If you look through financial news from time to time, you definitely run into with these definitions: “cryptocurrency”, “bitcoin” and “mining”. It seems the world has gone crazy. Bitcion is discussed absolutely everywhere. But what is bitcoin? Will cryptocurrency become the currency of future? What are the main kinds of cryptocurrency? Let’s find out!
What is cryptocurrency?
First of all, we need to understand the definitions. Cryptocurrency is digital money and in contrast to real money it backed by nothing. There is a reason why this currency is called like that – cryptocurrency is based on encryption and technology of cryptographic algorithm.
But encryption doesn’t work with all information; cryptocurrency contain information about all past operations with it. All history of transaction may be tracked from the very beginning. This information is called “blockchain” and it is the main idea of cryptocurrency.
Advantages of cryptocurrency
As it is said before all information of past operations is stored in cryptocurrency, however participants can keep anonymity. If you transfer bitcoin, you should know public key of recipient which doesn’t give any information about name or address of participant of the operation. This is a cause of big popularity of cryptocurrency.
There aren’t any banks that have right to make emission of cryptocurrency. Actually every man can produce cryptocurrency, using power of computer; this process is called mining. Creating of cryptocurrency is to use cryptography algorithm for embedding new blocks of information in blockchain. Mining is possible because of this reason.
However advantages of cryptocurrency can turn into its disadvantages. People can use bitcoins to pay illegal trades. These operations are anonymous so it is impossible to track them. Issuing the currency by any people means lack of the state control.
It is important to mention another feature of cryptocurrency – irreversibility of transactions. Unfortunately you can’t cancel transfer.
Exchange rate fluctuations of cryptocurrency are impossible to predict in relation to real money. We can only say that using of digital money will rise. Exchange rate of bitcoin grows constantly from the very beginning. And on April 2017 Japan is the first country which has recognized bitcoin as a form of currency.
Different kinds of cryptocurrencies
Cryptocurrencies differ from each other due to their difficulty and rate of creating, restriction on producing, method of creating blocks and one more important thing – exchange rate of cryptocurrencies.
The most important kind is Bitcoin (its abbreviation – BTC). Exchange rate of Bitcoin is 1 BTC = 2500 USD on the beginning of July 2017.
Now it has almost become a synonym of cryptocurrency, for this reason it is important to differ these definitions. Bitcoin has introduced the concept “blockchain” and it has created popularity of modern cryptocurrencies. The thing is that creators of bitcoin have laid out in a program code of open access and this action has brought many followers. All kinds of cryptocurrencies which descended from bitcoin are called forks.
Emission of bitcoin is limited by 21 million coins.
Litecoin (LTC), 1 LTC = 48 USD on the beginning of July 2017.
Litecoin was started in 2011. If bitcoin is a digital gold, then litecoin is a digital silver. Litecoin has simplified process of mining, so creation of this cryptocurrency is quite fast because of it. Limit of production is 84 million.
Namecoin (NMC), 1 LTC = 2,7 USD on the beginning of July 2017.
In comparison with other cryptocurrencies namecoin has high level of protection system. But it depends on american company ICANN. It is considered as serious disadvantage of digital currencies. Creators almost don’t update versions of the system and due this reason popularity of namecoin has fallen from the start in 2011. You can make only 21 million coins.
PPcoin or Peercoin (PPC), 1 LTC = 2,4 USD on the beginning of July 2017.
PPcoin appeared a little later than other currencies, in 2012. It used new method of creating blocks Proof-of-Stake, unlike Bitcoin Proof-of-Work. And also probability of attacks became 51% less.
There are plenty kinds of cryptocurrency. More and more cryptocurrencies try to be as popular as Bitcoin. Investors buy new currency and hope that one of the new currencies will bring proceeds/money. But it is real to get income on cryptocurrency.
