CryptoCurrency explained: How Cryptocurrencies/ Bitcoin work

A Cryptocurrency is a decentralized form of payment you can use to buy goods online. Being decentralized means that it has no formal control unlike hard currencies which are centralized and controlled by central banks

There are thousands of different cyrptocurrencies in the world just like we have different hard currencies in the world, dollar, pound, shillings, and euro etc. The most popular cyptocurrencies are Bitcoin, Ethereum, Litecoin, Cardano and of recent the meme cryptocurrency bitcoin has also gained recognition.

These cryptocurrencies run on a digital ledger of the currencies transactions know as blockchain. This blockchain ensures the same coin can’t be spent twice.

New coins are created/mined/minted when the computers solve complex mathematical problems to work out the legitimacy of transactions on the block chain. Owners of computers are in turn rewarded with those new crypto coins minted.

Each cryptocurrency has a number of coins in circulation which when multiplied with the real time value of the coin makes what we call Cryptocurrency market capitalization.

There are currently 18,839,750 bitcoins in the market, and the price of bitcoin on October 10th 2021 is $55,120.25 which makes the Market capitalization of Bitcoin at the moment $1,038,892,488,814 (USD 1.04 Trillion).

Just like hard currency, crypto is used as a form of payment. However many people look at as an investment reaching an extent of tracking the value of Bitcoin to track the value of their coins like how people do track stock markets and changes in stock prices.

Just like stock prices and hard currency, the value of cryptos increase helping those who hold them to gain. They can also decrease making investors in those coins to lose.

An increase in the value of a coin can be caused by increase in demand when there are many buys with supply being limited. It can also be caused by an announcement by a company to start accepting such coins as a form of payment. An increase can also be as a result of government policies to accept cypto transactions recently in El Salvador and Cuba. Hype from celebrities and tycoons like Elon Musk can also boost gains.

A decrease in value on the other hand can be a result of increased supply against demand where there are more sellers and a few buyers, it can also be a result of announcement by a big company that they will no longer accept certain coins for instance Tekla’s recent announcement that they will no longer accept Bitcoin. It can also be as a result of government policies for instance the recent crackdown on cryptocurrency in China made various cryptocurrencies including Bitcoin to lose value.

Using wallet apps and exchange websites like Binance, Coinbase , Crypto.com, BlockFi etc, people can use hard currency (dollars, shillings, pounds etc) and convert them into cryptocurrency to gain in cryptocurrency investment.

Just like people keep their shillings in their wallets ready to be spent, users keep their crypto coins in e wallets ready to be spent.

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