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What is Cryptocurrency?

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It is a digital or virtual currency, known as “crypto”, that you use for buying things, paying for services, and investing money to make some profit. Digital stands for digital files as money, which are usually created the same way as cryptography. Why so? Because people wanted to create a currency that would be independent and secure, decentralized in other words. Cryptocurrencies don’t depend on banks to verify transactions. It's a peer-to-peer system (P2P) that is usually formed by groups of computers storing their data using individual security and sharing it with all the other nodes. Those nodes use and provide resources. 

There is a great number of different cryptocurrencies over there, but the most prominent and popular, according to Market Capitalization, are Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB). Other common cryptocurrencies such as Litcoin (LTC), Cardano (ADA), Tether (USDT), and more were created for different purposes and have their own pros and cons. 

As cryptocurrency is entirely digital, its owners have special tools to manage it — a digital wallet and an online exchange. 

Here are some questions, that could arise while getting acquainted with cryptocurrency, and our answers to them.  

How many cryptocurrencies are there?

Sometimes it seems as if the number of cryptocurrencies is really limitless, but it is believed that there are more than 6,500 cryptocurrencies in 2021, and the number is growing quickly. So, if you thought that there is only Bitcoin or Ethereum, you were quite far from the real situation. It is better to dispel any misperceptions to understand that huge field covered with various cryptocurrencies and get through for the sake of having a better and clearer idea for those who are simply curious or about to invest money in the crypto market. 

 

Why is it so? 

Nobody is going to argue that Bitcoin is a kind of link point for other altcoins, as it is the largest cryptocurrency by market cap, and almost all other cryptocurrency prices depend on Bitcoin’s price. But we can’t ignore the fact that there are other cryptocurrencies waiting for you to “tame” them. Let’s try to categorize those cryptos into groups:

  • Stores of value
  • Smart contracts
  • Payments
  • Privacy
  • Exchange tokens
  • Oracles
  • Meme-coins 

 

  1. Stores of value crypto were created to hold or even increase its purchasing power over time. Compared with regular currencies that are very volatile and unstable, stores of value cryptocurrency were designed to protect people from economic swings and roundabouts. In other words, it was made as a real replacement to a real currency with an attempt to overcome all its disadvantages.
    Examples: Bitcoin (BTC), Bitcoin Cash (BCH)
  2. Smart contracts crypto is an alternative to the traditional digital and financial reality famous for data breaches, hacking, and everything that is connected to insecurity. Smart contracts could be used to create fungible and non-fungible cryptocurrency tokens. They cannot be modified once they’ve been created, and it’s impossible to shut them off because they are on a massive network of computer systems around the world.
    Examples: Ethereum (ETH), Solana(SOL),  Cordano (ADA) 
  3. Payment cryptos want to replace the ordinal payment system people use nowadays using smart contracts. That type of cryptocurrency aims to erase boundaries between you and an organization or a person you want to send money to, so you don’t have to pay high extra fees for transactions and wait for your money to be sent for ages.
    Examples: Bitcoin Cash (BCH), DASH, Terra (LUNA). 
  4. Privacy cryptos are created to protect your privacy when making transactions or you using dApps. Usually, everybody on the Net can see the transactions you’ve made, but with privacy cryptos, your transactions could be concealed and privatized. 
    Examples: Secret Network (SCRT), Tornado Cash (TORN), Monero (XMR)
  5. Exchange tokens are owned and operated by the cryptocurrency exchanges they belong to. Their price depends on the popularity of exchange mostly, that’s why it’s worth checking out which one is on its pick before investing in such cryptos.
    Examples: Binance (BNB), FTX Token (FTT), OKB (OKB). 
  6. Oracle cryptos can bring real-world data to smart contract cryptocurrency blockchains. A smart contract on the blockchain can then use the data, usually to make a decision to transfer money and to whom. To make it clear, we need to realize that the opportunity of checking a weather forecast online is possible thanks to provided outside world data.  
    Examples: Chainlink (LINK), WINkLink (WIN), Band Protocol (BAND)
  7. Meme coins are funny and enjoyable to use, they are based on Internet memes, current events, and so-called hype. They often have a weird but cute design, so it could be quite nice to have them in a cryptocurrency portfolio. The matter is that their supply is too massive, which means their cost is nearly nothing.  
    Examples:​​ Dogecoin (DOGE), SHIBA INU (SHIB), MonaCoin (MONA). 

To Sum It Up

In this brief but fruitful article, we tried to bring a variety of different coins to you to choose from and know them better. Now it should be easier for you to make the right choice and realize which coin is going to bring you a fortune. Wish you a bunch of luck in your crypto endeavors!

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