What is Cryptocurrency?

According to Decryptionary.com, Cryptocurrency uses a technology known as cryptography which is a computer technology used for security, hiding information, identities among other things. So logical-semantics, it is from cryptography we have crypto, and then put with currency-cryptocurrency.

“Currency” simply means “money currently in use’’ and by this Decryptionary.com described cryptocurrency as ‘‘an electronic money created with technology controlling its creation and protecting transactions, while hiding the identities of its users”. beautiful concept!

Before one better understands what cryptocurrency is , you need to understand Blockchain Technology.

A blockchain is a disseminated database or ledger that is distributed among computer networks also referred to as nodes. This is a programmable system of transcribing information in a way that makes it difficult or highly  impossible for an individual or a software program to alter, hack or even cheat the system, In this case the information is highly unalterable and cannot be deleted, compromised or even corrupted.

It is the very core for immutable ledgers, as it keeps archival data of transactions that cannot be altered. This explains why blockchains are considered to be distributed ledger technology (DLT).

Blockchains acts as storages of data in blocks that are programmable  linked together via cryptography.

With this background, we will realize that cryptocurrency is a technology that  uses cryptography and blockchain technology as an innovation programmed to expedite easy peer to peer transactions or payments without necessarily reliant on centralized monetary institutions  like the banks or government for its issuance.   

This makes it highly securitized, effective and most transparent because of the blockchain technology; this is because the transactions are kept not in private but in a public ledger, and this ledger is verifiable and made accessible to all parties involved and everyone.

With this, dealing in cryptocurrencies do not require you work with with the bank to keep safe your money or a third party, you don’t even need to know the person you are doing the transactions with since everything is efficiently handled by the Blockchain Technology which is distributed across the entire network of computer system on the blockchain  through records of verifications done by several blocks.  

So what happens when a person sends bitcoin as payment?

When a person sends bitcoin the transaction is encrypted and made available on the blockchain. This is accessible to everyone on the  public ledger, but only the assigned owner of that bitcoin can decrypt it through a given ‘private key’ accessible or known to the owner alone.

The interesting side of it is that, cryptocurrency is more than just a digital payment innovation, but more of a technology that can be owned as a property or asset that has the potential of giving juicy financial profit as the asset grows, means that it can used as a store of value.

 What are the types of Cryptocurrencies?

Before you get into cryptocurrency you should understand the types of cryptocurrency, the technology behind them and how they work so that you will know which to invest and how to pick up potential cryptocurrencies to invest.

Cryptocurrencies in a general classification are classified into Utility tokens, Security tokens, Exchange tokens, Non-Fungible tokens and Payment tokens. However to make things easier and simpler, we shall look at them under Bitcoin, Altcoins, NFTs and Defi-Coins, because this is where most cryptos fall under. This notwithstanding, we shall briefly look at the other type of tokens.

Utility tokens are mostly digital tokens issued in order to fund a new crypto project and serves as  initial development funding or a method relied on for fundraising for crypto start-up. Examples include, Helium, popular ones include; Matic, Qtum, filecoin etc . Utility tokens serves a specific purpose, such as payment of functions on the blockchain or payment of services. for example in a DApps or in a game.   

Security tokens are mostly issued and work under regulations. This makes them securitized tokens or cryptocurrencies. They are used to securitized tokenized properties such as bonds, stocks, Real Estate properties etc. they are to show validity of ownership.

Exchange tokens are tokens native to the crypto exchange platforms, they include, FTT Coin for FTX exchange, BNB token or Binance coin, KCS on Kucoin exchange, CRO for Crypto.com etc.

Payment tokens are used for paying for goods and services inside and outside their own platforms. Almost every crypto falls in this category. Some are also used for the payment of what is known gas fees, this happens when a person executes transactions within the network.  Examples include; Litecoin, Solana, and Bitcoin cash and Ethereum.

Non-Fungible tokens  they are blockchain-based tokens encrypted on the blockchain that each represent a unique asset such as a piece of Art, digital content or media such as videos, music, memes, GIFs, Posts and tweets, sports, games etc.  They are created with same technology of how tokens are encrypted on the blockchain. They are known as NFTs.

Types of Cryptocurrency

Bitcoin               

Bitcoin was the first cryptocurrency created in 2009 by a mysterious anonymous person/persons with the pseudonym-Satoshi Nakamoto (note that this is just a pseudonym not his/their real name).  I just admire the philosophy of this guy/guys for one reason or the other he/they chose to be anonymous and that philosophy perfectly resonates with the nature of Bitcoin. I know one day he/they’ll probably show up when there’s a wider global mainstream adoption.

