What Is Cryptocurrency in Simple Words?

 

What Is Cryptocurrency in Simple Words?

 

For the first time, a coin is removed from the issue and control of a central bank but is inspired by a technology, the blockchain, managed on a par with users who participate in this process.

 

The key points.

 

1. Blockchain technology.

2. The process of mining.

3. The other crypto. 

 

The most disruptive news in the financial sector in recent years has been the arrival of the so-called cryptocurrencies. The most famous is Bitcoin. Currencies that are also defined as digital and that have risen to the fore for their amazing performances but which still struggle to take off as real means of payment. After all, a currency is born primarily as a function of means of payment, and Bitcoin, together with other digital currencies, wants to be an alternative to traditional means of payment with a mechanism that is revolutionary in itself. 

 

For the first time, a currency is removed from the issue and control of a central bank but is inspired by technology, the blockchain, which has the characteristic of being managed on a par, between users who participate in this process. 

 Blockchain technology.

 

They are called cryptocurrencies because their security is guaranteed by an unassailable protection system, through a series of complex calculations.  The inviolability of the protocol underlying these uniforms is one of the reasons that ensured their success, about 10 years after their debut.

 

In fact, in January 2009 the first block of the Bitcoin blockchain was mined. A formula that hides a series of concepts that we will try to explain. Bitcoin and other cryptocurrencies are in fact concrete examples of blockchain technology or blockchain, which is used in many other fields. Bitcoin is essentially a numerical series concatenated in an immutable way in the form of blocks of bits within a chain (blockchain). Those who own Bitcoins keep this numerical series on an internet address that is used to make or receive payments.

 

The process of mining.

 

Mining is the process through which all this complex mechanism is carried out. The miners, or miners, are those who guarantee this IT process for the creation of coins, through the use of increasingly powerful PCs, and in return receive new mined Bitcoins. 

The miners, creating new Bitcoins, hook, through complicated calculations, new blocks to the chain that contains the register with the unchangeable transcription of all the transitions that have taken place up to that moment.  So a sort of continuous chain which, however, has a limit. Compared to traditional currencies, Bitcoin has a maximum number of coins that can be minted: 21 million while today (November 2021) we have reached about 18.8 million. This means that the process becomes more and more complex and requires more and more massive investments to coin them. The algorithm is calibrated to ensure that a block is "mined" every ten minutes.

 

The other crypto.

As of November 2021, there are over 12,000 digital uniforms on the market. In the first part of the month, total capitalization reached a record 3 trillion dollars and then dropped to around 2.5 trillion. Bitcoin remains the most important currency with around 1 trillion. The growth of all cryptocurrencies accelerated after the pandemic: it reached $ 2 trillion in April 2021 while the $ 1 trillion milestones were reached in January 2021. To have a term of comparison, just remember that in March 2020, in the midst of the pandemic crisis, the total value stood at around 150 billion.

 

The other most important cryptocurrency is Ethereum, which is worth around $ 450 billion. Then the others are at a safe distance since Binance Coin, the third most important in November 2021, capitalizes "just" 85 billion. Technically Ethereum is a system linked to the Ether currency. allows you to create smart contracts (smart contracts) considered to all intents and purposes digital money.