What Is Cryptocurrency and How It Is Used
Hello everyone, Daniel is in touch.
Today I would like to start a series of posts on the topic for a new crypto beginner.
What Is Cryptocurrency and How It Is Used?
Before one can understand the benefits of cryptocurrency, one needs to have a fundamental understanding of what it is and how it differs from other centralized payment systems and networks.
Cryptocurrency is any digital or virtual currency designed to work as a medium of exchange through a computer network that is not reliant on any central authority or centralized network. To protect transactions in cryptocurrency, encryption (cryptography) is used. There is no central authority to issue or regulate cryptocurrencies. A decentralized system is used to record transactions and issue new units.
One of its purposes is to make it possible to send any payments, regardless of location, while offering lowered commissions and surcharges compared to centralized banks, which often exploit their market dominance by overcharging their customers.
Cryptocurrency payments exist exclusively digitally in an online database describing specific transactions. They do not imply transactions with physical money that is in circulation. When transferring funds in cryptocurrency, transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.
This means that in order to send cryptocurrency from one wallet to another, you need to have a digital wallet (in your browser, on your phone, or on external storage), have tokens in a certain network and tokens of the same network to pay the commission and that’s it.
You do not need to register, go somewhere, stand in line, and waste time. Imagine how much it can simplify people’s lives. At the same time, all transactions are stored on the blockchain, where you can track the entire history on an immutable public ledger.
Since I have already touched on cryptocurrency wallets, let’s look at what types of wallets exist and how they are used.
There are several types of such wallets:
1. Hardware storage
2. Desktop cryptocurrency wallets
3. Online mobile gadget storage
4. Paper
Based on the specifics of the work, cryptocurrency storages are:
1. Hot
2. Cold
Hardware cryptocurrency storages resemble USB devices and are popularly called “flash drives.” These cryptocurrency storages are recognized as the most reliable among all existing ones.
Desktop crypto wallets are the most popular among users. Ease of use, fairly rich functionality, and reliability are the main characteristics of this type of storage. Choosing a desktop method of storing cryptocurrency, a crypto investor downloads a special program to his computer media that acts as a wallet.
Mobile cryptocurrency storages work like a desktop wallet but are designed for mobile gadgets. A special application on the device allows you to manage money at your discretion, send it to a specified address, and pay in stores using a QR code.
A paper cryptocurrency wallet is just a piece of paper on which a QR code is printed with an encrypted address for storing cryptocurrency funds. QR codes must first be scanned, and then they can carry out cryptocurrency transactions.
“Cold” and “hot” cryptocurrency wallets”
Depending on the ability to connect to the network, cryptocurrency storage can be “hot” and “cold.”
“Hot” cryptocurrency wallets are those storages that have constant access to the Internet.
“Cold” wallets are not connected to the Internet. Due to the unique architecture, “cold” crypto storages are more resistant to all kinds of external hacks.
That’s all for today! See you soon in the next posts, and good luck to everyone.
About MassBit
MassBit provides fully decentralized solutions for Defi and Web3 App project development. Currently, MassBit has 4 products in the stage of development; MassBit Route, MassBit Multi-chain Indexing, MassBit Prime, and MassBit Insights. MassBit enables DeFi and Web3 App development to be faster, stable, scalable, and more cost-effective.
The powerful ‘glue’ holding together and supporting all the products is the MassBit Verification Protocol, which is based on proof of stake. The protocol incentivizes those working within the system to verify each other’s work. The verification of other nodes, gateways, or indexers gives rewards or penalties for the mistakes to each individual or entity. From that, the protocol ensures the whole network’s health.
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