Turn to the financial section of any news website, and you will probably see the latest prices of bitcoin, litecoin, ethereum, and more. You may even hear about Elon Musk’s favorite currency, Dogecoin. As you probably know, these are all different types of cryptocurrencies. But what exactly does that mean? What is cryptocurrency in layman’s terms, and why is it trending online? Moreover, how do you get in on the action? Let’s find out.
Cryptocurrency is any type of digital or online currency that secures itself with cryptography. OK, so what’s cryptography? Well, cryptography is the art of encryption. Traditionally, cryptography was a way to write secretively so only the message’s target could read it. In terms of cryptocurrency, cryptography is the technology that encrypts it.
How Do Cryptocurrencies Work?
In a nutshell, cryptocurrencies like bitcoin use a decentralized system and technology called blockchain to let users make transactions and store money. Compare this with a conventional centralized system, like the dollars, pounds, or rupees in your bank account. Such centralized currencies largely depend on the bank for rules. Theoretically, a government could suddenly start printing more money and change the value of a currency. Let’s look at some benefits of a decentralized currency:
- With a decentralized currency, the power is with the people. Central authorities that control currencies can make things instable through incompetence or corruption. Look no further than many developing countries for an example.
- Cryptocurrency is also more secure and private. In addition, cryptocurrency transactions can be much faster than sending a bank transfer to another part of the world.
How Does Blockchain work?
Most cryptocurrencies use blockchain technology to record transactions. The blocks hold the information, and the chain is made of many computers across a peer-to-peer network. A peer-to-peer network, of course, is any network where multiple computers share files or devices. It keeps blockchain reliable because numerous computers verify, preserve, and spread the data.
How Do I Get Bitcoin?
You can get cryptocurrency like bitcoin by mining it. Mining is a process where computers solve sophisticated mathematical problems related to blockchains to get bitcoin for rewards. As cryptocurrency matures, it becomes harder to mine it, and that’s why people need more computing resources today to mine bitcoin than before. Many people just buy cryptocurrency from an exchange to avoid the hassle of mining.
What Are the Dangers of Cryptocurrency?
No system is impervious to hacking, including cryptocurrency. Still, blockchain is quite secure. Unfortunately, hackers have successfully hit platforms that store and sell cryptocurrency. For example, hackers stole $600 million in cryptocurrency from Poly Network, though thankfully, they returned it.
Another danger with cryptocurrency is that hackers infect computers with malware to mine for bitcoin and the like. Cryptojacking malware will slow down your computer, Internet connection and degrade your hardware. To protect your machine from cryptojacking, keep cryptojacking protection software handy and think twice before opening potentially malicious email attachments, websites, and links. Not many people realize this, but cryptojacking is a cybercrime.
If you’re interested in trading cryptocurrency, store your digital money in an offline wallet. Also known as cold storage, a good offline wallet keeps your cryptocurrency secure because it’s not connected to a network.