The world is going digital and part of this is the emergence of cryptocurrency. But while Bitcoin, Ethereum and other forms of virtual currency are capturing the imagination of millions worldwide, their popularity has also sparked debates, investments and even skepticism.
In the Philippines, there has been a lot of interest in the benefits of cryptocurrencies, particularly in how they can be a form of investment. While there is a great deal of attention, there is also a need for more clarity about what they are and how people can benefit from them.
This article will go through what cryptocurrency is, how it works, and why it is gaining such widespread popularity globally.
It’s time to delve into the basics to reveal this intriguing digital phenomenon.
What is Cryptocurrency?
The concept of cryptocurrency was introduced in 2008 when an individual or group using the pseudonym Satoshi Nakamoto released a whitepaper entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System.” This paper outlined the framework for Bitcoin, the world’s first decentralized cryptocurrency, which remains the most well-known and widely used cryptocurrency to date.
At its core, cryptocurrency is a form of digital or virtual currency that utilizes cryptography for security and operates independently of any central authority. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies exist solely in the digital realm. They are decentralized, which means that government entities or financial institutions have no control over them.
The idea of decentralization is one of the biggest attractions of cryptocurrencies. However, this aspect is also the reason why it is connected with shady transactions.
How Does Cryptocurrency Work?
Cryptocurrencies operate on a technology called blockchain, which serves as a distributed ledger that records all transactions across a network of computers. Each transaction is verified by network nodes through cryptographic techniques.
Once verified, it is added to a block of transactions and forms a chain. This decentralized and transparent nature of blockchain ensures security and immutability, as it is extremely difficult for any single entity to manipulate the data stored within the blockchain.
To participate in the cryptocurrency ecosystem, individuals can acquire cryptocurrencies through various means. They can purchase them on cryptocurrency exchanges, receive them as payment for goods or services, or even through mining.
Cryptocurrency mining involves using computer hardware to solve complex mathematical puzzles that validate and secure transactions on the blockchain network. Miners are rewarded with newly created cryptocurrency units for their efforts, incentivizing them to contribute to the network’s security and integrity.
When acquired, cryptocurrencies are stored in digital wallets. These are software applications or hardware devices that securely store the user’s private keys, allowing them to access and manage their cryptocurrency holdings.
Transactions in the cryptocurrency space are conducted peer-to-peer, meaning they occur directly between users without the need for intermediaries like banks or payment processors. This not only reduces transaction costs but also facilitates faster and more efficient cross-border transactions.
