Ten years ago, when it was still a relatively new technology, most people wouldn’t have been able to wrap their heads around the idea of cryptocurrency. But the digital revolution has since set the stage for cashless, contactless, and even decentralized trade. Cryptocurrency is no longer exclusively within the realm of the self-professed “techie” crowd. It’s recently grained traction among investors who would ordinarily trade in stocks, bonds, or real estate.
What’s the buzz about cryptocurrency, and why has it amassed a larger following in recent years? For those who are new to crypto and who are considering trading crypto coins themselves, here’s a brief explainer.
How Does Cryptocurrency Work?
Cryptocurrency is a form of digital currency that’s usually minted by a private company, although there are some currencies (like Tether or USDT) that are backed by fiat or government-issued currencies. Crypto coins are accounted for on what’s called a “blockchain,” or a highly secured digital ledger that’s available to the public. The ledger is also decentralized, free of intermediaries like banks or governments. Since the middlemen in the equation are eliminated, transactions can happen directly between traders.
The term “blockchain” in cryptocurrency takes its name from the individual “blocks,” or digital records, that are independently verified and added to a long, unalterable chain of data. Traders connect to the chain through their own computers, which are also called nodes. Once they’re linked up to the computer network, they can transact in earnest with other traders in order to buy or sell cryptocurrency.
Crypto traders can also opt to try their hand at mining, or solving complex cryptographic equations to win newly minted digital coins of their own. For mining crypto coins, one will need a mining rig that consists of mining software, hardware like a central processing unit (CPU) or graphics processing unit (GPU), and a power supply.
Each cryptocurrency coin is backed with its own technology and may require its own resources for trading. For example, someone who wants to trade in an increasingly popular privacy coin like Monero (XMR) will need an XMR wallet to store their coins.
Which Cryptocurrencies Have Made an Impact on the Market?
The crypto market is now worth trillions of dollars, and more than 13,000 individual cryptocurrencies are currently being traded around the world. Of course, there are a few coins that dominate the broad conversation on crypto. Most people know of cryptocurrency because of chart-topping coins like Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Cardano (ADA), all of which have market capitalizations above $65 billion.
But other players, like the privacy coins Monero and Zcash (ZEC), have started to make their mark as well. That’s because these coins have the potential to satisfy particular needs on the part of investors—for example, the need for extra privacy and anonymity while trading. Coins like these are set to become more than just “altcoins,” or niche coins, because they appeal to investors with different profiles.
Why Has Cryptocurrency Gained Broad Appeal?
In general, however, public interest in cryptocurrency has been on the rise. The coins themselves have become more accessible, and the technologies that back them are now easier for the public to understand. The companies behind these cryptos have accounted for how big their communities have gotten. This also means that they’ve sought to improve the speed, affordability, and security of their transactions. Those who are new to cryptocurrency likely won’t have to deal with the same growing pains as those who started trading when crypto was more obscure.
Establishments have also done their part to popularize the usage of cryptocurrency. Nowadays, luxury retailers, hotels, and art galleries accept crypto coins as payment. This option may come in especially handy for travelers to foreign countries, as there’s no longer any need to pay steep foreign exchange rates from one fiat currency to another.
What Can We Expect from Cryptocurrency in the Future?
There are several exciting possibilities that we can expect from the crypto world in the near future. Crypto allows us a glimpse of a decentralized financial future that reduces the dependency on middlemen. As a result, it will be both cheaper and faster for crypto traders to complete important financial transactions. Advocates of cryptocurrency also say that it will allow even those who are historically underbanked to trade currency without borders.
Crypto coins are also involved in applications like smart contracts, or self-executing contracts whose terms are stipulated in lines of code. Once certain conditions have been met, a smart contract can immediately initiate a transaction. That means that whoever is involved in the contract, say for example a business entity and their supplier, won’t have to spend additional time or money just to have an amount of crypto change hands.
Decentralized finance and smart contracts are only two examples of what cryptocurrency may be able to achieve soon. Who’s to say what’s next after crypto gains even more traction?
Final Words: Why You Should Learn about Cryptocurrency Today
For sure, there are a still a lot of unknowns about cryptocurrency. The speculative aspect of crypto coins also makes them a riskier investment than well-established options like stocks or real estate. These factors account for the hesitance of many when it comes to giving cryptocurrency a shot.
But given their current impact, there’s no denying that crypto technologies will have a bigger role to play in shaping our financial future. It’s a good idea to learn about them now and to think about how they could benefit you.