What is a Crypto-Currency? Bitcoin?! It’s a Global phenomenon– But what on earth is it?
If you asked someone what Bitcoin was around 5 years ago you would’ve probably been met with some blank expressions and puzzled looks! Fast-forward to today and every man and his dog has heard of it, traded it or knows someone who has made a fortune investing in it!
But Bitcoin isn’t the only Crypto-currency that has been met with huge popularity of late. LiteCoin, Ethereum, Dash and Ripple are amongst a plethora of other cryptos that have gained a mass following in recent years.
In this article we are going to talk you through what a crypto-currency is, look at some of the more popular cryptocurrencies and also look at some of the finer technical details of how a cryptocurrency operates.
What is a Crypto-Currency?
‘A Cryptocurrency is a digital assed designed to work as a medium of exchange where individual coin ownership records are stored in ledger existing in a form of computerised database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership’.
If you are looking to benefit from the volatility of cryptos, just treat them as you do any other currency pair. Don’t delve too deep into the intricacies of the crypto world. That said, there’s plenty more you need to know to give you a good trading foundation.
As opposed to traditional currencies which are based on coins or paper, Cryptos are digital. Bitcoin is the largest and most popular traded cryptocurrency – and we will look more at it later in this article. Cryptos can be exchanged into different currencies at the value of the other currency.
With a crypto being a ‘digital currency’ – you can send or transfer amounts to a friend or a business for example, without the need for a bank. The cryptocurrencies you own are usually kept in a ‘digital wallet’. But remember when you are trading them as a spread-bet or a CFD, you wont actually own the underlying, so that doesn’t apply to you.
A few more important points of note for cryptos are the fact that they aren’t backed by governments like bank deposits are, you aren’t protected like you are with debit card payments and credit card payments (payments are effectively irreversible) and cryptos are fast becoming a vehicle for scamming – so beware when opening certain crypto investment emails in your junk inbox.
Let’s take a look at a few of the larger cryptos, obviously starting with Bitcoin.
What is Bitcoin?
Bitcoin was created back in 2008 (although it didn’t start officially trading until 2009) and was founded by someone called Satoshi Nakamoto ( we’re unsure whether this is a person or a group of people) The supply limit of BTC is 21,000,000 and there is something like 19,000,000 bitcoin in circulation today.
You may have heard the term – ‘Blockchain’. The Bitcoin blockchain is a ledger where records of bitcoin transactions are held (Basically a digital accounting method)
Bitcoins are a reward for ‘mining’, which is a record keeping service though the use of computer processing power. This is done on powerful computers and programs that release the bitcoin after it has been mined. Once mined, the transaction is added to the blockchain.
Point of note – Don’t get confused by the pictures of the flashy gold Bitcoins you see pictures of online. They are just a visual representation and they don’t actually exist. Without the coding behind each bitcoin, they are worthless in any case.
A positive of using bitcoins is that you can spend them anonymously (They are popular with dark web users for a reason) and a negative would be that the theft of e-wallets its rife and if you lost your online login details, its almost impossible to gain access to your coins again.
Lets take a look at the last few years’ price action of Bitcoin:
What is Ethereum?
Ethereum came later than Bitcoin – 2015 to be precise. Much like Bitcoin, being a crypto-currency it is not controlled by governments or in the banks remit. Ethereum lets people build a variety of decentralised applications. Ethereum can also be mined. In fact they have a fair few similarities (The creator, Vitalik Buterin, was inspired by Bitcoin so it makes sense)
Ethereum also uses blockchain technology with blockchain reporting the transaction history. It differs from BTCs blockchain because it also allows people to build decentralised apps (called dapps) that also get stored within the blockchain.
When you see a price for Ethereum you are actually seeing a price for the first part of the word – Ether. Ether is the name given to the actual tokens (ethereum is the name of the digital platform as opposed to a crypto currency itself)
Lets take a look at the last few years’ price action of Ethereum:
What is Ripple?
Ripple is the final crypto-Currency we will look at and is another form a digital currency. But its not just a crypto-currency – its also a platform too. The platform was designed for quick, cheap and easy transactions to be made. Whenever you see Ripple quoted as a price, its ‘ticker’ is XRP – This is the token/coin used.
Ripple was founded back in 2004 (The original version) by someone called Ryan Fugger. Ripple is a popular crypto because of the speed of a transaction. When compared with bitcoin where a transaction can take a few minutes. Ripple transaction are much much quicker and can be completed in a matter of seconds.
Another principal of Ripple that differs from bitcoin is the fact that ripple is ‘pre-mined. We talked about how you can mine for bitcoin using powerful computers earlier in the article. No mining is necessary with Ripple and Ripple Labs control the dispersion of any new coins.
It’s also an important point to note that Ripple (as a platform) doesn’t only allow transaction in its own coin – XRP. It can also facilitate transaction in other cryptos (such as bitcoin) and other standard currencies like Euros and USD.
Lets take a look at the last few years’ price action of Ripple:
List of Top 10 Cryptos by Market Cap
- Bitcoin (BTC)
- Ethereum (ETH)
- Cardano (ADA)
- TetherUS (USDT)
- Binance Coin (BNB)
- Polkadot (DOT)
- Ripple (XRP)
- LiteCoin (LTC)
- Chainlink Token (LINK)
- FTX Token (FTT)