I have taken it upon myself to educate people that are tired of hearing and seeing cryptocurrency everywhere and not knowing what it meant and would like to stop being ignorant. I'm bringing another article to your screen to take you one step closer to being a crypto guru.
Cryptocurrency (or Crypto) is a form of digital or virtual currency that runs on a technology known as blockchain and utilizes cryptography. Cryptocurrency can function as a medium of exchange, a unit of account and a store of value. A cryptocurrency is a digital decentralized medium of exchange which means that unlike fiat currencies ( such as Nigerian Naira, Ghanaian Cedi,e.t.c.), there is no central or controlling authority that manages and maintains the value of a cryptocurrency.
Differences Between Cryptocurrency and Fiat Currency.
Fiat currency is a form of money that is centralized, backed and managed by a recognized government entity, like the Nigerian Naira, while cryptocurrency is a digital asset that derives its value from its native blockchain.
The issuance and governance of fiat currency are dictated by central banks,while blockchain protocols, code and communities govern cryptocurrency.
The distribution of fiat currency requires intermediaries such as banks and financialinstitutions, while most cryptocurrency operates peer-to-peer relying on distributed and decentralized networks to enable "trustless" transactions.
Fiat currency is physical currency, while cryptocurrency is a digital currency.
Similarities Between Cryptocurrency and Fiat Currency
- While cryptocurrency and fiat currency are poles apart in many regards they share one notable similarity which is they both exist in digital forms.
- Cryptocurrency and fiat currency are both mediums of exchange
- Cryptocurrency and fiat currency are store of value.
- They are widely accepted as a legal tender.
Types Of Cryptocurrency
Cryptocurrencies generally fall into one of these two categories:
- Coins, which can include Bitcoin and Altcoin (non-Bitcoin cryptocurrencies).
- Tokens, which are programmable assets that live with the blockchain of a given platform. Let's discuss a couple of said types of cryptocurrency
Bitcoin
Bitcoin is the first and most popular type of cryptocurrency in the world. It was created in 2009 by Satoshi Nakamoto when he/she/they published the Bitcoin White Paper. When Bitcoin launched, it didn't have much(or any) competition in the realm of digital currencies. By 2011, though new types of cryptocurrency began to emerge as competitors, they still adopted the blockchain technology Bitcoin was built on to launch their own platforms and currencies.
Bitcoin was designed to be independent of any government or central bank. Instead it relies on blockchain technology. Bitcoin established the basic system of cryptography and concensus (i.e., peer-to-peer) verification that is the foundation of most forms of crypto today. Bitcoin is the original cryptocurrency and remains the leader of the space.
Ethereum
Ethereum is one of the most popular type of cryptocurrency. It is a blockchain network but Ethereum was designed as a programmable blockchain, meaning it wasn't created to support a currency. Ether(ETH), the Ethereum currency, was developed as a form of payment on the Ethereum platform.
Ether became the number two virtual currency in September 2021. ETH is generated using a proof-of-work system, but unlike Bitcoin, there's no limit to the number of ETHs that can be created. Ethereum has also been behind the boom in non-fungible tokens (NFTs)
Cardano
Cardano is also a popular type of cryptocurrency that was launched in 2017. Cardano bills itself as a third-generation blockchain platform, to cast itself as a next level player. Cardano uses the proof-of-stake (PoS) consensus, meaning that the complicated proof-of-work (PoW) calculations and high electricity usage required for mining coins like Bitcoin are not needed, thereby making its network more efficient and sustainable.
Cardano's cryptocurrency is called ADA, named after a 19th century mathematician, Ada Lovelace.
Cardano's main applications are in identity management and traceability. The first application can be used to streamline the collection of data from multiple sources and the latter can be used to audit a product's manufacturing path, and potentially prevent fraud and counterfeit goods.
Solana
Solana is another popular type of cryptocurrency, it was launched in 2017. Solana is a blockchain platform that generates cryptocurrency known as Sol. It is the fastest blockchain in the world and the fastest growing ecosystem in cryptocurrency, with thousands of project spanning DeFi, NFTs, Web3 & more. Solana is dubbed 'the Ethereum Killer'.
Solana managed to balance what Ethereum and Binance smart chain have been unable to; scalability, security & decentralisation. It's transaction speed is fifty thousand transaction per second. It uses proof of stake and proof of history consensus.
Binance Coin (BNB)
Binance is one of the world's biggest cryptocurrency exchanges, and Binance Coin is a cryptocurrency token (unlike the name implies) that was created to be used as a medium of exchange on Binance. It was initially built on the Ethereum blockchain, but now lives on Binance's own blockchain place.
BNB was created as a utility token in 2017 that allowed traders to get discounts on trading fees on Binance, but now it can also be used for payments, to book travel, for entertainment, online services and even financial services.
Adavantages Of Cryptocurrency.
- Currency exchanges can be done easily.
- Decentralized.
- Cost effective mode of transactions.
- A fast way to transfer funds.
- Secure and private.
- Protection from inflation.
Disadvantages Of Cryptocurrency.
- Can be used for illegal transactions.
- Data losses can cause financial losses.
- Decentralized but still operated by some organizations.
- Some coins are not available in fiat currencies.
- Susceptible to hacks.
- Adverse effects of mining on the environment.