An Introduction to Cryptocurrency: The Future of Digital Transactions
Introduction to Cryptocurrency for Newbies
Cryptocurrency or crypto is a digital or virtual currency designed as a medium of exchange. Cryptocurrency uses a cryptographic system to secure and verify each transaction, as well as to control the creation of new units (tokens) of a particular cryptocurrency.
According to BitDegree, the definition of cryptocurrency can be explained from its characteristics and uses, including the following:
Digital
Cryptocurrency is only valid on computers and is digital, meaning it has no physical form and cannot be held like the Rupiah currency.
Peer-to-peer
Crypto can be used for transactions from one person to another online, and this makes transactions safer and can be controlled by the user, of course by doing research first so as not to get caught in fraud in the name of crypto.
Global
Can be done between countries quickly and is not affected by exchange rates
Encrypted
Each user has their own code or address for transacting with crypto, the address given contains a combination of numbers or letters. With this address, users cannot know the real identity of the sender and this ensures privacy.
Decentralized
Cryptocurrencies work on a network called blockchain which has no central authority like a bank or government, every transaction is transparent and everyone is responsible for their own assets.
Trustless
In using cryptocurrency, users do not need to trust anyone in the system. Therefore users need to be more careful and take care of their own assets, because if lost it is almost impossible to return them.
From this it can be concluded that crypto assets are digital currencies that have no physical form, have no intermediaries, and work on a decentralized network called blockchain.
History Cryptocurrency
There were many attempts to create digital currencies during the tech boom of the 90s, with systems such as Flooz, Beenz and DigiCash appearing on the market but inevitably failing.
There are many different reasons for their failure, such as fraud, financial problems, and even ‘friction’ between company employees and their bosses.
Notably, all of these systems use ‘Trusted Third Parties’, meaning that the companies behind them verify and facilitate transactions. Due to the failure of these companies, the creation of a digital money system took a long time.
Then, in early 2009, an anonymous programmer or group of programmers under the alias Satoshi Nakamoto introduced Bitcoin. Satoshi described it as a ‘peer-to-peer electronic cash system’.
Bitcoin is decentralized, meaning there are no servers involved and no central controlling authority. The concept is very similar to peer-to-peer networks for file sharing.
Cryptocurrency has emerged to penetrate conventional financial rules and is currently continuing to grow rapidly and is increasingly in demand by the world community.
This is also proven by many institutional companies starting to adopt Bitcoin and world central banks which are also working on Create on their own digital money
Evolution Cryptocurrency
Type Cryptocurrency
Although the cryptocurrency space started with just Bitcoin, the industry has grown to include countless other assets, projects, companies, and concepts. Several categories emerged over time.
Bitcoin started out as more than a currency, noted in its original white paper. However, the asset has taken on more of a store of value role.
Similar to the public's view of gold. Assets other than Bitcoin are commonly referred to as altcoins, for example, Ethereum, Ripple (XRP), Chainlink (LINK), Cardano (ADA) and so on.
Other crypto assets are also positioning themselves more as transactional assets, capable of fast payments and transfers based on blockchain technology.
Utility tokens exist as another faction within the crypto space. Utility tokens each play a role within a larger project, serving a function within an ecosystem dedicated to a specific solution.
Stablecoins peg their value to various national currencies or assets, such as gold. Most often pegged one to one to the US dollar.
Stablecoins give users a way to sell assets that have the same value as national currencies, but assets that can still be transacted and stored in a crypto-esque manner within the ecosystem.
Non-fungible tokens, or NFTs, are another type of cryptocurrency. NFTs are usually each unique in value and likeness, while other crypto assets can usually be exchanged for each other of the same type.
Before interacting with a particular asset, it may be important to research the asset type and function, depending on your goals. Not all digital assets are created for investment purposes. Today, there are more than 5,000 cryptocurrencies in circulation with their respective innovations and blockchain networks.
How Cryptocurrencies Work
When someone sends cryptocurrency to another person, the transaction is broadcast to a network of computers, called Nodes , which verifies the transaction.
Next miners or miners are responsible for verifying transactions and adding them to the blockchain, while nodes store a copy of the entire blockchain and relay transactions.
The miners use the power of their computers to process transactions by reaching a mutual agreement with "proof of work" which is in the form of breaking cryptographic encryption.
If it is agreed, the transaction is verified and added to the blockchain. This process is called miners or mining. miners who carry out verification will receive rewards in the form of crypto assets.
Once a transaction is verified it is recorded on a public ledger called blockchain. Blockchain is a chain of blocks that contains information about all previous transactions.
In conclusion, how cryptocurrency works is the result of an agreement between miners who play a role in the transaction process by involving powerful computer power to solve cryptographic problems.
How to Get Cryptocurrency
Crypto can be obtained by mining or can be purchased directly through exchange and stored in a digital wallet. When you own these assets, you do not own the physical object, but instead have a “key” that allows you to transfer cryptocurrency from one person to another without an intermediary.
Advantages and Disadvantages of Crypto
Cryptocurrencies have advantages and disadvantages, including the following.
Advantage
Universal
Almost all countries are familiar with cryptocurrency, apart from that cryptocurrency can be transferred between countries without any significant obstacles and does not require a third party, all parties can use cryptocurrency.
Fast Transactions
If you want to send crypto abroad, it doesn't take long, it only takes a few minutes or hours. This is certainly different from fiat currency transactions between countries which often take days with a complicated process.
Transparent
All transactions can be detected on the blockchain, all transactions are presented with random letters and numbers, but you cannot know the identity behind the address, you can only find out how many assets were transacted.
Full Control
If you use a decentralized exchange like Uniswap, then you control your assets completely and there are no third parties.
Deficiencies
Crime-prone
There are still many individuals who use crypto for crime, because it cannot be traced. Apart from that, many hackers are able to break into the security of the wallet or exchange where you buy crypto, so checking the security of the wallet and exchange is an important factor before using it.
Illegal
There are still many who consider crypto to be illegal, not all of them accept crypto kindly. However, in Indonesia you don't need to worry, because in Indonesia crypto assets such as Bitcoin, Ethereum, Ripple, Cardano, and so on are legal for trading on futures commodity exchanges and have clear rules. However, you need to remember that in Indonesia the only legal currency is the Rupiah.
If Lost, Impossible to Return
Crypto teaches its users to be responsible and thorough. Because when you lose crypto assets it is almost impossible to return them.
In accessing crypto, users need a password. For users who forget, losing the password could risk making crypto assets inaccessible or lost, therefore it is necessary to record and store the password in a safe place.
That's the article about what cryptocurrency is and some things you need to know about crypto. In order to invest in crypto.
The industry cryptocurrency has been one of the fastest growing markets that most of us have seen in our lifetime, especially since the industry started with Bitcoin debuted in 2009. The total market capitalization of the cryptocurrency market in 2013 was approximately US$1.6 billion. In January 2023 the total crypto market was worth US$1 trillion.