 It has a market capitalization of 21million and as of 2024 it has 19.9 million coins already mined and in circulation. The market capitalization of 21 million means that there will only be 21 million bitcoins in the world making it a valuable asset to own even just a coin. Already people that bought it when it was just $1 have already become millionaires if not billionaires when in November 2021 it hit a record high of a staggering 69 thousand per coin.

A teenager by name Erik Finman who is a teen millionaire struck his fortune in bitcoin when he used a $1,000 his grandmother gave him when he was 12 years and he  invested it into crypto when it was traded at just $12 per token and by age 18 the high school dropout became a millionaire. What a wise decision he made.

Bitcoin is philosophized as a viable efficient alternative to government issued fiat currency as an innovation to be used for payment and as a store of value. It was designed to be independent of any government or central banks control. It relies on blockchain technology for its issuance through the public ledger. This means it does not deal with physical notes but is digital.

Bitcoin is built on cryptography and consensus execution thus, peer-to-peer (P2P) verification  which is the foundation of most forms of cryptocurrencies.

 Altcoins

Altcoins is a short form of alternative coins which means coins other than Bitcoin. This means that they are generally  cryptocurrencies besides Bitcoin (BTC). However, some people might consider altcoins to be all cryptocurrencies besides Bitcoin and Ethereum (ETH) because most cryptocurrencies are inspired from them.

Example of Altcoins include, XRP, Polkadot, Solana, Cardano, Polkadot, Monero , Ethereum etc. Though some people will argue that Ethereum is no longer  an Altcoin, for instance study from San Francisco Open Exchange (SFOX) reveals that  “it may no longer be accurate to classify Ether as an ‘altcoin,’” because its correlation to bitcoin is significantly higher than bitcoin’s correlations to other coins.

Worth noting is that each of these Altcoins have different use cases and uniquely designed with varied technological approach. To make a decision to invest in a coin you need to do a little bit of research around them to know their use cases and technological growth potential.

Stable Coins

Just as the name implies, Stable Coins are tokens that are not subject to market price volatility as generally the nature of cryptos but remains stable no matter the market condition at any given time.  Others are pegged with the US dollar just to maintain their value. Some could be a different asset class backing them.  Example includes USD Tether which is in a 1:1 ratio with the US dollar.  Others include USD Coin, Paxos etc.

So the question is, why do crypto investors need  stable coins?? There are very useful during market price volatility and therefore used to safeguard volatility of digital assets, much helpful during prolonged bear markets.  They also aid the purchasing of crypto on platforms much easier since most crypto Exchanges or platforms accept them as mode of payment for other cryptocurrencies or trading with other cryptocurrencies.

Where can one purchase Cryptocurrencies?

Online crypto platforms are growing daily. There are several platforms to purchase cryptocurrencies, these include; Binance, Kucoin, Coinbase, FTX Exchange platform, Voyager, etc. Some of these serve as trading platforms as well, where cryptocurrencies are traded. Also not all are available in all countries, some are available in certain countries alone so you  might not be able to access them if your country do not fall within the permissible reach.

If you are in Ghana or in Africa, you can safely and conveniently purchase Cryptocurrencies  on Eccurency4u.net or on a peer to peer platform such as Paxful.com. The good news is that, you can conveniently purchase cryptocurrencies on those platforms with the local Ghanaian Cedis. Same way in most part of Africa you can equally purchase with your country’s currency; only check to see if your country is listed. You will only need to go through some basic registration and ID verification  or what is known as, Know Your Customer(KYC) to kick start.

Should I invest  cryptocurrency?

The choice is yours. Investment in cryptocurrencies is highly risky; you can easily make millions and probably become a millionaire with the right choice of investment, the same way you can easily lose everything. So before investing, do due diligence, understand the tech behind the coin and its potential before investing.

Conclusion

Bitcoin and Cryptocurrencies is now and the future and can be a good portfolio investment against the future if only one is patient enough to wait. It has a very huge potential to have institutional and global adoption and can make early investors a good bet on their investment.   One downside of it is that if you lose your private keys to the crypto, you lose everything , there’s no way you can trace or recover your crypto on the blockchain.

Good luck! Dizcova yourSelf in Crypto!!on