What Is Cryptocurrency? 8 Common Questions Answered

Cryptocurrencies like Bitcoin, Ethereum, and dozens of lesser-known digital currencies frequently appear in the news, often following wild price spikes, and sometimes to cover the revolutionary blockchain technology they are built upon.

This article strives to answer eight frequently asked questions about cryptocurrency in the most unbiased manner possible. We will follow that up with questions you should ask yourself or a financial professional before investing in digital assets.

What Is Cryptocurrency?

Cryptocurrency is any digital store of value that one can exchange for goods and services. Bitcoin is the oldest and most well-known example of a digital currency, invented by a person or persons using the pseudonym “Satoshi Nakamoto” in 2009.


What Is the Purpose of Cryptocurrency?

Cryptocurrency was initially conceived as a way of as a virtual currency and alternative form of payment versus traditional banking.


What Is Blockchain Technology?

All cryptocurrency transactions are recorded on a blockchain public ledger. These ledgers are known as decentralized networks. You can think of a blockchain similar to your account history on an online bank account.


What Do Transactions Look Like on the Blockchain?

Every transaction includes three critical pieces of information: Input, Output, and Amount. The Output is the name of the cryptocurrency account (called a wallet) that is receiving funds, while Amount is self-explanatory.


How Do Cryptocurrency Wallets Work? Each wallet consists of two random strings of characters. The first string acts like a username to signify your account on the blockchain, while the second is a private key or password.


Are Cryptocurrencies Safe?


Blockchain technology is often described as “hack-proof” because any hacker would need to modify all blocks simultaneously to ensure that the chain was in agreement.

How Does the Mining Process Work?


A complex process called a cryptographic hash function is at the root of mining. Put simply, a hash function is a mathematical trick that takes data of any size, performs an operation on it, and outputs something of a fixed size.

Swipe up to Read More on What Is Cryptocurrency? 8 Common Questions Answered!