What Is Cryptocurrency? Everything You Need To Know
Cryptocurrencies are digital assets created using computer networking software that enables secure trading and ownership. ...
The technology that underpins Bitcoin and most other cryptocurrencies is known as blockchain, which retains a tamper-resistant record of transactions and keeps track of who owns what. Decentralized public blockchains work without the need for a central authority, such as a bank or government.
The word cryptocurrency refers to the cryptographic techniques that developers have implemented to prevent fraud. These advances solved a difficulty that earlier attempts to establish fully digital currencies had: how to prevent users from duplicating their holdings and using them twice.
Depending on how they’re utilized, cryptocurrencies’ individual units are referred to as coins or tokens. Some are meant to be units of exchange for commodities and services, while others are value storage, and yet others are primarily designed to aid in the operation of computer networks that conduct more complicated financial operations.
The method of mining, which is employed by Bitcoin, is one of the most popular ways bitcoins are generated. Mining is a time-consuming process in which computers solve complicated riddles in order to validate the validity of network transactions. The owners of those machines may earn freshly minted bitcoin as a reward. Other cryptocurrencies manufacture and distribute tokens in other ways, and several have a substantially lower environmental effect.
For most people, the easiest way to get cryptocurrency is to buy it, either from an exchange or another user.
How does cryptocurrency work?
Cryptocurrencies run on a distributed public ledger called blockchain, a record of all transactions updated and held by currency holders.
Mining, which requires using computer processing power to solve complicated mathematical problems in order to earn coins, is how cryptocurrency units are created. Users may also buy the currencies from brokers, which they can then keep in encrypted wallets and spend.
If you own cryptocurrency, you don’t own anything tangible. What you own is a key that allows you to move a record or a unit of measure from one person to another without a trusted third party.
Although Bitcoin has been around since 2009, cryptocurrencies and applications of blockchain technology are still emerging in financial terms, and more uses are expected in the future. Transactions including bonds, stocks, and other financial assets could eventually be traded using the technology.
There are thousands of cryptocurrencies. Some of the best known include:
Founded in 2009, Bitcoin was the first cryptocurrency and is still the most commonly traded. The currency was developed by Satoshi Nakamoto – widely believed to be a pseudonym for an individual or group of people whose precise identity remains unknown.
Developed in 2015, Ethereum is a blockchain platform with its own cryptocurrency, called Ether (ETH) or Ethereum. It is the most popular cryptocurrency after Bitcoin.
This currency is most similar to bitcoin but has moved more quickly to develop new innovations, including faster payments and processes to allow more transactions.
Ripple is a distributed ledger system that was founded in 2012. Ripple can be used to track different kinds of transactions, not just cryptocurrency. The company behind it has worked with various banks and financial institutions.
Non-Bitcoin cryptocurrencies are collectively known as “altcoins” to distinguish them from the original.
Are Cryptocurrencies Legal?
Fiat currencies derive their authority as mediums of transaction from the government or monetary authorities. For example, each dollar bill is backstopped by the Federal Reserve.
But cryptocurrencies are not backed by any public or private entities. Therefore, it has been difficult to make a case for their legal status in different financial jurisdictions throughout the world. It doesn’t help matters that cryptocurrencies have largely functioned outside most existing financial infrastructure. The legal status of cryptocurrencies has implications for their use in daily transactions and trading. In June 2019, the Financial Action Task Force (FATF) recommended that wire transfers of cryptocurrencies should be subject to the requirements of its Travel Rule, which requires AML compliance.
As of December 2021, El Salvador was the only country in the world to allow Bitcoin as legal tender for monetary transactions. In the rest of the world, cryptocurrency regulation varies by jurisdiction.
Japan’s Payment Services Act defines Bitcoin as legal property. Cryptocurrency exchanges operating in the country are subject to collect information about the customer and details relating to the wire transfer. China has banned cryptocurrency exchanges and mining within its borders. India was reported to be formulating a framework for cryptocurrencies in December.
