What is a cryptocurrency?

what is a cryptocurrency

More than 10,000 of them on Coinranking, the one even more popular than another… Yes, we talk cryptocurrencies here; the fundament of Coinranking, the oil, the heart, the base! We’ll take you back to that base: what is a cryptocurrency?

A cryptocurrency is a digital form of exchanging value that runs on a system that isn’t regulated by a centralized authority. It’s often referred to as digital money, but that does not scratch the surface of all the use cases. There are many cryptocurrencies with various functions. Nevertheless, it started all with one… 

The mysterious beginning of Bitcoin

In 2008 the white paper ‘Bitcoin: A Peer-to-Peer Electronic Cash System‘ was sent to the world, which explained how cryptocurrencies would work, saying: “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution”.

It was the first time Satoshi Nakamoto made his/her/their appearance online. (The identity is still not revealed.) One year later, in 2009, the so-called genesis block of Bitcoin (which is the first block of a blockchain), was mined by Satoshi. 

You can’t spend the same coin twice, right?

To realize such a digital cash network, accounts, balances, and transactions are needed. A big problem that occurs in every payment network is double-spending; the network needs to prevent someone spends the same amount twice.

Usually, this is done by a financial institution that keeps track of the balances. In a decentralized network, you don‘t need this third centralized party. Instead, every peer in the network checks if a transaction is valid. If one of the peers in the network disagrees on a balance, the whole chain is ‘broken’.

Away with that middleman

So, Bitcoin is the so-called first generation of crypto. The second one is the range of alternative coins that have different types of blockchain technology, such as Ethereum and NEO.

The third generations are tokens built on an existing blockchain; altcoins. And what are they used for? Well, even though crypto is often referred to as digital money, there are many other functions for it. However, all cryptocurrencies have in common that they put you in charge, removing power from a middleman.

Cryptocurrencies let you exchange money, files, and other things of value without interference. And the list of cryptocurrencies constantly grows since more and more companies recognize the great functionalities.

Explore all cryptocurrencies and their functionalities on Coinranking.

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