What are cryptocurrencies?

Just over a decade ago, people were trying to create a new form of money that would facilitate payment and storage and bring revolution to the present world.

Until 2008 nobody succeeded it, until a scientific paper written by Satoshi Nakamoto turn up on the Internet, explaining the problem of today’s money and describing the work of a new digital decentralized currency called Bitcoin.

Ten years ago, Bitcoin was not considered as a serious threat to today’s currencies, and nobody paid too much attention to it, but today, when it is worth more than $ 3,000, it became interesting to the general public. How wouldn’t it, when its value from 2009 until today increased from $ 0 to incredible 3 thousand, and the biggest price through history was $ 20,000.

The day when bank cards were created, people were surprised by them, but they were accepted in the end,  and now Bitcoin offers an even simpler way of trading, with minimal transaction prices. But what are cryptocurrencies and how those famous Bitcoins work and is this really a revolution in the field of money, read below.

  • Content
  • What is blockchain?
  • What is Bitcoin?
  • What are cryptocurrencies?
  • What is a market cap?
  • What is Ethereum?
  • What is Bitcoin mining?
  • How to buy Bitcoin?
  • Other useful links

What is blockchain?

To begin this long text with the basics, we will briefly explain the blockchain technology on which the cryptocurrencies are based. Bitcoin was the first to popularize blockchain technology, and Bitcoin is also its first use in practice.

What makes blockchain technology special and decentralized is that it isn’t just run by one computer, as it is customary on today’s internet. That’s why the trust in Blockchain’s database is great, because no one keeps your information, and the whole system is kept for itself.

For example, Bitcoin’s blockchain stores all of its transactions, and all data is verified by a master computer that processes transactions and generates new Bitcoins. One of the most important things about blockchain technology is that its data can not be changed after being validated by a few computers, and this is precisely why blockchain can be applied in various fields and is therefore called revolutionary technology.

We could write much more about blockchain, but here we have briefly said what blockchain is and what are its biggest features, it is important to mention smart deals, but we will write more about it in Ethereum section of this article. If you want to read more about what blockchain is, you can look at it in the extensive article on this topic on our site: “What is blockchain ?”.

What is Bitcoin?

Before explaining what are cryptocurrencies, we will first speak about Bitcoin, which is the first cryptocurrency on the market. Bitcoin is the first decentralized and anonymous digital currency, along with the paying network. By using a peer-to-peer payment system, Bitcoin works without a broker, and those who handle transactions get new Bitcoins as a reward for processing the transaction.

The whole story about Bitcoin and Blockchain went off in 2008 when bitcoin.org launched a scientific paper on Bitcoin, a digital currency whose purpose was to replace the money we know today. On only 8 pages the author describes the problem of today’s banking system, its solution, and its way of functioning.

Interestingly, we do not know who is behind the scientific work and who was the main driver of Bitcoin, only that his name is Satoshi Nakamoto. But who is Satoshi Nakamoto and who stands behind that name remains an enigma today.

Bitcoin has earned most of its popularity on the dark web precisely because of its ability to be anonymous and use it for drugs, weapon and even human trafficking. Unfortunately, this is the black side of Bitcoin and generally all cryptocurrencies, but today’s paper money is used for such, and much worse things. This was precisely the turning point for Bitcoin and the main reason why today people know what Bitcoin is.

In the code, it is defined that the maximum upper bound for the creation of new Bitcoins is 21 million, and today more than 17 million Bitcoins are in circulation. Bitcoin’s value depends only on supply and demand since Bitcoin is completely decentralized cryptocurrency.

Bitcoin, as well as other currencies, is stored in wallets, and what are cryptocurrency wallets, and how are they used you can read in the article: How to store Bitcoin?

Through this section, we’ve been trying to get you closer to Bitcoin, which is the first application of blockchain and the first cryptocurrency on the market. If you want to know exactly what Bitcoin is and find out answers to many questions about Bitcoin investment, how to buy it, and so on see our article: “What Is Bitcoin?”.

