New to Crypto? Here’s a Basic 101 for Beginners
What are cryptocurrencies?
Cryptocurrencies are a type of currency in which encryption techniques are used to regulate the generation of units and verify the transfer of funds.
There is a public ledger in which all transactions can be seen and people can track when crypto was transferred between wallets. To prevent double spending, each crypto has a history that is unique and it cannot be spent twice by the same person.
What makes them different from fiat money?
Some may say cryptocurrencies are not really money in the strict sense. A lot of digital currencies function just like typical fiat money - they can be exchanged between two parties and work as a store of value. They offer features that traditional paper money can't right now, which is why they're becoming increasingly popular.
Cryptocurrencies can be transferred from person to person without the involvement of a bank. Financial experts find this one of the most amazing aspects of crypto.
Further to that, fiat money is basically just debt. When you deposit cash in your account, the government is issuing you with a certain percentage of their outstanding debt. When governments take out loans, they usually create the majority of the money themselves. When banks loan people money, the majority of that money is created by banks lending other people money.
Cryptocurrencies don't rely on debt to create their value unlike fiat money. Most cryptocurrencies have intrinsic value as well as people's confidence in them. Unlike fiat currency systems like the US dollar which relies on debt, these virtual currencies are not controlled by any central authority.
Top cryptocurrencies to explore
There may be a lot of cryptocurrencies, but there are different methods for investing in them. All cryptocurrencies have different risks and rewards depending on how you plan to use them. The top coins in the market today include these cryptocurrencies:
1. Bitcoin
This is the first decentralized cryptocurrency, and was introduced in 2009. You can buy bitcoins at a bitcoin exchange or by mining them through a process called bitcoin mining. Bitcoins are stored in a “bitcoin wallet” which you can use to transfer money to other people, or pay for goods and services online.
The system is peer-to-peer: transactions take place between users directly, without an intermediary such as a bank or payment processor. These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain; this ledger records every bitcoin transaction ever made. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, which cannot be forged without breaking the cryptographic key that ties the signature to its owner's identity.
2. Ethereum
Ethereum is a technology that's home to digital money, global payments, and many more applications. It's also the most popular platform for decentralized blockchain applications, "smart contracts", and ICOs.
Ethereum uses proof of work to validate transactions on its ledger. It was designed to be decentralized without any trusted authorities or central servers which means that there's no single point of failure. This has made it very popular with developers who are attracted by its openness, lack of restrictions, and ease of use.
The Ethereum platform is built on smart contracts which are computer protocols intended to digitally facilitate, verify or enforce the negotiation or performance of a contract by enabling contractual agreements between parties to be translated into code. The code can represent anything from simple transactions like buying a house to complex agreements like voting rights.
3. Binance Coin
Binance Coin is the cryptocurrency issued by the Binance exchange and trades with the BNB symbol. It is used to pay for transaction fees, gas, and other services on the Ethereum blockchain. It has a total supply of 200 million coins.
The use cases of Binance Coin are numerous. One of them is that it can be used to pay for trading fees on the exchange itself. Secondly, it can be used as an investment vehicle - thanks to its fixed supply, it provides an excellent hedge against inflation and has shown strong performance in 2018 thus far.
4. Ripple
Ripple is the first global enterprise system for payments, which can process transactions around the world using any type of currency. It has a real-time, digital currency exchange called XRP that can be used to fund cross-border transactions between banks in any country. Unlike Bitcoin’s blockchain which are public and are built on decentralized technology, Ripple’s network is an open source protocol that supports tokens representing fiat currencies or commodities like gold or oil. Ripple also offers xRapid as a solution for emerging markets to dramatically lower the cost of sending money across borders.
5. Cardano
Cardano was launched in 2017 and is often referred to as a third-generation cryptocurrency. It was developed by the Cardano Foundation, IOHK, and Emurgo. The Cardano Foundation acts as the research and development arm of the project while IOHK is responsible for engineering and maintaining all of Cardano’s code.
The cryptocurrency (ADA) that fuels the network was built on a new proof-of-stake algorithm called Ouroboros.
6. Dogecoin
Dogecoin is a memecoin, which is a type of cryptocurrency based on an idea instilled in popular culture by sending dogecoins to random people online. It is decentralized, non-profit, peer-to-peer, and open source software project that was started by Jackson Palmer and Billy Markus with help from Billy Markus' girlfriend at the time, Victoria van Eyk.
Dogecoin has been adopted as the internet currency by many communities across the world with its most notable use being for tipping people who create content or provide goods or services online. Although it is not widely used, there are various dogecoin-related projects that people enjoy.
