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What is cryptocurrency? In two words: digital cash. But a lot of people don’t really understand how cryptocurrencies work, much less how to use them.
A cryptocurrency is an encrypted digital currency that uses a system of decentralised control.
In other words, no one controls it. It relies on cryptography to secure transactions and create new units. There are many types of cryptocurrencies, including bitcoin and Ethereum.
Mining is the process by which new bitcoins are created. To mine, miners use computers to solve complex math problems and are rewarded with bitcoins. In an ideal world, it would take a person just 10 minutes to mine one bitcoin, but in reality, it takes an estimated 30 days.
You can buy or sell cryptocurrencies from central exchanges and individual currency owners, or trade them on platforms like Coinbase. Once purchased, they can be stored in digital wallets that are either connected to the internet or stored offline.
Cryptocurrencies like Bitcoins can be transferred from one digital wallet to another, and you can use them to buy goods or services, trade them, or exchange them for cash.
You can use crypto debit cards to make purchases with Bitcoin on the Internet, and you can withdraw cash from ATMs using your Bitcoin debit card as well.
All the crypto transactions that take place are recorded using blockchain technology. Blockchain is an open, distributed ledger technology that allows for several parties to access the same information at once.
It forms a chain of records known as blocks with each block containing a unique identifying hash. The technology allows for secure transaction verification and traceability, thus reducing compliance costs and speeding up data processing times.
Blockchain can also be used in voting platforms, and managing titles and deeds. The data recorded in a blockchain remains chronological and cannot be changed after it has been entered.
Cryptocurrency is decentralised digital money. Decentralisation refers to the transfer of control and decision-making from a centralised entity (individual, organization, etc) to a distributed network. Decentralised networks aim to reduce the level of trust that participants must place in one another, or in any central authority that could exert control over the network.
Since no one has to know or trust anyone else in a decentralised blockchain network, each member maintains a ledger of data.
If any ledger is altered or corrupted, it will be rejected by the majority of members in the network.
Decentralization can reduce reliance on specific actors, which helps protect against systemic failures.
This data is often exchanged between partners who transform and store the data in separate silos. This opens up chances for data loss, or even an incorrect number to enter the workstream. By having a decentralised data store, every entity has access to real-time information about the data.
Decentralization also offers better performance and consistency in promised services via optimised distribution of resources.
Cryptocurrencies have been described as a revolutionary technology since they are secured by cryptography and build on advanced blockchain technology.
Since cryptocurrencies are not printed or issued by any government, there is no third party involved and thus no way to seize your cryptocurrency account.
However, as with any new cryptocurrency, it is highly speculative and there is no guarantee for its future usage. There are several security risks associated with cryptocurrency ownership that you must do your own research and be aware of before buying it.
According to Singapore Business Review (SBR), in 2021, one in seven Singaporeans own some form of cryptocurrency, and the most popular coin among them is Bitcoin, which is held by 66.7% of local crypto investors, followed by Ethereum (52.4%), Cardano (23%), Binance Coin (17.6%), and Dogecoin (11.3%). Females account for 44.9% of all local crypto investors.
If you think that cryptocurrency isn’t your cup of tea (quite literally), don’t worry. The world is working at making cryptocurrencies more user-friendly everyday, and soon even non-geeks like me will be using them as a part of their daily lives.
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