What is Cryptocurrency Types, Functions, and How it Works

February 04,2023

Photo : Shutterstock

 What is Cryptocurrency - Presently the pattern in spending is enhancing. Great deals of individuals begin to study spending. Financial investments are made in many ways. Beginning with gold financial investment, stock financial investment, mutual funds, to cryptocurrency.

What are cryptocurrencies? 

Although it is about for a very long time, there are still many individuals that have no idea aspects of cryptocurrencies. This article will discuss cryptocurrencies. Beginning with the understanding, kinds, functions, ways of functioning, how to transact, the drawbacks and benefits.

Meaning of Cryptocurrencies

Cryptocurrency is an electronic money. This money is used as a device to earn deals practically, or through the internet network. Inside cryptocurrencies, there are ciphers. The codes are complex and private. Its function is to maintain and protect the security of this electronic money.

Cryptocurrency originates from 2 words combined right into one. The first word is "cryptography", which means trick code. The second word is "money" which means money.

READ MORE:what is Crypto and how does it work?

Electronic money or the idea of cryptography has actually been known for a very long time. Since the moment of Globe Battle II. The nation that uses it's Germany. Germany uses the idea of cryptography for battle strategy. They'll send out trick codes. These codes are used for the soldiers. So that the opposing forces don't know the strategies they'll run.

Conventional money is centralized. On the other hand, this electronic money is decentralized. Decentralization is a federal government system that gives more power to local federal governments.

There are several various other meanings of cryptocurrency.

 The meaning seen from its qualities and its use is as complies with:


Cryptocurrency is an electronic money. This means that cryptocurrency can just be done and legitimate through a computer system. Additionally, cryptocurrencies cannot exist in physical form. This is various from the cash we hold daily.


Cryptocurrency can be used for deals. Deals are carried out of a single person to another. This deal is performed online.


Cryptocurrencies have resemblances in every nation. Therefore, this money deal can be done freely. Deals can be made in between nations. Additionally, deals will not be affected by trade prices.


Cryptocurrency makes every user have a code. The code works when production deals with cryptocurrencies. When production a deal, the user cannot see that the deal was made with. This is because no real name shows up in every electronic money deal. Aside from that, there are no rules whatsoever in this deal. Anybody can transact. As lengthy as you can use it. After that, you need to know what it will be used for.


Generally, any money deal will involve several celebrations. The party functions to moderate the process of the deal. An instance that we can see is a financial institution. However, this electronic money is various. In the deal process, there's no financial institution as intermediary. There are also nothing else celebrations associated with the deal. In this electronic money deal, everybody will be in charge of their money independently.


This associates when diving right into the globe of cryptocurrency. What that means is that the user does not need to trust anybody inside the system.

Kinds of Cryptocurrencies

The following are several kinds of cryptocurrencies that have gained a great deal of people's trust. So often traded:


Bitcoin is of the first type. Despite that, bitcoin is still incredibly popular today. Bitcoin first appeared in 2009. Increased by a party called Satoshi Nakamoto. No one knows whether Satoshi Nakamoto's name is a person's name, a team name, or a business name. Besides that, no one knows where Satoshi Nakamoto originated from.

Since November 2019, there more than 18 million bitcoins. The Bitcoin is currently traded. The total market price is about US$146 billion. To this day, 68% of cryptocurrencies are bitcoins.


Litecoin is a kind of cryptocurrency that was also present when the electronic money wased initially introduced. Litecoin arised in 2011 as a peer-to-peer or P2P electronic money. This kind generates new obstructs that will form the blockchain. The speed is a lot much faster.

Centered on that particular, Litecoin makes its users make deals quickly. Additionally, users don't need an effective computing system.


Dogecoin is a type that appeared in December 2013. Dogecoin is a by-product of Litecoin. As the name suggests, dogecoin is a cryptocurrency that has a Shiba Inu canine mascot.

This kind of cryptocurrency is known to be the friendliest, this is because the community often does contributions and charity. Additionally, this community also often brings out favorable tasks.


The kind of cryptocurrency is feathercoin. This kind is open up resource. Feathercoin was produced in April 2013 by an IT man called Peter Bushnell. He is an IT policeman located at Brasenose University, Oxford College. Feathercoin has some resemblances with Litecoin. Furthermore, feathercoin is under the MIT/X11 license.

Cryptocurrency Functions

1.Cryptocurrency to buy products and solutions

Previously, many stores have began using electronic money as a way of payment. Instances of large and widely known companies that currently use it are Overstock and Newegg.

Users of this electronic money can also use it in several resorts, dining establishments, trips, bars and applications. In truth, there are several colleges that have also done it. However, the kind of cryptocurrency that's commonly used is bitcoin.

