[Blockchain 101] What is Cryptocurrency?

New to crypto? No worries, let’s have some fun exploring current uses of the cryptocurrencies.

OliveX Team

Published in

OliveX

2 min readAug 13, 2021

Bitcoin

To fully understand the blockchain requires us to understand its origin story, and it begins with Bitcoin.

Bitcoin is a cryptocurrency because the transaction history can be seen publicly, but the contents are only known to buyers and sellers. Yet, bitcoin does not exist in a physical form. Unlike the money we are using nowadays, there are no coins or notes. All the transactions are validated by computers and blockchain is the mechanism behind.

What is blockchain? Click here.

Value of cryptocurrency

You may ask how can a digital currency possibly have value? In order to have value, it must be relatively scarce and accepted by others for payment. For instance, gold, silver, diamonds, and oil have high values as they are limited and expensive to mine.

How might that translate to a digital currency? The bitcoin creator fixed the total amount of bitcoin to 21 million. Therefore, there is a limited amount of bitcoins. Moreover, it requires a lot of electrical power and effort from miners in every blockchain transaction to acquire a new bitcoin. Miners are responsible for adding the blocks to the blockchain by using computer processing power to solve complex math puzzles. The miner who correctly solves the problem is awarded a bitcoin so they can trade it openly on global bitcoin exchange.

As a result, the value of cryptocurrency is calculated by supply and demand, which is similar to other existing currencies. The higher the demand, the higher the value.

Examples