The rise of cryptocurrency has been meteoric. Tech-savvy people have, for years, been investing in the likes of Bitcoin and Ethereum. But if you're not a coding whiz, all this talk about cryptocurrency may be confusing. Cryptocurrency, often referred to as digital currency, describes any type of currency that exists only in digital form, usually in the form of blockchain. This means that cryptocurrency doesn't exist in physical form; you won't be able to hold it in your hand, feel it, or put it in your wallet. Cryptocurrency exists online only.
Cryptocurrency has gained popularity for a number of reasons. The transactions are anonymous. There's no need to give your name or any personal information when you use cryptocurrency. This reduces the possibility of identity theft. Cryptocurrency is also available for you regardless of where you live, as long as you have internet access. It's also easier to store and exchange cryptocurrency than cash or credit cards. Before we get into the different types of cryptocurrency, let's look at how it all works. Here are the five uses of cryptocurrency.
1. Bitcoin - banking the unbanked:
An estimated 2 billion people in the world don't have access to banks. They're what's known as "unbanked." But cryptocurrency can bring banking and other financial services to those without a bank account. Many cryptocurrency companies will accept cash for their coins and then store those coins in electronic accounts for the unbanked. This allows them to make purchases online and receive money from friends or family members who are banked. Cryptocurrency is also beneficial to banks because it's decentralized. That means there's no central bank or government involved. There's no risk of a bank running with cryptocurrency. A reliable company that can help your bitcoin investment portfolio or automate strategies? Look no further than Bitcoin Code!
2. Ethereum - a decentralized network for applications and smart contracts:
Ethereum is a cryptocurrency and blockchain platform that was introduced in 2014. It's a system of smart contracts run by the Ethereum Virtual Machine (EVM). These smart contracts allow for applications to be written. This means that developers can create their own apps on the Ethereum platform that are designed to work specifically with smart contracts. Ethereum doesn't have a company behind it, so the application programming interfaces (APIs) are open-source, so anyone can use them and improve the underlying system. Ethereum has also created a way to pay people in cryptocurrency for the work they put into the system. This is called "gas," and it's similar to paying someone in real currency for their work.
3. IOTA - connecting services and resources in the IoT:
IOTA is a cryptocurrency that's designed to allow machines to talk to each other. It does this through a distributed ledger called the Tangle. This allows devices to make micropayments without having to trust a third party. Currently, IoT devices are connected individually, so if you want to purchase something online, you need one of those devices on your own network with your own internet connection. IOTA doesn't require you to use an internet service provider, and there's no big central company controlling the network. Instead, it's spread across the globe in many different devices, giving it a distributed and decentralized nature. Think of IOTA as the original internet without a centralized company like Facebook in charge.
4. Asset-backed tokens - digitizing precious metals:
Tokenizing assets, such as precious metals, can help to digitize them and make them easier to trade. This could be used for things like gold trading or real estate listing. Doubling up as a store of value, you're attracting investors without having to handle the risk of storing physical assets. Imagine if you could buy gold from your digital wallet without having to deal with the hassle of storing it all in one place. You could even use it to lend gold to other people. There are several types of tokens. Some are focused on a certain type of asset, such as real estate, and others are designed to be used on the internet.
5. Tether - pegging cryptocurrencies to fiat:
One of the major issues with cryptocurrency is that the value of one cryptocurrency can fluctuate wildly when compared to another. Cryptocurrency is its own market, so it's not pegged to any real-world currency. That means you could buy a bunch of cryptocurrencies, promising the value will rise, and then find out that it's dropped dramatically by the next morning. Tether is a cryptocurrency that's pegged to fiat currencies. This is because it's backed by real fiat money. That makes it similar to a cryptocurrency but more stable than most other types of cryptocurrency.
Cryptocurrency is a new financial system that's decentralized and computer-based. It offers advantages over traditional currencies and current banking systems, such as increased security, privacy, and less volatility. There are several different types of cryptocurrency that offer different benefits. For example, you'll find that Tether cryptocurrency is used by many cryptocurrency exchanges around the world. These exchanges keep a majority of their reserves in fiat currency because it's easier to send and receive funds from fiat currency than from cryptocurrency assets.