In the European Union, cryptocurrencies are legal. Cryptocurrency derivatives and other products will need to be classified as “financial instruments.” The European Commission published the Markets in Crypto-Assets (MiCA) regulation in June 2021, which defines regulatory protections and requirements for organizations or suppliers who provide financial services utilizing cryptocurrency. Crypto derivatives such as Bitcoin futures are accessible on the Chicago Mercantile Exchange in the United States, the world’s largest and most sophisticated financial exchange. Bitcoin and Ethereum, according to the Securities and Exchange Commission (SEC), are not securities.
The question of whether cryptocurrencies are allowed, however, is only one part of the legal question. Other things to consider include how crypto is taxed and what you can buy with cryptocurrency.
- Legal tender: You might call them cryptocurrencies, but they differ from traditional currencies in one important way: there’s no requirement in most places that they be accepted as “legal tender.” The U.S. dollar, by contrast, must be accepted for “all debts, public and private.” Countries around the world are taking various approaches to cryptocurrency. El Salvador in 2021 became the first country to adopt Bitcoin as legal tender. Meanwhile, China is developing its own digital currency. For now, in the U.S., what you can buy with cryptocurrency depends on the preferences of the seller.
- Crypto taxes: Again, the term “currency” is a bit of a red herring when it comes to taxes in the U.S. Cryptocurrencies are taxed as property, rather than currency. That means that when you sell them, you’ll pay tax on the capital gains, or the difference between the price of the purchase and sale. And if you’re given crypto as payment — or as a reward for an activity such as mining — you’ll be taxed on the value at the time you received them.
How to buy cryptocurrency
1. Choose a Broker or Crypto Exchange
To buy cryptocurrency, first you need to pick a broker or a crypto exchange. While either lets you buy crypto, there are a few key differences between them to keep in mind.
What Is a Cryptocurrency Exchange?
A cryptocurrency exchange is a platform where buyers and sellers meet to trade cryptocurrencies. Exchanges often have relatively low fees, but they tend to have more complex interfaces with multiple trade types and advanced performance charts, all of which can make them intimidating for new crypto investors.
Some of the most well-known cryptocurrency exchanges are Coinbase, Gemini and Binance.US. While these companies’ standard trading interfaces may overwhelm beginners, particularly those without a background trading stocks, they also offer user-friendly easy purchase options.
What Is a Cryptocurrency Broker?
Cryptocurrency brokers take the complexity out of purchasing crypto, offering easy-to-use interfaces that interact with exchanges for you. Some charge higher fees than exchanges. Others claim to be “free” while making money by selling information about what you and other traders are buying and selling to large brokerages or funds or not executing your trade at the best possible market price. Robinhood and SoFi are two of the most well-known crypto brokers.
2. Create and Verify Your Account
Once you decide on a cryptocurrency broker or exchange, you can sign up to open an account. Depending on the platform and the amount you plan to buy, you may have to verify your identity. This is an essential step to prevent fraud and meet federal regulatory requirements.
You may not be able to buy or sell cryptocurrency until you complete the verification process. The platform may ask you to submit a copy of your driver’s license or passport, and you may even be asked to upload a selfie to prove your appearance matches the documents you submit.
3. Funding your account
Once you have chosen your platform, the next step is to fund your account so you can begin trading. Most crypto exchanges allow users to purchase crypto using fiat (i.e., government-issued) currencies such as the US Dollar, the British Pound, or the Euro using their debit or credit cards – although this varies by platform.
Crypto purchases with credit cards are considered risky, and some exchanges don’t support them. Some credit card companies don’t allow crypto transactions either. This is because cryptocurrencies are highly volatile, and it is not advisable to risk going into debt — or potentially paying high credit card transaction fees — for certain assets.
Some platforms will also accept ACH transfers and wire transfers. The accepted payment methods and time taken for deposits or withdrawals differ per platform. Equally, the time taken for deposits to clear varies by payment method.
An important factor to consider is fees. These include potential deposit and withdrawal transaction fees plus trading fees. Fees will vary by payment method and platform, which is something to research at the outset.
4. Place Your Cryptocurrency Order
Once there is money in your account, you’re ready to place your first cryptocurrency order. There are hundreds of cryptocurrencies to choose from, ranging from well-known names like Bitcoin and Ethereum to more obscure cryptos like Theta Fuel or Holo.