2.Cryptocurrency for financial investment

Another function is as a financial investment vehicle. When this electronic money was at first popular amongst individuals, its price remained to increase steadily in time. So that makes many individuals all of a sudden abundant. That is because many individuals spend through cryptocurrencies.

The concept of spending with this is very little various. Basically the like financial concepts. Prices will increase, when there's a great deal of demand. If there are more and moremore and more individuals purchasing electronic money, the price will also increase.

However, recently the increase in the price of this electronic money is unimportant. The increase isn't the like in previous years. Financial investments with electronic money are classified as financial investments in the high risk category.


Among the important points in cryptocurrency is mining. Basically, the user needs to refix a challenge inside cryptocurrency. The challenge is rather complicated. The purpose of the challenge is to verify deals. Additionally, it's also used to record on the blockchain.

The challenge can be refixed through mining. If the user's computing power is obtaining larger, the chances of the user refixing it are also obtaining larger too. When you have effectively refixed the challenge, the user will receive a reward. The reward is used as a deal charge.

How Cryptocurrencies Work

The following are some of the ways relates to how cryptocurrencies can work:

1.Cryptocurrency deal tasks

Someone that is currently acquainted with cryptocurrencies, must have more knowledge to know the kinds of deals. Such as tasks coming from from the stock exchange, specifically trading conventional money with one kind of cryptocurrency, specifically bitcoin.

After that invest independently with a couple of keeps in mind. The keep in mind includes that places where users wish to earn electronic money payment center deals.

After that, crowdfunding or huge information collection. This is to avoid deal fees. Particularly if the marked project experiences a big loss. The cryptocurrency trade markets that you could find in America are, CME (Chicago Merchant Exchange), ICE (Intercontinental Exchange), and CBOE (Chicago Board Option Trade).

2.How to determine money worths

The next way of functioning associates to specifying the money. This electronic money is produced from a cryptographic system. This makes it well secured and uniquely. Users need to know, that every worth in every kind of cryptocurrency is a monetary item.

When the video game time is high enough with just a few gamers enhancing, financial resources. When the demand becomes high enough, the worth of cryptocurrencies will proceed to increase.

What this means is that cryptocurrencies are produced to vary. Additionally, it can also experience an decrease and increase. This is based upon accessibility or a trust from its users. The top position of cryptocurrencies is bitcoin. After that put together by Ethereum.

Cryptocurrency Deal Techniques

When production a deal, no party will exist. No one acts as an intermediary in the deal. Payment through this cryptocurrency is electronic. That's, the deal will occur from the sender to the recipient. This system is commonly described as peer-to-peer.

Although it appearances easy and fast, there are points that need attention. When production a deal, whatever is done must be tape-taped. Additionally, it's also necessary to monitor the network system.

In practice, there's something as a cryptocurrency miner. Cryptocurrency miner is a document of deals that occur. After that you'll obtain a compensation. The compensation is electronic money that can be used again.

Benefits of Cryptocurrencies

1.Cryptocurrencies are global

The first benefit is that it's global. All nations on the planet can use cryptocurrency. If you want to become a financial institution client, you need certain problems, but not in electronic money. To become an individual, no problems are required. This is the reason it's considered global.

2.Cryptocurrencies are done quickly

In the deal process, this electronic money is quite fast. Compared with deals within financial institutions, deals with electronic money are superior in regards to speed. Transfers in between worldwide financial institutions take quite a very long time, about one to 2 days. On the other hand, trading with bitcoins doesn't last that lengthy. It just takes in between a couple of mins to a hr to process the deal.

3.Cryptocurrencies are clear

The next benefit is its openness. Every cryptocurrency user can certainly see all deals that have been made. However, the user cannot know the identification. The user will unknown with which the deal was made. Just in regards to numbers can the user know. 4. Cryptocurrency can be controlled directly

Cryptocurrencies can also be controlled independently. This means that each user will work independently. Users of this international money will be in charge of all their particular money.

Drawbacks of Cryptocurrencies

1. The incident of a criminal offense

The user cannot find out that lags the code. Therefore, there are great deals of individuals that take benefit of cryptocurrencies. They dedicate criminal offenses there. They'll deal for points or items that are unlawful. The factor is because this electronic money is untraceable.

2.Password define

Once you forget the password, after that all the cash will be shed. This is an extremely harmful weak point. Cryptocurrency uses a password system. No one knows and handles this password. So, the user goes to great risk. The risk is through shedding all the cash if you forget the password.

3.Considered unlawful

The next disadvantage is the point of view of culture. Although it is not new any longer, this electronic money is still considered something unlawful. There are several nations that don't consent to perform deal centers using electronic money.



Post a Comment

Previous Post Next Post