Cryptocurrency Explained for Laymen

The word cryptocurrency may sound complicated but that does not last long. Taking a quick look at the word will give you a new and useful view of this new system of payment. Remembering the short history of cryptocurrency will also shed some light on the subject.

To get a rapid and basic look at what cryptocurrency is, take a peek at the makeup of this word. The first half is actually what most people use to describe this new phenomenon. That is, simply use the word “crypto” and this is the place to begin understanding. The crypto portion describes a mathematical process of securing things. Just like a lock, you would place on a door or gate, math is what is used to secure cryptocurrency. The complexity of the math process is what secures the payment process. Thankfully, you do not need to know the complex math that goes into this new form of money to be able to use it.

The second half of the word is straightforward. Currency is used around the world in different forms and cryptocurrency is no different. Your own currency may be the dollar or the euro. These are currencies that you use every day. Many use the term money to describe currency, or even simpler, a medium of exchange. It is the second most basic manner to do commerce. The most basic is trading. To put it in everyday terms, the world’s first most widely accepted currency was gold and silver. Then came paper money, called fiat. After fiat came credit and debit cards. Now you have cryptocurrency which is more secure than debit and credit cards when used correctly. Whereas your wallet or purse has been used for a place to put paper bills and plastic cards now your smartphone or another device will take care of this task using a cryptocurrency.

Looking at why cryptocurrency was created can also help to understand it. The most famous cryptocurrency is widely reported to be created by Satoshi Nakamoto. He named his cryptocurrency Bitcoin. He created it as a way to have a decentralized method of payments not controlled by central banks. His idea was to use the internet to provide a ledger, similar to the banking institutions. He incorporated cryptography (complex math) to secure it. So far his idea is flourishing. With Bitcoin, you will not have the inflation problems and recurrent crashes as the fiat system has. The production of Bitcoin is limited, unlike dollars or euros which you will see printed up in the billions, causing inflation. Other cryptocurrencies such as Litecoin allow a significantly higher number of coins to be produced.

Basically, if you think of cryptocurrency as the internet of money you will have understood it correctly. You now have a medium of exchange that requires no permission to use. For you to begin using a cryptocurrency is to enjoy this freedom secured by the laws of the universe. Cryptocurrency is an idea whose time has come just like the internet was around fifty years ago.

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