Cryptocurrencies are digital forms of money that use encryption to secure transactions, control the creation of new units, and verify asset transfers. They are decentralized, meaning they are not controlled by any central authority like governments or banks. The most famous cryptocurrency is Bitcoin, which was launched in 2009 and is considered the first cryptocurrency ever developed.
How Does Blockchain Technology Work?
Blockchain technology is the foundation upon which cryptocurrencies are built. Simply put, it is a distributed database that records all transactions in a secure and transparent manner. It consists of a chain of blocks, where each block contains a set of transactions and is linked to the previous blocks through a unique identifier known as a “hash.” This system ensures that any modification to the information is nearly impossible, enhancing trust and security in transactions.
Types of Cryptocurrencies
- Bitcoin (BTC):
- The first and most well-known cryptocurrency, often referred to as “digital gold.” It serves as a medium of exchange and a store of value.
- Ethereum (ETH):
- Not just a currency, but a platform for creating decentralized applications and smart contracts. It ranks second in market capitalization after Bitcoin.
- Altcoins:
- This includes various cryptocurrencies developed after Bitcoin, such as:
- Litecoin (LTC): Often referred to as “Bitcoin Light,” designed to improve transaction speeds.
- Ripple (XRP): Used to enhance financial transfers between banks.
- Cardano (ADA): A platform focused on providing sustainable and secure solutions for app development.
- Stablecoin:
- These are linked to stable assets like the dollar or euro, reducing volatility. An example is Tether (USDT).
- Tokens:
- These can represent various assets and are often used in decentralized applications. An example is UNISWAP (UNI).