When you’ve decided which cryptocurrency to buy, type in its ticker symbol (Bitcoin’s is BTC) and the number of coins you want to buy. You can buy fractional shares of cryptocurrency on most exchanges and brokers, allowing you to acquire a sliver of high-priced tokens like Bitcoin or Ethereum that would otherwise cost thousands of dollars.
The symbols for the 10 biggest cryptocurrencies based on market capitalization* are as follows:
- Bitcoin (BTC)
- Ethereum (ETH)
- Tether (USDT)
- Binance Coin (BNB)
- Cardana (ADA)
- Dogecoin (DOGE)
- XRP (XRP)
- USD Coin (USDC)
- Polkadot (DOT)
- Uniswap (UNI)
How to store cryptocurrency
Cryptocurrency exchanges are not insured by the Federal Deposit Insurance Corporation (FDIC), therefore thus are vulnerable to theft and hacking. If you forget or lose the codes to access your account, you risk losing your whole investment, as millions of dollars in Bitcoin have already been lost. That’s why having a safe location to store your bitcoins is critical.
As noted above, if you’re buying cryptocurrency via a broker, you may have little to no choice in how your cryptocurrency is stored. If you purchase cryptocurrency through an exchange, you have more options:
- Leave the crypto on the exchange. When you buy cryptocurrency, it’s typically stored in a so-called crypto wallet attached to the exchange. If you don’t like the provider your exchange partners with or you want to move it to a more secure location, you might transfer it off of the exchange to a separate hot or cold wallet. Depending on the exchange and the size of your transfer, you may have to pay a small fee to do this.
- Hot wallets. These are crypto wallets that are stored online and run on internet-connected devices, such as tablets, computers or phones. Hot wallets are convenient, but there’s a higher risk of theft since they’re still connected to the internet.
- Cold wallets.Because cold crypto wallets aren’t linked to the internet, they’re the safest way to store bitcoin. External devices, such as a USB drive or a hard disk, are used. Cold wallets, on the other hand, must be used with caution: if you lose the keycode connected with them, or if the device breaks or malfunctions, you may never be able to recover your bitcoin. While this might happen with certain hot wallets, some are maintained by custodians who can assist you in regaining access to your account if you become locked out.
Best cryptocurrencies by market capitalization
More than 17,500 different cryptocurrencies are traded publicly, according to CoinMarketCap.com, a market research website. And cryptocurrencies continue to proliferate. The total value of all cryptocurrencies on Feb. 18, 2022, was about $1.8 trillion, having fallen substantially from an all-time high above $2.9 trillion late in 2021.
If that weren’t enough to navigate, there are millions of NFTs — or nonfungible tokens — which are based on similar technology and offer ownership of content such as pictures and videos.ADVERTISEMENT
These are the 10 largest trading cryptocurrencies by market capitalization as tracked by CoinMarketCap.
Advantages and Disadvantages of Cryptocurrency
Cryptocurrencies were created with the goal of revolutionizing the financial system. However, like with every revolution, there are compromises to be made. There are significant gaps between the theoretical ideal of a decentralized system with cryptocurrencies and its actual application at the current level of development for cryptocurrencies.
Cryptocurrency inspires passionate opinions across the spectrum of investors. Here are a few reasons that some people believe it is a transformational technology, while others worry it’s a fad.
- Cryptocurrencies are a new, decentralized money paradigm. To enforce trust and police transactions between two participants, centralized middlemen such as banks and monetary organizations are not required in this system. As a result, a system based on cryptocurrencies reduces the risk of a single point of failure, such as a huge bank, triggering a global crisis, such to the one generated in 2008 by the failure of institutions in the United States.Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable.
- Cryptocurrencies promise to make it easier to move payments between two parties without the use of a trusted third party such as a bank or credit card provider. Public and private keys, as well as other incentive schemes like as proof of work and proof of stake, are used to secure such decentralized transfers.Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties are faster as compared to standard money transfers. Flash loans in decentralized finance are a good example of such decentralized transfers. These loans, which are processed without backing collateral, can be executed within seconds and are used in trading.
- Some cryptocurrencies offer their owners the opportunity to earn passive income through a process called staking. Crypto staking involves using your cryptocurrencies to help verify transactions on a blockchain protocol. Though staking has its risks, it can allow you to grow your crypto holdings without buying more.
