies begin to crowd out various payment systems.

That kind of money is much easierand cheaper to translateanywhere in the world 🌎🌏. This is due to the absence of the need for intermediaries to participate in such operations. Transaction in progress directly between two counterparties.

📎 That is why the commission for conducting the operation is significantly lower than that established by financial institutions. Commissions are distributed between the miners, that is, participants in the cryptocurrency system that support its performance.

The transfer received in cryptocurrency can be easily withdrawn into fiat money - rubles, Euro, dollarsor any other. It is enough to use the services of an exchanger or exchange.

Trying to understand why cryptocurrency is needed for society, it is worth noting the following features:

• electronic money can become a world currency, displacing the American dollar in the world market;
• transfers are made worldwide without the assistance of intermediaries;
• emission is carried out decentralized, that is, without the participation of a single center, which allows anyone to earn money in this process.

Question 2. How to start using cryptocurrency?

To start using any cryptocurrency, you need to prepare for it storage. Therefore, in the first place create wallet. It is a unique digital address and acts as the user identifier in the system. We recommend reading the article - “How to create a Bitcoin wallet?”

The principle of cryptocurrency

In other words, a cryptocurrency wallet is a program that stores unique keys. Such security interacts with a chain of blocks, that is, a blockchain. As a result, the owner of the wallet gets the opportunity check balance, transfer cryptocurrency or make another transaction.

✔ When sending electronic money to a user, funds are credited to his wallet number. In this case, the transfer of real money is not carried out. The only thing that happens at the time of the transfer is the appearance on the blockchain of a record of the operation.

Question 3. What is cryptocurrency provided with?

In the process of studying cryptocurrencies, their provision becomes an important issue. Fiat money is secured foreign exchange reserves, as well as state economy. In contrast, cryptocurrencies are absolutely not provided with anything ⚠.

The value of digital money is determined solely by the demand for it. The higher it is, the greater the currency rate.

Cryptocurrency creators usually determine the maximum amount of their emission. When this level is reached, the release ceases.

Question 4. What is the name of the cryptocurrency with the largest market capitalization?

The largest market capitalization, as you might guess, has the first cryptocurrency created - bitcoin. In March 2018 topped 140 billion dollars. At the same time, the total capitalization of all cryptocurrencies is at the level of 330.3 billion. It turns out that bitcoin takes almost 43% electronic currency market.

10. Conclusion + video on the topic

Cryptocurrency is a relatively new tool in the financial market. At the same time, digital money arose not spontaneously, but in accordance with the needs of our time.

At its core, cryptocurrency has no physical embodiment. Despite this, such money is increasingly becoming part of the life of a modern person, becoming means of payment, investment. They can also be used in various transactions.

Almost everyone can earn cryptocurrency today. There are several available methods for this. Despite the fact that electronic digital money is similar in many respects to fiat money, it has a number of features. To use cryptocurrency effectively, you should carefully study them.

In conclusion, we recommend watching the video - What is cryptocurrency in simple words and how you can make money on it ":

Blockchain technology video:

And also the video - “What is Bitcoin and who invented it”:

This is where we end.

The team of the Rich Pro website wishes everyone financial prosperity! Let the amount of electronic and real money in your wallets constantly grow!

If you have any questions, comments or additions on this topic, then write them in the comments below. Also do not forget to share the article with your friends on social networks. See you soon!

Watch the video: Cryptocurrency Explained (November 2024).