Cryptocurrency is a term that you must have heard a lot in recent years.
Since 2013, cryptocurrencies have begun to receive attention from the world community. Many media have started reporting on this digital currency. However, the presence of cryptocurrencies has its pros and cons.
Then, what exactly is a cryptocurrency and why is it so popular with the public? How does it work?
Come on, look at the following Glints explanation which will thoroughly explore what cryptocurrency is!
What is Cryptocurrency?
Cryptocurrency is a digital or virtual currency that is guaranteed by cryptography, as quoted from Investopedia. With cryptography, this digital currency becomes almost impossible to counterfeit.
1. Digital: Cryptocurrency is a digital currency which means it only applies to computers. Cryptocurrency does not exist in a physical form that we can hold on to every day.
2. Peer-to-peer: Cryptocurrencies can be used for transactions from one person to another online.
3. Global: Cryptocurrency is the same in every country. Thus, transactions can be carried out freely between countries without being affected by exchange rates.
4. Encrypted: Each user has their own code to transact with cryptocurrencies. Every time a transaction is made, the user cannot see who the transaction was made by. No real names appear in any cryptocurrency transactions. Moreover, there are no rules about who can use cryptocurrencies and for what purposes.
5. Decentralized: Money transactions in general always involve parties who mediate each transaction, such as banks. But in the world of cryptocurrencies, there is no such bank or party. Everyone is responsible for their own money.
6 . Truthless: In using cryptocurrency, you don’t need to trust anyone in the system.
From the explanation above, it can be concluded that cryptocurrency is a digital currency that can be used for transactions between users without the need to go through a third party.
In addition to using it as a transaction tool, many users use cryptocurrency as an investment instrument.
This is due to the fluctuations in the value of cryptocurrencies. The more people who believe in cryptocurrency, the higher its value will be.
1. Buying goods or services
Currently, many shops have started to use cryptocurrency as a means of payment, including two well-known companies Overstock and Newegg.
You can also use cryptocurrency in many restaurants, hotels, flights, apps, and bars. In fact, quoted from Cointelegraph, some universities have also implemented cryptocurrency.
However, most of these companies are new to accepting Bitcoin.
Another function of cryptocurrencies is an investment.
At the beginning of the popular cryptocurrency, its price continued to rise sharply. No wonder many people are ‘suddenly rich’ after investing through cryptocurrencies.
The principle is more or less the same as the economic principle, namely the price will rise when there is a lot of demand.
The more people invest in cryptocurrencies, the higher the price will be. However, lately, the increase in the price of digital currencies is not as significant as a few years ago.
Investments with cryptocurrencies are also included in the high-risk category.
Mining or mining is an important thing in cryptocurrency.
Basically, users have to solve complex cryptographic puzzles to confirm transactions and record them in the blockchain.
The puzzle can be solved by way of mining. The greater the user’s computing power, the greater their chances of solving it.
If you successfully solve the puzzle, you will receive a reward as a transaction fee.
Types of Cryptocurrencies
Quoted from NerdWallet, there are more than 2,200 types of publicly traded cryptocurrencies.
As of this writing, the total cryptocurrency market cap has reached US$266,172,890,753, as stated on the Coin Market Cap website.
This shows that there are so many types of cryptocurrencies that have won the public’s trust.
Here Glints describes some of the popular types of cryptocurrencies traded.
Bitcoin is the first type of cryptocurrency that is still very popular.
This type of cryptocurrency first appeared in 2009 by a party named Satoshi Nakamoto. No one knows if it’s the name of a person, group, or company and where they came from.
As of November 2019, there were more than 18 million bitcoins traded with a total market value of around US$146 billion, as Investopedia wrote.
As of now, around 68% of cryptocurrencies are bitcoins.
Litecoin is a type of cryptocurrency that was also present at the beginning of the digital currency being launched.
This type of cryptocurrency came into existence in 2011 as a peer-to-peer (P2P) digital currency that generates new blocks (which make up the blockchain) at a faster rate.
Therefore, Litecoin allows users to make transactions faster without the need for a powerful computing system.
Dogecoin is a derivative of Litecoin which appeared in December 2013.
As the name implies, Dogecoin is a cryptocurrency that makes the Shiba Inu dog its mascot.
This type is known as the friendliest cryptocurrency because the community often makes donations, charities, and other positive activities.
Dogecoin has a much lower value than bitcoin. So, it is not surprising that users usually use this type of cryptocurrency for small transactions, donations, and tipping.
BitcoinCash was only launched in August 2017 but is currently in the top five cryptocurrencies.
This type was launched because a group of Bitcoin users did not agree with some of the applicable rules.
They then broke away and formed their own digital currency called BitcoinCash. The group also made some improvisations that they thought were better than the first cryptocurrency.
Feathercoin is a type of cryptocurrency that is open source. This type was created by Peter Bushnell, an IT officer at Brasenose College, Oxford University in April 2013.
Feathercoin is similar to Litecoin and is under the MIT/X11 license.
Strengths and weaknesses
- Universal: The whole world can use cryptocurrency. Meanwhile, not everyone is eligible to register as a customer at a bank. Therefore, cryptocurrencies are considered universal because there are no conditions to become their users.
- Fast: Transactions with cryptocurrencies are fairly fast when compared to transactions at banks. International bank transfers can generally take up to more than a day. Meanwhile, bitcoin trading only takes about a few minutes to an hour.
- Transparency: Every cryptocurrency user can see all transactions that have been made. However, of course, you will not know who the transaction was carried out by whom because it is only in the form of numbers without an identity.
- Personal control: Each user is responsible for their own money.
- The loophole for the crime: No one knows who is behind a cryptographic code. Therefore, many people take advantage of cryptocurrencies for evil. They can transact for illegal goods or things with this digital currency without being traced.
- Once you forget your password, you can lose all your money: Since cryptocurrencies use a password system without anyone setting it up, you run the risk of losing all the money in your account if you forget your password.
- Many still consider it illegal: Many countries still consider cryptocurrencies illegal and do not apply to buying and selling transactions in their country.