While the ideas and principles behind cryptocurrencies have been around for decades, it was really the 2008-09 financial crisis that sparked the creation of cryptocurrencies. These digital assets aim to cut out intermediaries such as banks and governments, which had been seen as part of the problem by some after the crisis.
Today, there are thousands of cryptocurrencies with their total value being over $1.3 trillion in June 2021, according to Coinmarketcap, while the next great digital token, which will spur another illusory gold rush, might only be released tomorrow.
You can easily have access to cryptocurrencies, and in this article we will show you how. However, be extra careful when investing in cryptos. Before investing in cryptocurrency, you should be aware that it is a highly volatile and speculative market, which can create the illusion of quick gains but it is just as easy to lose your money.
What is a cryptocurrency and how does it work?
Cryptocurrencies are systems that allow for secure payments online which are denominated in virtual cryptocurrency “tokens.” These are digital assets created by cryptographic means, mostly using blockchain technology as their backbone. Similarly to traditional currencies, digital currencies can be used for buying products and services.
Cryptography makes cryptocurrencies very difficult to counterfeit or double-spend. Blockchain, the technology at the core of most cryptocurrencies, is a decentralized technology that keeps a record of transactions across a network of computers creating a safe, online, distributed ledger. The different parties participating in maintaining the blockchain are called miners, who use their computers to validate transactions.
The creation and the transfer of cryptocurrencies is also decentralized, meaning there is no single central authority or body, such as a central bank, that oversees the creation and distribution of tokens or the amount available on the market. It also rules out inflation from the cryptocurrency system.
What is the point of crypto?
The first widely-known cryptocurrency was Bitcoin, which still is the most popular in terms of how much value is stored in it. One of the main reasons it was created is to allow anyone to make financial transfers without the need for a central financial authority, relying instead on blockchain technology.