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Crypto 101: The Basics Of Cryptocurrencies

Cryptocurrency 101: The Basics of Cryptocurrencies

Beginner Nov 8, 2022

Cryptocurrency 101: What is Cryptocurrency?

A cryptocurrency by definition is any form of currency that is digitally or virtually created via cryptography to have secure transactions. 

Cryptocurrencies are famous for having no central issuing or regulating authority—it uses a decentralized system (blockchain) to record transactions and issue new cryptocurrencies.

To put it simply, cryptocurrencies don’t rely on banks to verify transactions. It utilizes a peer-to-peer technology that enables people to send and receive payments anywhere and anytime.

Moreover, cryptocurrencies are stored in digital wallets (crypto wallets) and are recorded in a public ledger (blockchain). Each transaction is verified through encryptions, to ensure a more secure and safer procedure.

How Does It Work?

Every unit of cryptocurrency is created through mining. This involves the usage of computer power to solve complex mathematical problems and algorithms to generate cryptocurrencies. 

Again, these cryptocurrencies are virtual and digital—owning cryptocurrencies means you do not own anything tangible. Instead, what you own is a key that allows you to move these cryptocurrencies from Point A to Point B without trusting a third-party regulator. 

Types of Cryptocurrencies

The very first cryptocurrency ever created was Bitcoin (BTC) in 2009 by Satoshi Nakamoto. It still remains the best to date. After Bitcoin, thousands of cryptocurrencies succeeded it. 

There is another type of cryptocurrency, Altcoins, which are literally forks or clones of Bitcoin. Some cryptocurrencies, however, like Solana (SOL), Litecoin (LTC), Cardano (ADA), etc., are all built from scratch.

Each cryptocurrency claims to have distinct functions and specifications. While securities are in place, (thanks to smart contracts and the innate algorithms behind cryptocurrencies), like all types of investments, they still carry risks. What’s more, cryptocurrency prices also vary.

For this reason, traders should always do their own research, to understand how cryptocurrencies work, and only invest what they can afford to lose. What’s more, they have to own the safest and most secure blockchain wallet to keep their digital assets safe.

There are still a lot of things to discuss entailing cryptocurrencies. Subscribe to stay tuned to our latest articles, tackling everything about cryptocurrency guide!

Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Hippo Wallet. Nothing in this article should be interpreted as investment guidance. Hippo Wallet encourages all users to do their research before investing in cryptocurrencies.