- Investing in cryptocurrencies may be profitable. Over the last decade, the value of cryptocurrency markets has surged, reaching over $2 trillion at one time. Bitcoin was worth more over $862 billion on crypto marketplaces on December 20, 2021.The remittance economy is testing one of cryptocurrency’s most prominent use cases. Currently, cryptocurrencies such as Bitcoin serve as intermediate currencies to streamline money transfers across borders. Thus, a fiat currency is converted to Bitcoin (or another cryptocurrency), transferred across borders and, subsequently, converted to the destination fiat currency. This method streamlines the money transfer process and makes it cheaper.
- Cryptocurrencies are pseudonymous, despite the fact that they promise to be an anonymous type of transaction. They create a digital trail that may be deciphered by entities like the Federal Bureau of Investigation (FBI). This gives governments and federal agencies the ability to trace the financial transactions of regular persons.Many cryptocurrency projects are untested, and blockchain technology in general has yet to gain wide adoption. If the underlying idea behind cryptocurrency does not reach its potential, long-term investors may never see the returns they hoped for.
- Cryptocurrencies have become a popular tool with criminals for nefarious activities such as money laundering and illicit purchases. The case of Dread Pirate Roberts, who ran a marketplace to sell drugs on the dark web, is already well known. Cryptocurrencies have also become a favorite of hackers who use them for ransomware activities.
- In theory, cryptocurrencies are meant to be decentralized, their wealth distributed between many parties on a blockchain. In reality, ownership is highly concentrated. For example, an MIT study found that just 11,000 investors held roughly 45% of Bitcoin’s surging value.
- One of the conceits of cryptocurrencies is that anyone can mine them using a computer with an Internet connection. However, mining popular cryptocurrencies requires considerable energy, sometimes as much energy as entire countries consume. The expensive energy costs coupled with the unpredictability of mining have concentrated mining among large firms whose revenues running into the billions of dollars. According to an MIT study, 10% of miners account for 90% of its mining capacity.
- Though cryptocurrency blockchains are highly secure, other crypto repositories, such as exchanges and wallets, can be hacked. Many cryptocurrency exchanges and wallets have been hacked over the years, sometimes resulting in millions of dollars worth of “coins” stolen.
- Price volatility is a problem for cryptocurrencies traded on public exchanges. Bitcoin’s value has risen and fallen rapidly, reaching a peak of $17,738 in December 2017 before plummeting below $7,575 in the following months. 3 As a result, some economists regard cryptocurrencies as a passing fad or speculative bubble.Governments around the world have not yet fully reckoned with how to handle cryptocurrency, so regulatory changes and crackdowns have the potential to affect the market in unpredictable ways.
How Can You Mine Cryptocurrency?
Mining is the process of releasing new units of bitcoin into the world in return for confirming transactions. While it is theoretically conceivable for the common individual to mine cryptocurrencies, with proof-of-work systems like Bitcoin, it is becoming increasingly difficult.
“As the Bitcoin network grows, it gets more complicated, and more processing power is required,” says Spencer Montgomery, founder of Uinta Crypto Consulting. “The average consumer used to be able to do this, but now it’s just too expensive. There are too many people who have optimized their equipment and technology to outcompete.”
Remember that mining Proof of Work cryptocurrency takes a lot of energy. Bitcoin farms consume 0.21 percent of the world’s electricity, according to estimates. As’s almost the same amount of electricity that Switzerland consumes in a year. Most Bitcoin miners use 60 percent to 80 percent of their earnings to pay electricity costs, according to estimates.
While it’s impractical for the average person to earn crypto by mining in a proof of work system, the proof of stake model requires less in the way of high-powered computing as validators are chosen at random based on the amount they stake. It does, however, require that you already own a cryptocurrency to participate. (If you have no crypto, you have nothing to stake.)
How Can You Use Cryptocurrency?
You can use cryptocurrency to make purchases, but it’s not a form of payment with mainstream acceptance quite yet. A handful of online retailers like Overstock.com accept Bitcoin, but it’s far from the norm.
You may get around the existing constraints by trading bitcoin for gift cards until crypto becomes more broadly recognized. You can buy gift cards for Dunkin Donuts, Target, Apple, and other businesses and restaurants with Bitcoin at eGifter, for example. To make purchases, you might be able to put bitcoin onto a debit card. The BitPay card, a debit card that transforms crypto assets into dollars for purchase, is available in the United States, however there are costs associated with ordering the card and using it for ATM withdrawals, for example.
