Simply put, cryptocurrencies are electronic peer-to-peer currencies. They don’t physically exist. You can’t pick up a bitcoin and hold it in your hand, or pull one out of your wallet.
A cryptocurrency (also called a crypto-coin, crypto-asset, crypto money, or token) is an internet-based medium of exchange that uses cryptography to secure the digital exchange of financial transactions, control the creation of new units, and verify the transfer of it.
Cryptocurrencies are considered to be a internet-based decentralized and digital meduim, where the transfer between users is peer-to-peer (P2P) and confirmed via a process commonly called mining. They are fungible to be used on everyday goods and services, just like government issued currencies, such as Dollars, Euros, Rupees, or Renminbis.
What is the definition of a Cryptocurrency Token?
A token is a type of cryptocurrency that represents a utility, asset, or both and is issued on top of an existing blockchain, without a currency use case. Cryptocurrency tokens act as a secondary asset for a particular application in a blockchain ecosystem. Tokens have market value, but are not considered to be a straightforward currency such as Bitcoin or Litecoin.
Similar to a blockchain being a type of distributed ledger, tokens are a type of cryptocurrency. Much legal scrutiny has been exerted for lawmakers to define if a cryptocurrency is a token or a security. This is important because financial securities require extensive regulatory compliance, whereas a token would be considered a non-security asset and not be subject to the same compliance requirements.
Introduction to Cryptocurrency
“Cryptocurrency is the next evolution of money.”
– Diversified Internet Holdings CEO Ryan Nelson
We know that in ancient days, commodities essential to daily living were considered money (e.g. cows and chickens) and traded among micro-economies. Then the modernization of society and urban cities brought the need to track money and value across large territories of land, which resulted in the birth of paper and coin money issued from the ruling governments.
Fast forward to a quarter of a century ago, and an invention called the world wide web made it possible for people to buy and sell virtually anything to anyone around the world. Because you sending paper-cash and coins is a burdensome process, the preferred method for these transactions was bank-issued credit cards.
Present times have gifted us with another advancement, which is a new form of money that is native to the internet – cryptocurrency. Below we explore what this new type of money is, how it works, and how you can get involved.
GETTING STARTED WITH BITCOIN
Bitcoin is a revolutionary system that is quite complex and has a steep learning curve. Make sure you have a decent grasp of the system before you store a significant amount of value in it. If you make a critical mistake such as losing your keys or sending your money to a scammer, no one can fix it!
Some things you need to know
If you’re getting started with Bitcoin, there are a few things you should know. Bitcoin lets you exchange money and transact in a different way than you normally do. As such, you should take time to inform yourself before using Bitcoin for any serious transaction. Bitcoin should be treated with the same care as your regular wallet, or even more in some cases!
Securing your wallet
Like in real life, your wallet must be secured. Bitcoin makes it possible to transfer value anywhere in a very easy way and it allows you to be in control of your money. Such great features also come with great security concerns. At the same time, Bitcoin can provide very high levels of security if used correctly. Always remember that it is your responsibility to adopt good practices in order to protect your money. Read more about securing your wallet.
Bitcoin price is volatile
The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its young economy, novel nature, and sometimes illiquid markets. Consequently, keeping your savings with Bitcoin is not recommended at this point. Bitcoin should be seen like a high risk asset, and you should never store money that you cannot afford to lose with Bitcoin. If you receive payments with Bitcoin, many service providers can convert them to your local currency.
Bitcoin payments are irreversible
A Bitcoin transaction cannot be reversed, it can only be refunded by the person receiving the funds. This means you should take care to do business with people and organizations you know and trust, or who have an established reputation. For their part, businesses need to keep track of the payment requests they are displaying to their customers. Bitcoin can detect typos and usually won’t let you send money to an invalid address by mistake, but it’s best to have controls in place for additional safety and redundancy. Additional services might exist in the future to provide more choice and protection for both businesses and consumers.
Unconfirmed transactions aren’t secure
Transactions don’t start out as irreversible. Instead, they get a confirmation score that indicates how hard it is to reverse them . Each confirmation takes between a few seconds and 90 minutes, with 10 minutes being the average. If the transaction pays too low a fee or is otherwise atypical, getting the first confirmation can take much longer.