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What Are Cryptocurrencies

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what are cryptocurrencies

You are an investor and must be aware of what cryptocurrencies are. Otherwise, in case you do not, we can explain this topic to you.
 
Cryptocurrencies are digital or virtual currencies secured by strong digital protocol. And they are proper to buy goods or pay for services.
 
One of the main uses of Cryptography is to verify and guarantee online transactions. Cryptocurrencies are not backed up by any government or any other institution.
 
They use a blockchain, which is a decentralized among many computers. Those are responsible for managing and recording transactions.
 
Blockchains are a series of computing nodes that run the cryptocurrency software. They can contain parts or the complete history of the transaction occurring in the web. As a consequence, they stablish checkpoints to ensure that the transaction is valid. This process is assured by the proper validation parameters.
 

what are cryptocurrencies and how do they work

what are cryptocurrencies

To know what cryptocurrencies are, you need also to know how they work.
 
They exist only , and use a peer-to-peer system, so there is no central bank or government to manage or help if anything goes out of the ordinary.
 
So, there are some risks on cryptocurrencies. Since there are no banks or governmental authority to protect you, in case of a hoax, you may never recover the money.
 
Bitcoin network operates by an underlying technology, called blockchains, which is a collection of computers or nodes that run the software and contain a partial or complete history of the transactions that are currently occurring on Bitcoin network.
 
Each full node or a node containing the entire history of transactions on Bitcoin, is responsible for the approval or rejection of a transaction in its network.
 
The node conducts several types of checks to ensure that it is a valid transaction, by ensuring that it contains the right validation parameters and that it does not overcome the imposed length.

Most popular cryptocurrencies

Besides knowing what cryptocurrencies are, you must also check out on popular cryptocurrencies. Some of those are:

Bitcoin

what are cryptocurrencies

So, what are cryptocurrencies? There are distinct kinds of cryptocurrencies created in diverse ways. The creation of Bitcoin is through a mining process. This uses powerful computers to solve complex algorithms and crunch numbers.
 
It is a decentralized currency that uses a peer-to-peer technology. A network of miners enables functions such as:
  • Currency issuance;
  • Transaction processing;
  • Transaction verification,
People using their computers to take part in the network is a process called bitcoin mining. This process is a transaction processor and validator.
 

Ripple

what are cryptocurrencies

As mentioned before, cryptocurrencies aims purchasing goods and services. Yet, Ripple is a remittance system created for payment networks and banks. And works also as a currency exchange and payment settling.
 
It is a system of direct transfer of assets that is presented as a more secure, transparent, and cheaper alternative for transfer systems used by banks, like SWIFT codes.
 
While Bitcoin is based on a blockchain technology, Ripple makes use of distributed consensus ledger that uses a network of validating servers and crypto tokens named XRP or Ripple.

Litecoin

what are cryptocurrencies

Created in October 2011, Litecoin is based upon Bitcoin’s open-source code, but with several modification like a faster block generation rate, and the use of a Scrypt to a prove of the work scheme.
 
Those Scrypts are a password-based key derivation function designed to make large-scale, custom-built hardware attacks more difficult in the currency.
 
Bitcoin’s algorithm does not demand a lot of RAM as an impediment to parallel processing like Scrypt does. Litecoin was, in fact, developed with the objective to improve on Bitcoin shortages.
 

Ethereum

what are cryptocurrencies

Unlike Bitcoin, Ether was not created to be a digital currency, but an asset to reward developers using the Ethereum platform. It is a  software platform blockchain-based, which is used for sending and returning value on a global level, through its native cryptocurrency, ether, without any government or third-party interference.
 
The fundamentals of Ethereum are ment to broaden the useability of cryptocurrencies. This result can occur by empowering developers to build their own premium applications.
 
As opposed to traditional applications, these so-called "decentralized applications" based on Ethereum are self-executing thanks to the use of smart contracts.
 
Those smart contracts are code-based programs and the Ethereum blockchain serves as host. Those execute specific functions when conform requirements.
 
This might be anything from forwarding a transaction when a particular event takes place, or the lending of funds once a guarantee is deposited in a nominated wallet.

Conclusion

Now you know what cryptocurrencies are, how they work, and what are the most popular ones right now, such as Bitcoin, Ripple, Litecoin and Ethereum. Don´t forget to join our Telegram Channel for the hottest crypto signals on the market.

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