You may also use crypto as an alternative investment option outside of stocks and bonds. “The best-known crypto, Bitcoin, is a secure, decentralized currency that has become a store of value like gold,” says David Zeiler, a cryptocurrency expert and associate editor for financial news site Money Morning. “Some people even refer to it as ‘digital gold.’”
How to Use Cryptocurrency for Secure Purchases
Using crypto to securely make purchases depends on what you’re trying to buy. If you’d like to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, like BitPay, in the U.S.
If you’re trying to pay a person or retailer who accepts cryptocurrency, you’ll need a cryptocurrency wallet, which is a software program that interacts with the blockchain and allows users to send and receive cryptocurrency.
You may scan your recipient’s QR code or manually input their wallet address to send money from your wallet. Some services make this more convenient by allowing you to input a phone number or choose a contact from your phone. It’s important to remember that transactions aren’t immediate since they must be verified using proof of labor or proof of stake. This might take anything from 10 minutes to two hours, depending on the coin.
This lag time, though, is part of what makes crypto transactions secure. “A bad actor trying to alter a transaction won’t have the proper software ‘keys,’ which means the network will reject the transaction. The network also polices and prevents double spending,” Zeiler says.
Should You Invest in Cryptocurrency?
Experts hold mixed opinions about investing in cryptocurrency. Because crypto is a highly speculative investment, with the potential for intense price swings, some financial advisors don’t recommend people invest at all.
Bitcoin, for example, nearly tripled in value in 2020, completing the year at more over $28,900. BTC’s price had more than quadrupled from the start of the year by April 2021, but by July, all of those gains had been squandered. BTC then more than doubled again, reaching an intraday high of $68,990 on November 10, 2021, before dropping to roughly $46,000 before the end of the year. Cryptocurrencies, as you can see, can be quite volatile.
That’s why Peter Palion, a certified financial planner (CFP) in East Norwich, N.Y., thinks it’s safer to stick to currency that’s backed by a government, like the U.S. dollar.
“If you have the U.S. dollar in your cash reserves, you know you can pay your mortgage, you can pay your electricity bill,” Palion says. “When you look at the last 12 months, Bitcoin looks basically like my last EKG, and the U.S. dollar index is more or less a flat line. Something that drops by 50% is not suitable for anything but speculation.”
That said, for clients who are specifically interested in cryptocurrency, CFP Ian Harvey helps them put some money into it. “The weight in a client’s portfolio should be large enough to feel meaningful while not derailing their long-term plan should the investment go to zero,” says Harvey.
When it comes to deciding how much to invest, Harvey asks investors how much of their wealth they’re ready to lose if the venture fails. “It may be anything from 1% to 5%, or it might be 10%,” he says. “It depends on how much they have today and what’s actually on the line for them in terms of loss.”
What can you buy with cryptocurrency?
Bitcoin was designed from the start to be a daily transactional currency, allowing users to buy everything from a cup of coffee to a computer, as well as big-ticket things like real estate. That hasn’t happened yet, and while the number of institutions adopting cryptocurrencies is increasing, major transactions involving cryptocurrencies are still uncommon. Despite this, crypto may be used to purchase a wide range of things from e-commerce platforms. Some instances are as follows:
Technology and e-commerce sites:
Several tech businesses, like newegg.com, AT&T, and Microsoft, accept cryptocurrency on their websites. Overstock, an online retailer, was one of the first to take Bitcoin. It’s also accepted by Shopify, Rakuten, and Home Depot.
Some luxury retailers accept crypto as a form of payment. For example, online luxury retailer Bitdials offers Rolex, Patek Philippe, and other high-end watches in return for Bitcoin.
Some car dealers – from mass-market brands to high-end luxury dealers – already accept cryptocurrency as payment.
In April 2021, Swiss insurer AXA announced that it had begun accepting Bitcoin as a mode of payment for all its lines of insurance except life insurance (due to regulatory issues). Premier Shield Insurance, which sells home and auto insurance policies in the US, also accepts Bitcoin for premium payments.
