How Cryptocurrencies Work, Beginners Must Read!

Cryptocurrencies or cryptocurrency is a payment method that is starting to be accepted in many countries. The way crypto currency works is in a network called Blockchain.

Apart from being a means of payment, cryptocurrencies such as Bitcoin are also considered as investments. However, the value of cryptocurrency assets, especially Bitcoins, could increase hundreds of percent in the last year alone. Many traders have become rich because of cryptocurrencies and in the end many people are interested in it.

Payments are made in crypto currency peer to peer, directly from the sender to the recipient. Most of the cryptocurrencies adopt a decentralized network based on blockchain technology. Blockchain itself is a distributed ledger created by a network of different computers. 

These digital currencies are not issued by government financial institutions, so in theory, governments cannot “disrupt cryptocurrencies”.

All transactions using cryptocurrency are always recorded in the system and network. Registration is carried out by cryptocurrency miners and will receive services in the form of digital currency used in transactions.

How Crypto Currency Works

Anyone in the world can trade Cryptocurrencies. Using only your phone or PC, you can easily trade this cryptocurrency. How to invest in this type of asset is slightly different from other investment tools.

When you make a transaction, both parties, who are sending and receiving cryptocurrency, will receive information about the transaction. This transaction also has a digital signature via a private key and cryptocurrency system. 

Verified transactions are stored permanently. Neither of these parties can change or modify this transaction.

It can be said that cryptocurrency is a payment method that is almost the same as the current method of paying money. The difference is, for this money there is no middle section that regulates the amount of money from this money.

In fact, the way cryptocurrencies work is when a transaction occurs using cryptocurrency, the transaction will create cryptographic evidence that is approved and recorded on the blockchain.

Cryptocurrencies can be used as investment assets. In Indonesia, for example, cryptocurrency has no official regulation. Therefore, cryptocurrency ownership is not limited to financial assets. Cryptocurrency trading in Indonesia is monitored by the government through BAPPEBTI.

Cryptocurrency Types 

Talking about the types of cryptocurrencies, this may require a long explanation. There are more than 2,000 types of cryptocurrencies in the world. However, not all cryptocurrencies can be traded freely. 

Bitcoins 

Talking about cryptocurrencies, of course Bitcoin cannot be missed. Bitcoin is the first and most important form of cryptocurrency today. The first cryptocurrency appeared in 2009 under the pseudonym Satoshi Nakamoto. 

Ethereum 

This type of digital currency has the second largest market after Bitcoin. Ethereum or ETH was also noted to have reached an all-time high at the end of April 2021 at a price of IDR 40 million per chip. 

Also read: Get to Know Compound Crypto and Its Advantages

Tethers

Tether was first launched in 2014, using a blockchain-based system designed to facilitate the use of fiat money in digital environments. 

Interestingly, the value of Tether's assets will be tied to fiat currency, namely the US dollar. Therefore, one unit of Tether has the same value as one US dollar. 

Binance Coins 

Binance Coin, or bnb, has the fourth largest market capitalization in the world. BNB conducted its first initial coin offering (ICO) in 2017.

Also read: Collection of Indonesian Crypto Exchanges

That was an explanation of how cryptocurrency works that you need to know about some of the most popular types of crypto today.