What is cryptocurrency in simple words?
Cryptocurrency in simple terms is electronic virtual or digital money. Physically this coin does not exist, there are only special electronic registries that keep records of how much cryptocurrency users have and who transfers it to where. These registers are called blockchains.
What does cryptocurrency look like?
Cryptocurrency is stored in an electronic wallet. Anyone can install such software on their computer. The address of such a wallet, depending on the type of digital coin and its technology is a set of several Latin letters and numbers. It can also be presented in the form of a QR code.
Analogy with non-cash payments
The way cryptocurrencies work, in simple terms, is similar to the way cashless payments are made in banks: when you pay with a card in a store, you don't give anyone any physical money or gold either. It's just that somewhere in the bank register your transaction is recorded, in your account the number decreases, in a second account it increases.
Difference from regular currency
Cryptocurrency differs from conventional currency in that registries are not stored centrally in banks and payment systems, but simultaneously on all computers of users who have installed special software. This means that it is possible to find out everything about when and how much cryptocurrency has been used throughout its history.
Types of cryptocurrencies
There are currently more than 1,000 different types of cryptocurrencies based on different technologies and created for different purposes. Not all of them become leaders or somehow interest investors at all, but if altcoin has an idea or is supported by some large company, it has a lot of prospects.
Benefits of cryptocurrencies
- Your cryptocurrency account cannot be blocked, unlike accounts in other payment systems and banks;
- you can use such an account anywhere you like;
- Transactions are anonymous and transparent - all transactions are visible in the public log, but user names are not disclosed;
- Your account is in no way tied to your personal data. However, this can also be a disadvantage of cryptocurrency.
Disadvantages
- the risk of losing money when exchanging cryptocurrencies, because exchange platforms are not regulated;
- The value of any cryptocurrency can change significantly in a very short period of time, sometimes a coin can depreciate completely, and nothing can prevent this, as it is not tied to any official state currency;
- Consumers who use cryptocurrency to pay for goods and services are not protected by state regulations that provide for refunds if funds are debited as a result of an unauthorized transaction;
- Stolen cryptocurrencies are virtually impossible to recover, as transactions are made anonymously;
- lost wallet codes cannot be recovered.
- periodic hacking of cryptocurrency exchanges and theft of funds without the possibility of any further effective investigation, since all cryptocurrency transactions are anonymous.
The main advantage of cryptocurrency
Cryptocurrency developers managed to come up with a scheme where the problems associated with intermediary services, such as a bank or a payment system, are completely eliminated. This is achieved by a technology where each user can directly transfer money to another user of the system without commissions and overpayments associated with third-party services.