What Is Cryptocurrency?

What Is Cryptocurrency?
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2021.11.13

Understanding what cryptocurrency is or cryptocurrency in the digital era is not an easy thing, especially for ordinary people.

However, the presence of this digital currency is increasingly in demand as an investment instrument. This is because the value of cryptocurrencies continues to fluctuate from time to time.

For that, in order not to be out of date, you need to understand the definition, basic concepts, to the mechanism of cryptocurrency transactions. Here's the review!

What is Cryptocurrency?

Cryptocurrency is a decentralized digital currency developed using encryption technology. This means that no party is an intermediary in a transaction. Payments made using digital currency take place on a peer-to-peer basis, that is, from the sender directly to the recipient.

Nevertheless, all transactions made are still recorded in the existing system on the cryptocurrency network. The registration is carried out by cryptocurrency miners and will receive a commission in the form of digital money used.

Because it is decentralized, cryptocurrency requires computers with special and sophisticated specifications. Generally using the Blockchain platform so that digital currencies can be used for transactions.

You can understand Blockchain like a ledger containing a database, anyone can access this platform even if they don't make virtual money transactions at all.
 

Types of Cryptocurrencies

Basically, cryptocurrencies have been developed since the 1990s. However, about 10 years ago it was only popular among the world community.

Currently, there are several types of cryptocurrencies that are widely used, including:

  • Bitcoin
  • Ethereum
  • Ripple
  • Binance Smart Chain

In addition to the names of these currencies, there are still more the 2000+ cryptocurrencies currently circulating around the world.

By its creator, Satoshi Nakamoto, Bitcoin has only created up to 21 million coins according to an agreed protocol. This amount is predicted not to be mined out until the year 2140. You can transact with Bitcoin through a computer, without intermediary banks or other financial institutions.

Bitcoin miners tend to be at minimal risk because they will not suffer losses due to counterfeiting or inflation like conventional printed currencies.
 

Cryptocurrency Transaction Mechanism

After understanding what cryptocurrency is, you also need to know the mechanism or how cryptocurrency works. Interestingly, cryptocurrency transactions offer high flexibility because they can be done anytime anywhere, and from anywhere in the world.

Armed with a smartphone or PC that is connected to the internet, you can transact either send or receive a certain amount of money without going through an intermediary. Even transactions using this currency can be completed in minutes without worrying about downtime.

For example, when you are about to send money to a recipient. Both parties will be provided with information regarding the amount of the transaction. It is also equipped with a digital signature via a private key into the cryptocurrency system used.

These confirmed transactions are then stored permanently. Neither party can alter, hijack, or even falsify these records.

Because it is permanent, all transactions using digital currency cannot be canceled for any reason. For that, those of you who have just set foot in knowing what cryptocurrency is should have to be wiser before transacting.
 

How to Determine Cryptocurrency Exchange Rates

Given that cryptocurrencies are created with uniquely encrypted cryptography, it is not uncommon for their value to depend heavily on market mechanisms.

Keep in mind, the value of each type of cryptocurrency is the same as financial products in general. Where when demand is high enough while miners are few, then the value will increase. 

For example, Bitcoin, which has only provided 21 million since it was first created, has a relatively higher value than other types of cryptocurrencies.

In other words, the value of cryptocurrency is volatile which can easily increase or decrease based on availability or user trust.

Some time ago, the value of cryptocurrencies was also affected by The WannaCry attack which increased the number of transactions using cryptocurrencies.
 

Transact with Cryptocurrencies

Those of you who regularly mine cryptocurrencies can use virtual currency for several types of transactions.

Starting from buying and selling activities on the Exchange Market by exchanging their conventional currency for a number of Bitcoins, personal expenses with a record that the company you are transacting provides digital currency payment facilities, to mass fundraising or crowdfunding to minimize transaction costs if the project being funded is not funded successfully.
 

Cryptocurrencies vs The Goverment

Although quite a lot of Malaysians, Indonesians, Phillipians, Singaporeans, and a few other cryptocurrency users around the world, understand what crypto is, unfortunately, the existence of this digital currency has been strongly rejected by the central government.

Even cryptocurrencies are not legal tender in the country. 

Although transactions using cryptocurrencies are banned from the central government, the existence of this digital currency is not illegal.

The central government through their respective central banks suggests that cryptocurrencies could be stored or traded as assets but at their own risk. One evidence of this statement can be traced to Indonesia where the permission to establish Bitcoin Indonesia has now changed its name to Indodax ( Indonesia Digital Asset Exchange ).

Now that you what cryptocurrency is, are you interested to know more and being part of the new financial revolution? Click here to find out more