Cryptocurrency Definition – 4 Things You Can Do With Cryptocurrency

In the last couple of months, a lot of people have been talking about Cryptocurrency & Cryptocurrency Definition.

I’m sure you have heard people discussing how a certain coin had a sudden spike or how cryptocurrency markets are enjoying a boom.

You might also have asked yourself if this is the right time to make money online by Trading and Investing in Cryptocurrency. Check this useful Guide about  59 Free Ways To Make Money Online

To make sure you are not left out in this everyday discussion, we have prepared a guide for you dedicated fully to cryptocurrency.

Cryptocurrency Definition

Cryptocurrency Definition:

Before we discuss what cryptocurrency is, let’s first focus on the two words that form this term- crypto+currency.

Crypto: is derived from the word cryptography, a term that was derived from the Latin word “kryptos” which translates “to hide.”

During the medieval times, crypts acted as vaults which stored valuable artifacts and were hidden underground.

Away from that brief history; cryptography involved writing in a hidden language.

In the modern age, it is the art of writing codes, which when decoded becomes meaningful statements.

This form of communication emerged during the 2nd world war to hide messages.

Currency, the second word in cryptocurrency: is monetary token. Something that has monetary value and can be used for transacting goods and services.

In the current world, currency takes the form of coins, notes, money orders, checks, and other digital currencies. Cryptocurrency raised the bar towards digital currency.

Now that you understand what crypto and currency mean when put together, you have cryptocurrency- a hidden and secure form of token that has monetary value. Bitcoins, Litecoins, Ehereum, and other similar terms you hear being mentioned all fall under the term cryptocurrencies. Currently, there are close to 1,000 cryptocurrencies.

Now that you have understood what cryptocurrency is let’s see how it came into existence.

History of Cryptocurrency:

Since the 90s, there have been multiple attempts at creating a secure digital currency. Systems such as DigiCash, Beenz, and Flooz emerged, but did not last long because of financial problems, fraud, and wrangles between companies’ bosses and their employees.

All these systems had one thing in common, they used a Trusted 3rd Party approach, meaning all the transactions were verified and facilitated by the companies that ran them. Because of failures of these companies, people lost faith in the success of a digital cash system.

However, in early 2009, Satoshi Nakamoto, an anonymous programmer(s) invented Bitcoin. Termed as a “peer-to-peer digital cash system” by Satoshi, this system was completely decentralized meaning that there were no servers or central authority involved.

The concept resembled that of peer-to-peer networks for file sharing, and this is how Bitcoin came into existence. It still works on this same principle.

The traditional mode of payment is controlled by a 3rd party- a central server, which keeps records of transactions and balances.

Also, it has the problem of double-spending, whereby you incur double expenses for the same transaction.

But in a decentralized system like Bitcoin, every participant can access all the transactions that happened within the network.

Therefore, everyone in the network can view every account’s balance.

Every transaction comprises of public keys known as wallet address, for both the sender and recipient as well as the amount involved.

The transaction is signed off by the sender using their private key. This is just basic cryptography.

After confirmation, the transaction is then broadcasted in the network.

In cryptocurrency, only the miners can confirm transactions, and they do so by solving a cryptographic puzzle.

They make transactions legit before spreading them across the network.

Once confirmed, the transaction is added to every node of the network and becomes irreversible and unforgeable. The miner receives a reward and transaction fees.

What Can You Do With Cryptocurrency:

Below, you will find 4 Awesome Uses of Cryptocurrency:

[1] You Can Use Cryptocurrency to Buy Goods:

  • Although it was hard at the start to find a merchant that accepted cryptocurrency, nowadays the situation is different, and there are many merchants that accept Bitcoin as payment for goods.
  • You can use Bitcoins to buy goods from online retailers like Newegg and Overstock as well as various local shops and restaurants.
  • You can also pay for flights, apps, vacations, computer parts, and education in some colleges using Bitcoins.
  • Other digital currencies such as Ripple, Litecoin, Ethereum, etc. are yet to be widely accepted.
  • However, soon they will be accepted as large companies such as Apple have authorized the use of over ten different cryptocurrencies as a form of payment on App Store.
  • Of course, you can exchange other cryptocurrencies for Bitcoins.
  • There are marketplaces such as OpenBazaar and Bitify that exclusively accept cryptocurrencies.

[2] Making Investment:

  • You can invest in cryptocurrencies. In fact, it is one of the most valuable investment you can currently make.
  • Many people have become millionaires thorough Bitcoin investments.
  • Being the most popular and most recognized digital currency to date, Bitcoin price exceeded $7,000 per Bitcoin in November 2017.
  • Ethereum, which is perhaps the 2nd most valued cryptocurrency is growing gradually, and its value has increased by at least 2,700% since May 2016.
  • All cryptocurrencies have had a cumulative growth rate of more than 10,000% since 2013.
  • However, I can term cryptocurrencies a high-risk investment since its market value fluctuates very first, unlike other assets.
  • Besides, lack of proper regulation exposes them to potential hacks and risk of them getting outlawed.
  • If you decide to invest in cryptocurrency, I would advise you to invest in Bitcoin because of its dominance.
  • However, its share is dramatically falling because of other options that are continually emerging.
  • Once you have invested, follow up your cryptocurrency market value to track the price, market cap, and circulation supply of other existing cryptocurrencies.
  • Depending on where you live, once you record a profit or a loss, you might need to include it in your tax report.