What are cryptocurrencies?

After Bitcoin, many other cryptocurrencies have emerged, and each of the lesser-known ones has some purpose in some platform or mode of payment. But what are actually cryptocurrencies and why are there so many different cryptocurrencies?

Crypto wallets
Wallets for storing crypto.

The most famous and at the same time the first cryptocurrencies after Bitcoin are Ethereum and Litecoin. While Ethereum intends to create a decentralized network for creating decentralized applications (dApps), Litecoin is solely for payments. We will write about each of them in detail in the following separate chapters, and in this topic we will explain in detail what is the purpose of the crypto, which cryptocurrencies exist, and why they are needed and used in today’s technological world.

Today, there are over 1,500 cryptocurrencies available on the market, and some of them don’t serve anything at all and have no purpose, but blockchain is still at an early stage of development and it is expected that this will rise in the year when blockchain-based projects will be completed. What many consider to be a problem is that today everyone is crazy about blockchain technology, so they are implemented in projects where it is not needed.

Cryptocurrencies are not necessary as money in today’s world, because there is paper money on which banks base their business and trading, but cryptocurrencies are a necessary means of payment for computers and independent work of computers.

For example, the CryptoLogger project used to rent resources from other computers uses the Golem token as a payment currency and sends it automatically to someone whose computer has completed work.

What is a market cap?

Now that you know what are cryptocurrencies, it’s important that you know what the market cap is. Many people invested in cryptocurrencies last year at “all-time high”, without first informing about what is crypto and other important info, like “market cap”.

Today, many wonder what the market cap is and how it is determined. Market cap or market capitalization means what is the total value of the cryptocurrency, not the amount of money invested in it. In the example below, we will explain how a market cap works.

For example, imagine that a building has 4 apartments, and 2 of these 4 apartments are sold for 10 thousand euros. Then the other two apartments that have not yet been sold have a value of 10 thousand euros, and the market cap of the building is 40 thousand euros, although only 2 apartments are sold. Mathematically, the market cap is determined by the formula: the total amount of cryptocurrency times the price of one piece. For details on what the market cap (click) is, read in our separate article.

What is Ethereum?

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Ethereum is one of the first cryptocurrencies ​​after Bitcoin and the blockchain on which many other cryptocurrencies ​​are based because it permits the creation of the ERC20 token. We believe that the name Vitalik Buterin means nothing to you and that you are now wondering who Vitalik Buterin is, and why are we talking about him?

Namely, in the 21st century, he created a special blockchain Ethereum with a special Ether encoder used to propel the Ethereum network and create and execute smart deals that can be created on that network. He came to the idea when he concluded that Bitcoin needed a programming language to run applications, and shortly thereafter found a solution to the problem and created the Ethereum network.

Unlike Bitcoin, Ethereum differs by supporting blockchains in creating new tokens and creating smart deals. If you are interested in what Ethereum smart deals can do, read our article in more detail: What is Etherum?

What is Bitcoin mining?

Since Bitcoin is a decentralized currency, and there is no central point in processing and validating transactions, someone should perform and record transactions. That is why there are miners, computers that process transactions, confirm that they are real and write them down on the blockchain. For each processed transaction, miners were rewarded with Bitcoin, and you can read about bitcoin mining in Bitcoin Mining.

How to buy Bitcoin?

If you have concluded that Bitcoin is a good investment or you need it for payment and trading, Bitcoin is very easy to buy today. Because of the steep rise in popularity, there are many exchange offices today where you can easily buy Bitcoin with your card, and in just a few minutes own Bitcoin. One Bitcoin divides into a million parts, and every one-millionth part is called Satoshi, according to the creator of the Bitcoin, Satoshi Nakomotu. That’s why you can buy as much Bitcoin as you like Bitcoin, and you don’t have to buy the whole Bitcoin, but you can buy 0.1 BTC.

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