Cryptocurrencies have roared into the mainstream over the last couple of years, transforming themselves from a niche technological marvel into a usable technology that could reshape the entire global economy.
Given the high complexity of the blockchain technology that underpins crypto, the incredible amount of noise surrounding the digital economy, and the sheer number of cryptocurrencies there are in existence, trying to grasp the fundamentals of crypto is not the work of a moment.
Indeed, the mind-boggling speed at which new projects spring up, older projects die out, and the digital economy evolves makes it difficult to flatten the learning curve. The good news is that it is the same for everyone – even early crypto adopters – so all you can do is grasp the fundamentals.
Apart from giving you interesting knowledge to impress your friends, having a basic understanding of cryptocurrencies helps you unlock a whole new realm that may one day form the bedrock of society itself.
The digital economy is evolving at breakneck speed, with cryptocurrencies, NFTs, and the metaverse emerging seemingly overnight. They might be novelties today, but there can be no denying their status as the future of the internet.
Here is a beginners guide to cryptocurrencies:
What is a cryptocurrency?
A cryptocurrency is a digital currency that does not need to rely on a central or third party to operate.
Unlike conventional currencies, there is no government or bank available to actively meddle with the money in circulation, create potentially disastrous financial behavior like hyperinflation, or undermine the currency in any way.
Instead, cryptocurrencies are built as tokens in a decentralized digital network, able to be exchanged for specific services on a crypto network (such as to build a project) or to be exchanged for other cryptocurrencies (or fiat currencies, for that matter).
What’s more, it is instantly clear who owns what and for how long. This is because cryptocurrencies are built on top of blockchain networks. These are distributed ledgers that store every transaction inside blocks of data. These blocks are strung together in a chain, making it abundantly clear when each transaction happened.
The fortunes of cryptocurrencies are mixed, to say the least. With over 9,000 in circulation as of 2022, some have become widely adopted currencies (Bitcoin outstrips the adoption of most world currencies), and others have floundered.
If you want to keep track of the current cryptocurrency prices, why not use an online price chart – such as an Ethereum price chart.
Why are they so popular?
Cryptocurrencies are popular for two primary reasons.
The first is that they are decentralized, essentially cutting out the need for a global banking system. Many crypto adopters believe that the current financial system has been undermined by the need for a third-party (such as a government or bank) to act as an intermediary.
Instead, a cryptocurrency acts independently of national borders and traditional finance. This means there are smaller fees when transferring crypto, no need to keep your money in banks (which then lend it out to others), and with a far smaller risk of currency devaluation due to inflation.
What’s more, the lack of government intervention or banking fingerprints gives cryptocurrency many of the qualities that cash used to have. It is relatively anonymous and instantaneous, and the value of the currency is useful to both parties.
Secondly, the incredible price gains over recent years have made certain cryptocurrencies lucrative investments for many retail investors.