[3] Mining:

  • Miners provide a bookkeeping service for cryptocurrency users.
  • They confirm and record transactions in a distributed public ledger known as Blockchain, after solving complex cryptographic puzzles.
  • One interesting thing about mining is that the puzzle keeps getting complex and difficult as more people try to solve it.
  • Therefore, a cryptocurrency attracts more miners as it gets more popular, and the puzzle gets more complex to solve.
  • Many people have made fortunes through mining. In the past, people could make substantial profits from mining by using a computer.
  • These days, you have to invest in industrial-grade mining hardware.
  • For beginners, Litecoins, Feathercoins, and Dogecoins are the best cryptocurrencies you can consider because of their cost-effective nature.
  • How can you invest in mining cryptocurrency? The more computing power miners manage to garner, the more chances of them solving the cryptographic puzzles. Once they solve the puzzle, they get a reward and transaction fee.

[4] Accepting as Form of Payment:

  • If you own a business, you can begin accepting cryptocurrencies as a form of payment to attract new customers. People are still gaining interest in cryptocurrency.
  • There are currently almost 1,800 ATM in 58 countries. You can accept payments using hardware terminals, simple wallet addresses through QR codes or smartphone apps.
  • If your business is located in the US, you need to record all the sales paid through cryptocurrencies for taxation purposes.

There are many services one can use to accept payments in cryptocurrency.

For instance, CoinPayments is currently open to 75 different digital currencies, charging a fee of 0.5% for every transaction.

Other popular services include CoinGate, BitPay, and Cryptonator.

In the US, you can use Bitcoin and other recognized cryptocurrencies as they have been recognized as convertible virtual currencies.

This means that by accepting them as a form of payment is similar to accepting cash, gold, or gift cards.

Now that you know how cryptocurrencies can be used let’s discuss common cryptocurrencies in the world.

Most Common Cryptocurrencies:

Most Common Cryptocurrencies

=> Bitcoins:

  • These are the most popular cryptocurrencies thanks to them being pioneers of cryptocurrency.
  • 2017 was an incredible year for Bitcoin as its coin value crossed over to $7,500.

=> Ethereum:

  • Just like how Bitcoin is a currency token of blockchain, Ethereum is a currency token of the Ethereum Blockchain.
  • The value of this coin has steadily rose over the last two years and has been a volatile currency with its value going up to $400 at times.

=> Ripple:

  • This has been around since 2012 and is popular thanks to its ledger system which makes it attractive to some banks.
  • It has been implemented by several banks such as Santander and UBS.
  • Although the current value of this coin is quite low, don’t underestimate it as it carries a market cap of $8.5 Billion.

=> Litecoin:

  • Quite similar to Bitcoin, but more innovative and faster, Litecoincurrently has a market cap of $4.3 Billion.

=> Bitcoin Cash:

  • Supported by Bitcoin mining company, and ASICS Bitcoin mining chips manufacturer, this cryptocurrency has been in existence for less than a year, and it is already among the most popular cryptocurrencies based on market cap.

=> NEM:

  • NEM utilizes Proof of Importance which requires users to possess a certain amount of coins before getting new ones.
  • Other cryptocurrencies use a Proof of Work. It encourages users to spend and track their funds to determine how important one is to the NEM network.

=> IOTA:

  • This cryptocurrency utilizes a ledger technology called Tangle. It requires the sender to do a Proof of Work that accepts two transactions. This means there are no miners from the process.

=> NEO:

  • This smart contract network allows for all financial contracts as well as 3rd party distributed apps to be hosted on top of it.
  • It is similar to Ethereum in terms of goals but was developed in China, which give it an edge due to the improved relationship with local businesses and Chinese regulators.

=> Dash:

  • This two-tier network has miners as first tier who ensures the network is secure and transactions are recorded, while the second tire has “masternodes” that distribute transactions and enable PrivateSend and InstantSend type of transactions.
  • InstantSend is significantly faster than Bitcoin whereas PrivateSend allows you to transact anonymously.

=> Qtum:

  • This is a merger of Ethereum’s and Bitcoin technologies, and it targets business applications.
  • The network is highly reliable like that of Bitcoin, and it also allows for the use of distributed applications and smart contracts, just like Ethereum network.

=> Ethereum Classic:

  • This is the classic version of Ethereum.
  • Ethereum was built after a decentralized, independent organization, which was built on top of the original Ethereum, got hacked.

=> Monero:

  • This cryptocurrency allows private transactions capabilities and has one of the most active communities thanks to its privacy-focused and open ideals.

The Future of Cryptocurrency:

Bill Gates, the co-founder of Microsoft, philanthropist, and investor, had this to say about cryptocurrency
“Bitcoin is an exciting currency because of how cheap it can be. Bitcoin is better than standard currency since you don’t have to possess it physically in the same place, and can facilitate a large transaction. Other currencies are pretty inconvenient when it comes to this.”
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Richard Branson, the founder of Virgin Galactic, and over 400 other business said
“Well, I think Bitcoin is working. There may exist and emerge other currencies similar to it, some even better. However, in the meantime, there is a big industry around Bitcoin- people have amassed wealth through Bitcoins, while some have lost money. It is volatile, but it is this volatility that people earn from.”
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Al Gore, a former Vice President of theUnited States, had this to say
“When Bitcoin is converted from currency to cash, the interface has to be safeguarded by some regulations. I think the fact that in the Bitcoin world an algorithm replaces government function… that is pretty cool.”

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Eric Schmidt, the executive chairman of Google, said that
“Bitcoin is an extraordinary achievement in cryptography. Its ability to create something that is not duplicable in the digital world is a valuable thing… A lot of people will build businesses on top of it.”

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Peter Thiel, the co-founder of PayPal claimed that

“PayPal had goals of creating a new currency, but we failed at that. Instead, we created a new payment system. I think the Bitcoin has succeeded on that level of creating a new policy, but the payment system is somehow not well structured, it’s lacking. It is hard to use it, and that’s the biggest challenge with Bitcoin.”

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