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Introduction to Cryptocurrencies



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Our era is marked by the digitalization of everything, and in the last decade, even money is becoming electronic. It is almost impossible to find a person in our world who does not know what cryptos are, but few people really know about them.

In this article, we will tell newcomers what digital currencies are, how they differ from each other, and how a person can earn from them. And you can track the newest and most promising projects with the help of Chain Broker service. It will provide you with the latest and most up-to-date information that will help you become a real shark of crypto investing.

Let’s Get to The Bottom of Definitions

Cryptocurrencies are digital coins that are tamper-proof and can be stored in electronic wallets and transferred between them. However, these currencies do not have an issuing center and each crypto wallet is a bank. That is, anyone can create such a currency by having a powerful PC.

The most well-known and widely-used today is Bitcoin. The main advantage that attracts users is anonymity. But any state wants to get access (for example, by court order) to personal data to fight crime. Today, there are cases of cryptos being used to pay for drugs, terrorist acts, and contract killings, and such facts are against the spread of such payment systems. If cryptocurrencies are not used for criminal transactions, this will provide new opportunities for financial technologies and allow consumers to save money.

Every country has a central bank that regulates money circulation and the banking system. Cryptocurrencies work beyond the central bank’s ability to influence. In order to prevent it from affecting the country’s economy, it would be more rational to ban it altogether or define the rules by which it operates. The latter is very difficult and requires significant intellectual and material costs.

Cryptocurrency: Types And Their Features

What is so unique about this type of currency that so many users pay attention to it? First of all, they don’t exist in the physical world. You can’t touch them, but they are used to make calculations. Secondly, they provide a high level of security and anonymity, which is important for financial transactions. There are several types of such currencies, and we will talk about them in more detail below.

What is Bitcoin?

The first and still leading digital currency is Bitcoin. It is a global, decentralized electronic payment system that allows users to make transactions with each other without intermediaries, such as banks or other financial institutions.

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It is often seen as a digital replacement for fiat currencies and gold and remains the number one market capitalization among all cryptos.

What is Litecoin?  

The system was launched in October 2011. Its creator is a former Google employee Charlie Lee. He tried to base his currency on the correspondence of its price on the cryptocurrency exchange to the market price of silver. At the same time, Bitcoin corresponds to the market price of gold. That is why Litecoin is called “electronic silver”. The current Litecoin exchange rate is $55.45 (as of October 2022). The coin issue limit is 84 million.

Litecoin uses the script cryptographic function and more “friendly” mining parameters. Therefore, transactions in this system are performed 4 times faster compared to Bitcoin. In addition, due to changes in mining methods in this system, owners of specialized processors do not receive advantages over other users.

What is an Altcoin?

The history of the creation dates back to back in 2008. After the creation of the most popular digital currency, replacements began to appear. They became known as altcoins because many became a true alternative to BTC. Unsurprisingly, these are the ones that account for around 40% of total digital assets at the start of 2023.

Some of these currencies have goals that are different from those of Bitcoin. For example, Ethereum is the world’s first programmable blockchain platform that allows developers to create and deploy decentralized applications (DApps) and smart contracts.

What is a Token?

All digital currencies share the common goal of making transactions faster and easier. This is achieved through the use of blockchain technology, which stores all transaction information in an encrypted form.

Tokens are a separate type of crypto that does not use blockchain. Instead, they are recorded in a distributed transaction block information system (blockchain) that confirms the digital token holder’s ownership of certain civil rights objects.

Simply put, tokens are units of account with the ability to replace financial assets (such as securities, indices, commodities, gold, etc.) in the digital world. They are digital receipts from the creator of the token, obligating it to provide certain objects to the owner of the token.

Unlike Bitcoin and altcoins, tokens cannot function autonomously, so they are placed atop an established crypto network (typically Ethereum and blockchain) and managed through smart contracts.

To access tokens, it is usually necessary to use special software.

There are several types of tokens, including:

  • Capital tokens are used as securities (shares) of a company;
  • Service tokens are used by online platforms and can represent points, game currency, reputation, etc;
  • Asset-backed tokens are a kind of commitment to services or goods.
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The latter type is the most interesting. The ability of tokens to represent almost any asset has given investors access to the world of traditional financial instruments.

Why Are Such Currencies So Widespread Now?        

Cryptocurrencies are interesting because they do not belong to a specific person or regulator, and there is no single center for issuing and supervising them. Everything that happens within the system is the actions of the users themselves and the direct owners of digital money.

What Are The Prospects for Distribution?        

The analytical company Technology Strategies International predicts that virtual currencies will occupy all global markets within the next five years. Organizations involved in financial activities are advised to prepare for the upcoming changes.

The U.S. Commodity Futures Trading Commission has officially named Bitcoin a commodity, and the Spanish company Bitchain, together with the startup ChipChap, is working on creating a large network of ATMs for buying and selling cryptocurrencies.

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