If you want to spend cryptocurrency at a retailer that doesn’t accept it directly, you can use a cryptocurrency debit card, such as BitPay in the US.
Is Cyptocurrency safe?
Blockchain technology is commonly used to create cryptocurrencies. The method transactions are recorded in “blocks” and time stamped is described by blockchain. It’s a lengthy, complicated procedure, but the end result is a secure digital ledger of bitcoin transactions that hackers can’t alter.
In addition, transactions require a two-factor authentication process. For instance, you might be asked to enter a username and password to start a transaction. Then, you might have to enter an authentication code sent via text to your personal cell phone.
While securities are in place, that does not mean cryptocurrencies are un-hackable. Several high-dollar hacks have cost cryptocurrency start-ups heavily. Hackers hit Coincheck to the tune of $534 million and BitGrail for $195 million, making them two of the biggest cryptocurrency hacks of 2018.
The value of virtual currencies, unlike government-backed money, is solely determined by supply and demand. This can lead to dramatic swings in the market, resulting in substantial gains or losses for investors. Furthermore, compared to traditional financial instruments such as equities, bonds, and mutual funds, cryptocurrency investments are subject to significantly less governmental oversight.
1. Bitcoin (BTC)
- Market cap: Over $730 billion
Created in 2009 by someone under the pseudonym Satoshi Nakamoto, Bitcoin (BTC) is the original cryptocurrency. As with most cryptocurrencies, BTC runs on a blockchain, or a ledger logging transactions distributed across a network of thousands of computers. Because additions to the distributed ledgers must be verified by solving a cryptographic puzzle, a process called proof of work, Bitcoin is kept secure and safe from fraudsters.
Bitcoin’s price has skyrocketed as it’s become a household name. In May 2016, you could buy a Bitcoin for about $500. As of Feb. 22, 2022, a single Bitcoin’s price was over $38,000. That’s growth of about 7,600%.
2. Ethereum (ETH)
- Market cap: Over $327 billion
Both a cryptocurrency and a blockchain platform, Ethereum is a favorite of program developers because of its potential applications, like so-called smart contracts that automatically execute when conditions are met and non-fungible tokens (NFTs).
Ethereum has also experienced tremendous growth. From April 2016 to February 2022, its price went from about $11 to over $2,700, increasing nearly 25,000%.
3. Tether (USDT)
- Market cap: Over $78 billion
Tether is a stablecoin, which means it is backed by fiat currencies such as the US dollar and the Euro and has a value that is theoretically equivalent to one of those denominations. Tether’s value is intended to be more constant than other cryptocurrencies, which is why it’s appreciated by investors who are frightened of other coins’ excessive volatility.
4. Binance Coin (BNB)
- Market cap: Over $63 billion
The Binance Coin is a form of cryptocurrency that you can use to trade and pay fees on Binance, one of the largest crypto exchanges in the world.
Since its launch in 2017, Binance Coin has expanded past merely facilitating trades on Binance’s exchange platform. Now, it can be used for trading, payment processing or even booking travel arrangements. It can also be traded or exchanged for other forms of cryptocurrency, such as Ethereum or Bitcoin.
Its price in 2017 was just $0.10; by Feb. 1, 2022, it had risen to around $377, a gain of approximately 377,000%.
5. U.S. Dollar Coin (USDC)
- Market cap: Over $50 billion
Like Tether, USD Coin (USDC) is a stablecoin, meaning it’s backed by U.S. dollars and aims for a 1 USD to 1 USDC ratio. USDC is powered by Ethereum, and you can use USD Coin to complete global transactions.
6. Cardano (ADA)
- Market cap: Over $35 billion
Somewhat later to the crypto scene, Cardano is notable for its early embrace of proof-of-stake validation. This method expedites transaction time and decreases energy usage and environmental impact by removing the competitive, problem-solving aspect of transaction verification present in platforms like Bitcoin. Cardano also works like Ethereum to enable smart contracts and decentralized applications, which are powered by ADA, its native coin.
Cardano’s ADA token has had relatively modest growth compared to other major crypto coins. In 2017, ADA’s price was $0.02. As of Feb. 22, 2022, its price was at $1.05. This is an increase of 5,150%.
