Cryptocurrency is one of the fastest growing buzzwords in the world today. Today’s blockchain-based cryptocurrency journey started with Satoshi Nakamoto’s Bitcoin in 2009. Although many have tried to popularize cryptocurrencies before, they have all come back to one place; faith The concept of cryptocurrency first started in 1989. But no one has been able to create a trustless cryptocurrency using cryptography. Later, Satoshi Nakamoto came up with Bitcoin, a blockchain-based cryptocurrency through Proof of Work that can be transacted without the intervention of a specific person. Means decentralized currency, no third party is required for transactions. There are countless cryptocurrencies out there today, although most of them are useless or don’t solve any problems, like Bitcoin was able to do.
What is cryptocurrency?
Cryptocurrency refers to currency created through cryptography. With the help of cryptography, digital currency transactions are managed through a decentralized network without the help of any third party through the blockchain. All the transaction information of this currency is stored in the blockchain due to which it is impossible to change the transaction information. However, it is good to know here that only cryptocurrencies which are decentralized are safe. For example, Bitcoin transaction data cannot be changed by anyone because it is a decentralized network. On the other hand, if we talk about Ethereum, which currently has the 2nd highest market capitalization position in the world, then you will be surprised to know that some transactions were rolled back through a hard fork in Ethereum in 2016. I will write about this in detail another day. If anyone is interested, please comment. This is a very interesting case. However, if we say what cryptocurrency means, then it is those currencies that can be transacted from person to person with the help of cryptography without the intervention of any third party.
What is cryptocurrency money?
Cryptocurrency means hidden currency. This can be called literal meaning. But if we consider what the Bengali meaning of cryptocurrency can be written, then Guptamudra goes with it? Of course not. You can see why not in our Cryptocurrency meaning in Bengali article. We discussed it in detail there. Anyway, so we can actually use the Bengali meaning of cryptocurrency? Cryptocurrencies, digital currencies or cryptocurrencies? Most people use these 3 meanings. From that point of view, cryptocurrency seems quite acceptable to us. However, in Bengali it is more pleasant to use cryptocurrency as it is without making any sense. Meaning, cryptocurrency means cryptocurrency. Not all foreign words make sense. From that point of view, the term cryptocurrency is very acceptable to us and we think it is what everyone should use.
How many types of cryptocurrency?
The question of how many types of cryptocurrency may seem redundant. But those who are thinking of investing in cryptocurrencies, must know what are the types of cryptocurrencies and what are the uses of any cryptocurrencies. Below we will discuss the different types of cryptocurrencies in detail. Cryptocurrencies are mainly of two types.
- Proof of Work
- Proof of Stake
Proof of Work (PoW)
When we do cryptocurrency transactions, a transaction contains a lot of information. Bitcoin is a proof of work cryptocurrency. When we send someone Bitcoin, we get a transaction ID. With this transaction ID, anyone can see with Blockchain Explorer where you sent bitcoins, how many bitcoins you sent, from which input you sent bitcoins or when you sent them. Now you can create a fake transaction by writing a fake code. Or you can use one input twice. Although possible in theory, not possible in practice. Because, all the information of our transaction is verified by miners. A miner can find new blocks by checking the transactions we make. In that case, if we create a fake transaction, it will not be accepted. If a miner wants to make a fake transaction by himself, that will not be acceptable because there are numerous nodes in the Bitcoin network that will not accept fake transactions. Anyway, the fact that the miner is verifying the information of a transaction, updating the ledger is proof of work.
Proof of Stake (PoS)
On the other hand, Proof of Stake also does the above. Means, whether our transaction is genuine or not, whether someone is trying to do fake transaction etc. Then our transaction is updated in the new block. But here proof of staking is used to find new blocks. Meaning, holding said coins in your wallet. Whoever holds more coins and whose input is older, will get new blocks here. This process is Proof of Stake.
Above we discussed the two main types of cryptocurrencies. Again if we think in terms of blockchain, there are two more types of cryptocurrencies.
No matter how many types of cryptocurrency are mentioned, the first thing that comes to mind is the name of the coin. Let’s start with Bitcoin. Generally speaking, coins that have their own blockchain are actually called coins. For example, Bitcoin has its own blockchain which is why Bitcoin is a coin. Or Ethereum has its own blockchain so we can call Ethereum a coin.
On the other hand, cryptocurrencies that do not have their own blockchain but are built on another blockchain are tokens. For example, Power Ledger is a token of Ethereum.
How does cryptocurrency work?
Cryptocurrency is a digital currency that uses encryption to conduct safe and secure transactions. It is not controlled by any central authority, rather it is managed through a decentralized network.
Cryptocurrency uses blockchain technology. Blockchain is a database that keeps a record of every transaction. Each new block is linked to the previous block, which keeps the database secure.
Cryptocurrency transactions require a cryptocurrency wallet. A cryptocurrency wallet is a digital wallet that stores crypto. When making a transaction, users send or receive crypto from their wallet.
To make cryptocurrency transactions safe and secure, encryption is used. Encryption is a process that makes data completely obfuscated, which protects it from illegal access. Cryptocurrency transactions are usually encrypted using a public-key cryptography system. In this system, everyone has a public key and a private key. The public key can be used by anyone, but the private key is known only to the owner.
To confirm cryptocurrency transactions, a contentious process is used. The debating process is a competition where computers try to solve complex mathematical problems. The computer that solves the problem first creates a new block and adds it to the blockchain. For adding to the blockchain, the computer receives a new currency unit (coin). This process is called “mining”.
Cryptocurrencies have several advantages. They allow fast and cheap transactions, and they are not dependent on central authorities like governments or banks. However, cryptocurrencies also have some disadvantages. They are still relatively new and unstable, and they are vulnerable to fraud.
Some specific examples of cryptocurrencies are Bitcoin, Ethereum, and Litecoin. These cryptocurrencies are widely used worldwide and their value has increased significantly.
The future of cryptocurrencies is still uncertain. They may become more widely accepted, or they may be a passing trend. However, cryptocurrencies represent an important evolution in financial technology, and they could shape the future of payments.
List of some popular cryptocurrencies
Currently there are different types of cryptocurrencies. There are different cryptocurrencies to perform different functions. Below we have listed some of the popular cryptocurrencies.
- Engine coin
Hope you understand the basic things you need to know about cryptocurrency. If you have any special question then you can let us know by commenting or you want to see our article on any other topic.