Cryptocurrencies such as Bitcoin, Ethereum or Ripple exist ONLY virtually. Like the money in your bank account, virtual currencies are physically nonexistent. The difference with your money in the bank is that you can always convert your numbers in the account into cash.
This is not possible with cryptocurrencies, as they only exist digitally and are not deposited with a bank. Virtual currencies do not require a bank at all. A transaction takes place solely within the so-called blockchain. The blockchain is the only system for cryptocurrencies that allows trading and all transactions for virtual currencies. As a means of payment, cryptocurrencies have the decisive difference that they work without banks. The money in your pocket or in your account, on the other hand, is always a securitized debt that the bank must redeem against you.
Previously, with the possession of a dollar, the owner was assured, for example, that he could exchange it for gold at any time at a bank. However, the “gold standard”, which established this value, was abolished in the twenties of the last century. Today, central banks and states guarantee the preservation of value. So there is always a certain material value to money. With cryptocurrencies, this protection is completely eliminated. Here, critics also see the greatest risk.
What exactly does crypto do?
Cryptocurrency, sometimes called just crypto, is any form of currency that exists digitally or virtually and secures transactions using cryptography. There is no central issuing or regulatory authority for cryptocurrencies. Rather, they use a decentralized system for recording transactions and issuing new units.
What are cryptocurrencies?
A cryptocurrency is a digital payment system that does not rely on banks for verification of transactions. It is a so-called peer-to-peer system in which any user can make and receive payments anywhere. Instead of physical money that is exchanged in the real world, cryptocurrencies exist only as digital entries in online databases that describe the individual transactions. When you transfer cryptocurrencies, the transactions are recorded in a public register. Cryptocurrencies are stored in digital wallets, the so-called wallets.
Cryptocurrencies owe their name to the fact that encryption is used to verify transactions. This means that complex coding is used in the storage and transfer of cryptocurrency data between e-wallets and the public register. The aim of this encryption is to increase security.
The first cryptocurrency, Bitcoin, was launched in 2009 and is also the most famous to this day. The main purpose of cryptocurrencies is to trade them in order to make a profit, with speculators sometimes driving up prices.
Is crypto a real money?
What is crypto in simple words?
Is crypto a good investment?