What Is a Cryptocurrency?
Cryptocurrency is a digital currency that allows you to transfer funds without intermediaries over the Internet. Since there is no "middle-man," crypto-transfers within the network are free, and the commissions charged as fees to network participants for making the network work are minimal.
Cryptocurrency is a digital currency that allows you to transfer funds without intermediaries over the Internet. Since there is no "middle-man," crypto-transfers within the network are free, and the commissions charged as fees to network participants for making the network work are minimal.
The first, largest and best known cryptocurrency is bitcoin (BTC).
How does cryptocurrency work?
Cryptocurrency exists in a special database called blockchain. Blockchain is a registry of all transactions, the current version of which is stored on all devices participating in the network. For this reason, the network is also called a distributed ledger. It cannot be altered or tampered with, which ensures not only the security of the network, but also the irreversibility of transactions, a characteristic of cryptocurrencies.
Cryptography - from which cryptocurrency gets its name - verifies transactions and adds information to the database. In this way, user data is protected and partially anonymous. The entry of only valid information into the database is achieved by consensus of all participants in the network. Cryptocurrency projects have different consensus algorithms - Bitcoin (BTC), for example, uses proof-of-work.
The way cryptocurrency is issued depends on the consensus mechanism. For the Proof-of-Work algorithm, the characteristic option is mining - the process of automatically issuing as a reward to network participants for adding new blocks. The value of cryptocurrencies supports the fact that the amount of issuance in most cryptoprojects is limited by the program and decreases over time.
Crypto Infrastructure
With the popularization of cryptocurrencies began the active development and formation of their market. All cryptocurrencies created after Bitcoin (BTC) are called altcoins. The largest of them is Ethereum (ETH), which is not just a cryptocurrency, but an entire digital environment for creating decentralized applications.
A large-scale digital infrastructure has formed around cryptocurrencies:
mining companies and pools;
cryptocurrency exchanges;
Sidechains and layer 2 protocols;
decentralized financial services, etc.
Thanks to this, cryptocurrencies have been integrated into the global financial system, becoming a full-fledged analogue of traditional finance.
