What is Cryptocurrency?
A cryptocurrency, simply put, is a digital currency that parallels traditional fiat currency, the cash that we’re so accustomed to. Managed by peer-to-peer networks and transferred over the internet, you can use crypto to pay for just about anything these days, thanks to its ever-rising popularity and adoption by payment giants like PayPal, Visa, and Mastercard.
And by now you’ve probably heard of cryptocurrencies such as Bitcoin, Ethereum, and even Dogecoin that often dominate the news because of their rapidly increasing adoption by institutions and retail investors alike. But let’s cut through all the noise and fan-fare to get down to brass-tax. Why exactly are we hearing more and more about this technology? Well, since the Bitcoin whitepaper was published all the way back in 2008 (which is eons in the crypto world!), and the technology subsequently released in 2009, we’ve had our eyes opened to the possibilities of a payment system that is inflation-proof, decentralized, and which can be sent all over the world without need for 3rd party financial institutions.
TL;DR
Cryptocurrency is an exciting technology that offers users a secure way to transfer money without the need for intermediaries. This means that users can access financial services without financial institutions and at a fraction of the cost and time.
Why is it called cryptocurrency?
The name cryptocurrency is a portmanteau of cryptography and currency. This is due to the fact that crypto is made viable by its secure consensus mechanism called the blockchain, a sort of digital ledger that records transactions and is designed in such a way that it cannot be changed.
What exactly is cryptography?
Cryptography is the study of and development of methods that ensure the secure transfer of data. With cryptocurrency, all transactions are encrypted, which means that senders and recipients can remain anonymous. While senders and recipients can access their own information and transaction history, these transactions are not linked to them while their record remains public, which means that transactions can be transparent yet anonymous.
How is cryptocurrency used?
Everyone can become an investor
Often, as you’ll find more about below, cryptocurrency is used in place of traditional payments, as users hold the power and responsibility of sending and receiving it. But it goes deeper than that. With the power to send and receive in the hands of the individual, people can invest more quickly and with less unnecessary costs tacked-on. What this means is that there is a lower barrier to entry for smaller and individual investors to participate in the investment process.
And with adoption on the rise among a vast number of different shops and companies, you can use your crypto to do things like buy a car, concert tickets, or tip your favorite Twitch streamer or content creator on Twitter!
Crypto projects can now bring along anyone, from the crypto-curious individual to large and established institutions, to invest in their vision
For projects, cryptocurrency can represent shares in their company, hence why ICOs, or initial coin offerings, have been a popular vehicle for companies to go public and fundraise. Companies can more easily and cheaply fundraise from a multitude of different investors from all over the world. There is a phrase that gets thrown around when people refer to cryptocurrency: “the democratization of finance”. And for good reason! Investment opportunities are no longer only reserved for large firms or those with a high-net-worth, which makes for more fundraising opportunities and a better chance for a company to fund its growth.
What are the advantages of cryptocurrency over fiat currency?
Security
One of the advantages of using crypto is its security that is baked in its transparency, decentralization, and immutability on the blockchain. We go into what blockchain is in our What is a blockchain article, but for now you just need to know that being on the blockchain means that cryptocurrency transactions are stored on a sort of digital ledger which is designed to be immutable, or unchangeable, and it can only be appended, or added to. This helps prevent vulnerabilities to hacks and double spend.
Privacy
Because cryptocurrency uses cryptography to verify transactions, it eliminates the need to provide personal information when making a payment. One of the great use cases of crypto, its privacy gives users peace of mind that their sensitive financial information won’t be compromised and that their identity won’t be stolen.
Transferability
Another advantage of cryptocurrency over fiat is that it is much faster and cheaper to transfer. Where a wire might take 2–3 days to process and reflect in the recipient’s account, cryptocurrency takes a small fraction of that time, and at a fraction of the cost thanks to its decentralized nature. That is, without intermediaries and institutions running the show and owning the means by which one transfers money, it is we, the users, who own our own destiny!
Borderlessness
As mentioned earlier, crypto can be sent anywhere with little to no hassle. Thus, it has become the top choice for people sending remittances. Intermediaries take more time and a cut for their services, making crypto the obvious choice for cross-border payments (and honestly payments in general).
How to buy cryptocurrency
One of the easiest ways to buy cryptocurrency is via an exchange like Poloniex. We support trading of all major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), USD Coin (USDC), and Cardano (ADA), as well as other exciting companies such as TRON (TRX), Decentraland (MANA) and Solana (SOL).
With exchanges, you can take advantage of the wallet that is built into the exchange in order to store your assets. All that’s left to do to start trading is to either load in fiat (this just means a national currency like US Dollars, Euros or Japanese Yen) or send cryptocurrency from another wallet to your exchange wallet.
Feeling ready to get started? Poloniex makes it easy to sign up and start trading- https://poloniex.com/signup/. With our easy-to-use yet robust trading platform, you’ll be on your way to trading like a pro in no time!
