Cryptocurrency: Everything You Need to Know

by Celina Joyce D. Lazaro, SEPTEMBER 2021

Cryptocurrencies let you buy goods and services or trade them for profit. According to Investopedia.com, a cryptocurrency is a digital currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. To have a cryptocurrency, just like in casinos or arcades which money can be exchanged with casino coins or arcade tokens. In cryptocurrency, you’ll need to exchange real currency for the cryptocurrency to access goods or services.

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Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and records transactions. Part of the appeal of this technology is its security. Using this technology, participants can confirm transactions without a need for a central clearing authority. Potential applications can include fund transfers, settling trades, voting, and many other issues.

DIFFERENCE BETWEEN COINS AND TOKENS IN CRYPTOCURRENCIES

There are different types of cryptocurrencies and most of them fall into one of the two categories:

  • COINS – example of this is Bitcoin and altcoins (non-Bitcoin currencies)
  • TOKENS – these are programmable assets that live within the blockchain of a given platform.

Coins and tokens provide different functions in cryptocurrency. Coins are built on their blockchain, and they’re intended as a form of currency. Ether (ETH) is a cryptocurrency that is based on the Ethereum blockchain. Any blockchain-based cryptocurrency that is not bitcoin is referred to as an altcoin short for “alternative to Bitcoin”.

Tokens are also built on an existing blockchain, but they aren’t considered a currency but rather programmable assets that allow for the creation and execution of unique smart contracts. These contracts can establish ownership of assets outside of the blockchain network. Tokens can represent units of value, including real-world items like electricity, money, points, coins, digital assets, and more, these tokens can be sent and received. In-play to earn games such as Plant vs. Undead, Cryptoblades, Axie Infinity, etc., they use tokens to exchange with different cryptocurrencies that can exchange with our real currency. 

HOW DO USERS INCREASE CRYPTO VALUE?

There are also a few methods how users increase crypto currency value:

  • Buy low, sell high – using the classic investment strategy, users can increase the value of crypto by buying and holding coins. The buying increases demand and hence crypto value increases.
  • Mining – the act of mining Bitcoins or altcoins can be profitable. It also impacts the supply of cryptocurrencies.
  • Increasing utility – as more institutions invest in crypto and accept it as a form of payment, its utility increases. As a user, you can contribute to this process. This will increase the value of cryptocurrencies over the long term. 
  • Media coverage – crypto prices fluctuate according to media coverage. Users can impact this through their social media accounts.

TOP CRYPTOCURRENCIES TODAY

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Below are details about cryptocurrencies:

  • Bitcoin (BTC)

Bitcoin is the world’s largest cryptocurrency. Its valuation is increasing as more investors are endorsing this ‘digital gold’. The most vital factor behind its prized value is the maximum limit of its coins: 21 million.

  • Ethereum (ETH)

Ethereum or ether is almost always in competition with Bitcoin, Ethereum, or ether. Its share in the crypto market recently rose from 18 perc ent to 20 per cent. It is a decentralized blockchain platform that cuts out third parties.

  • Cardano (ADA)

Cardano is also a decentralized blockchain platform that uses a native cryptocurrency. It enables secure peer-to-peer transactions. There are plans to enable smart contracts on it very soon.

  • Uniswap (UNI)

This currency already allows the use of smart contracts. It facilitates automated transactions with tokens on the Ethereum blockchain.

  • Dogecoin (DOGE)

The coin has earned a high mining rate since its inception. It’s still on the speculative stage and hasn’t crossed the dollar mark. However, it has a larger circulation and unlimited capacity to mine more.

  • Binance Coin (BNB)

Like Bitcoin, it has a limit on the number of tokens that it circulates: 200 million coins. It also follows a quarterly routine of destroying or “burning” much of its currency around the year. These are major reasons for its soaring value.

  • Polkadot (DOT)

This currency provides a bridge for networks so that many applications built on Polkadot can also work on Ethereum and Bitcoin. However, it is more scalable and faster.

  • Tether (USDT)

It became one of the first cryptocurrencies pegged to the US dollar. It is a blockchain-based cryptocurrency. The coins are backed up by fiat currencies kept in banks.

HOW DOES CRYPTOCURRENCY GAIN VALUE?

Like any currency, cryptocurrencies gain their value based on the scale of community involvement. Cryptocurrency gains value if the demand for it is higher than the supply. When a cryptocurrency is useful, people want to own more of it, driving up the demand. Since people want to use it, they don’t want to sell it. This means there is more demand than supply and the value increases.

Cryptocurrency is barely a speculative investment these days. Retail and institutional investors are taking digital assets very seriously. With so much going around the digital currency, investors are treating them as useful for not only short-term profits but also for long-time investment. Considering their relative stability, these could be good choices for a long-term investment.

Source:

https://www.investopedia.com/terms/c/cryptocurrency.asp

https://www.nerdwallet.com/article/investing/cryptocurrency-7-things-to-know#1.-what-is-cryptocurrency

https://www.forbes.com/advisor/investing/top-10-cryptocurrencies/

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About the writer:

Celina Joyce D. Lazaro. Simply Celine. Graduated as a Computer Engineer in Bulacan State University and current position as Toll and Traffic Systems Associate. Bubbly but shy. Finds peace in quiet places. Also an optimist.

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