7. Solana (SOL)
- Market cap: Over $33.5 billion
Solana is a cryptocurrency that was created to fuel decentralized finance (DeFi), decentralized applications (DApps), and smart contracts. It employs a hybrid proof-of-stake and proof-of-history mechanism to conduct transactions rapidly and securely. The platform is powered by SOL, Solana’s native cryptocurrency.
When it launched in 2020, SOL’s price started at $0.77. By Feb. 22, 2022, its price was around $100, a gain of almost 13,000%.
8. XRP (XRP)
- Market cap: Over $29 billion
XRP, a digital technology and payment processing firm founded by some of the same people as Ripple, may be used on that network to ease the exchange of many currency kinds, including fiat currencies and other major cryptocurrencies.
At the beginning of 2017, the price of XRP was $0.006. As of Feb. 22, 2022, its price reached $0.62, equal to a rise of more than 10,000%.
9. Terra (LUNA)
- Market cap: Over $21 billion
Terra is a blockchain payment platform for stablecoins that relies on keeping a balance between two types of cryptocurrencies. Terra-backed stablecoins, such as TerraUSD, are tied to the value of physical currencies. Their counterweight, Luna, powers the the Terra platform and is used to mint more Terra stablecoins.
Luna stablecoins and Terra stablecoins function together based on supply and demand: Users are encouraged to burn their Luna to produce additional Terra stablecoins when the price of a stablecoin climbs above the value of its associated currency. When the value of the Luna stablecoin dips in comparison to the base currency, users are encouraged to burn their Terra stablecoins in order to manufacture more Luna. As the Terra platforms become more popular, Luna’s worth rises.
From Jan. 3, 2021, when its price was $0.64, Luna has risen almost 8,000% to $51.39 just over a year later.
10. Polkadot (DOT)
- Market cap: Over $19 billion
Polkadot (and its namesake coin) intends to unify them by building a cryptocurrency network that connects the multiple blockchains so they may function together. Since Polkadot’s inception in 2020, this integration has sparked significant growth and may transform how cryptocurrencies are maintained.
Between September 2020 and Feb. 22, 2022, its price grew about 565%, from $2.93 to $19.49.
*Market caps and pricing current as of Feb. 1, 2022.
Frequently Asked Questions
- What Is Cryptocurrency in Plain Words?
Cryptocurrencies are digital assets and decentralized systems that allow for secure online payments.
- How Do You Get Cryptocurrency?
Any investor may buy cryptocurrencies via well-known crypto exchanges like Coinbase, applications like Cash App, or brokers. Financial derivatives, such as CME’s Bitcoin futures, and other products, such as Bitcoin trusts and Bitcoin ETFs, are another popular way to invest in cryptocurrencies.
- What Is the Point of Cryptocurrency?
Cryptocurrencies are a new paradigm for money. Their promise is to streamline existing financial architecture to make it faster and cheaper. Their technology and architecture decentralize existing monetary systems and make it possible for transacting parties to exchange value and money independently of intermediary institutions such as banks.
- How does a blockchain work?
The majority of cryptocurrencies are built on blockchain technology, which is a networking protocol that allows computers to collaborate to retain a shared, tamper-proof record of transactions. In a blockchain network, the problem is ensuring that all members can agree on the right copy of the historical record. It would be difficult for individuals to trust that their assets are safe if there was no established method of validating transactions. On a blockchain network, there are various techniques to establish “consensus,” but the two most often utilized are “proof of work” and “proof of stake.”
- Can You Generate Cryptocurrency?
Cryptocurrencies are generated by mining. Bitcoin, for example, is created through Bitcoin mining. The procedure entails downloading software that provides a partial or complete history of transactions that have taken place on the network. Though everyone with a computer and an Internet connection may mine bitcoin, the business is dominated by huge corporations because to its energy and resource-intensive nature.
- What Are the Most Popular Cryptocurrencies?
Bitcoin is by far the most popular cryptocurrency followed by other cryptocurrencies such as Ethereum, Binance Coin, Solana, and Cardano.
- Are Cryptocurrencies Securities?
The SEC has said that Bitcoin and Ethereum, the top two cryptocurrencies by market cap, are not securities. It has not commented on the status of other cryptocurrencies.
“Hope this Article Is Helpful”