What is CryptoCurrency?
Learn how to use cryptocurrency
These days, cryptocurrencies are becoming a very popular method for transactions and payments, with both businessmen and companies. Such operations require reliability and stability, therefore, new types of digital currencies continue to emerge. Thanks to this article you will find out how to use cryptocurrency and their features as well as stablecoins.
The history of the cryptocurrency market
In the early 2000s, it became clear that the system of bank payments was very long and complex for business and that there was a need for faster and more convenient transactions between countries and users. The most important event happened in 2009 when Bitcoin was born. At first, it seemed like nothing more than a simple surprise, but later the currency became extremely popular and and it's price shot up. Therefore, the obvious question arose - what is cryptocurrency.
Cryptocurrency is virtual money that, unlike fiat money, has no physical expression. The digital currency must be protected from counterfeiting and duplication, and its quantity and emission are strictly limited, for example, for the largest cryptocurrency Bitcoin (BTC), the maximum amount is 21 million coins (more than 21 million BTC will never be created).
Over time, users realized that this was a great way to make instant transactions around the world and began to actively use the system. Cryptocurrency has many advantages over fiat currencies.
• Opened code. Thanks to this feature, everyone can mine virtual coins.
• Anonymity. Unlike classic electronic money, transactions with which are easily tracked, it will not work to get information about the owner of a cryptocurrency wallet. Only the wallet number and limited data on the amount on the account are available.
• Decentralization. Cryptocurrency is an independent currency. Nobody regulates its issue or controls the movement of funds in the account.
• Limitedness. As a rule, the cryptocurrency is issued in a limited volume, which excludes the risks of inflation due to the excessive activity of the issuer.
• Reliability. Hacking, forging, or performing other similar manipulations with virtual currency will not work - it is reliably protected.
What is a stablecoin and the difference from crypto?
Classic cryptocurrencies have one more important feature - large fluctuations of the rate. For example, the value of one Bitcoin coin has grown from a few cents to thousands of dollars. However, such large fluctuations in the exchange rate scares off some investors. Therefore, they need some alternative that can be more reliable and predictable. It's time to find out what is stablecoins.
A feature of classic cryptocurrencies is the absence of dependence on fiat currencies but stablecoins are a special category. They use the same technologies as Bitcoin, Ethereum, and others.
However, there is a big difference due to the need for stability - they are tied to a physical asset. There can be many options: fiat currency, gold, oil and even real estate.
The question arises, what is the point of stablecoin? The main task of such currencies is to provide a stable exchange rate, but to maintain mobility, anonymity, and provide users with the ability to carry out almost instant transactions around the world.
Extremely high volatility in the cryptocurrency market is good for traders and speculators, as it allows them to make good money. But for the real business, it poses a threat - due to sharp leaps in the course, it is difficult to plan a budget, etc. This is the main answer to the question - "What is the purpose of a stablecoin". They solve this problem and open the way for the real economy to the world of modern technology. The more business projects are involved in blockchain technologies, the greater the demand for stable assets.
The market offers different options for transactions, but what stablecoin is better to use? Today several options can be recommended to users:
TrueUSD. The TUSD currency is fully backed by assets in the reserve account. The conversion rate is the US $1.
GeminiUSD. Created by the billionaire brothers Winklevoss in 2018. Depends on the US dollar.
Tether. The idea of this "stablecoin" from Tether company was born in 2012. Since being listed in 2015, Tether has become one of the most popular and successful assets in the market.
USD-Coin. This is a stablecoin created by Coinbase and Circle. It also depends on the US dollar.
PAX. This popular stablecoin was created as an alternative to Tether. PAX is traded alongside other assets available on exchanges. Specifically, you can use PAX to buy or sell Bitcoin, Ether, Binance coins, EOS, XRP, and Stellar lumens.
What is token?
Another area that is becoming popular these days is tokens. If you want to find out what is token, then you must know that this term can be used as a substitute for money. For example, subway tokens or casino chips are great options for tokens. Today, they are sold for pre-sale and ICO by the issuers themselves. Instead, they take cryptocurrency and sometimes fiat currencies.
They often do not have their blockchain, using existing platforms, for example, Ethereum or Waves. If you want to understand what is a crypto token, then a great example is the Ethereum network (ETH). The project passed ICO in 2014 with the ETH token.
Now you need to figure out what the main differences are. The main difference is in the attachment of the second to a specific ICO project. It is a means of payment in a specific ecosystem based on the underlying cryptocurrency. A cryptocurrency without a token can exist, a token without a cryptocurrency cannot.
This is because tokens are based on a specific blockchain, and cryptocurrency is an integral part of it. They are built on a ready-made platform. Moreover, a malfunction of the parent blockchain will have an unforeseen effect on the circulation in the network and will likely severely undermine the functionality and operation of the issuing project. Malfunctioning tokens will not affect the operation of the blockchain. Now you know what is the token economy.
Thus, the functions of tokens are tied to the issuer. They are not mined, unlike cryptocurrency, but are issued by the company itself at the time of the ICO or token generation event (TGE). The cost and investment attractiveness of a token are determined by the actions of the organization that issued them.
They can also be divided into several types:
• Equity-tokens - an analog of a promotion in which a network member has the opportunity to receive a share of the profit;
• Utility-tokens - give a certain value or opportunity within their platform
• Asset-backed-tokens - a token backed by a real commodity (for example, gold).
There are as many ways to use tokens as there are projects. The user can pay for educational courses, pay a doctor for a consultation, buy gated content, or publish ads. Below is a table that will help you understand the main differences between tokens and classic cryptocurrencies.
|Emission||Decentralized. Depends on consensus algorithms, but is mined by miners.||Centralized.
Tokens are issued by the issuing organization during the ICO or token generation event (TGE).
|Blockchain||Cryptocurrency plays the role of the unit of account of this blockchain.||Released on someone else's blockchain.|
|Dependency on each other||No||Problems in the blockchain will also affect the tokens issued on it.|
|Possibility to pay for transactions||Yes||No|
Now you know what is a basic attention token, the main features of cryptocurrencies and stablecoins. This information will help you to work with digital currencies more productively.