What is Cryptocurrency?
Everything you need to know about the fundamentals of cryptocurrencies. Learn the concepts of decentralisation, blockchain technology and more.
Cryptocurrency is a term that’s been making headlines in recent times. Considering our increasingly digital lives, cryptocurrency is becoming more and more relevant in today’s society.
The adoption of cryptocurrency is increasing in South Africa. A survey from Finder shows that about 11.3% of Internet users in South Africa own cryptocurrency.
Furthermore, the survey claims that South Africa is one of the countries with the highest number of Bitcoin owners, with 56% of all crypto owners owning some amount of Bitcoin.
Hopefully, you will be more confident to learn about cryptocurrencies after seeing these numbers. Let’s dig deeper into cryptocurrencies!
What is a cryptocurrency?
Cryptocurrencies are simply a form of digital currency. The use of cryptography is what allows it to be secure, and this makes it nearly impossible to counterfeit (or, in crypto terms, “double-spend”).
To make it simple, cryptocurrency is like fiat (regular) money, but it only exists in digital form. With fiat money, you can buy products and services – the same functionality can be said with cryptocurrencies. In fact, some cryptocurrencies even have additional functionalities.
The most important aspect of cryptocurrencies is that they are not issued by any bank nor any government in the world. As such, its total supply and issuance rate is programmed by a computer code — rather than through central bank policies or government intervention.
Another important aspect about cryptocurrencies is that they are all completely transparent. In other words, you can see directly how it works, see all the transactions that have occurred, and you will be able to verify for yourself that the network is working as intended.
In summary, cryptocurrencies are digital cash that self-regulate without the need of a trusted authority.
How does cryptocurrency work?
To understand how cryptocurrencies work, you’ll have to understand how blockchain works.
Blockchain is a global digital ledger that records and keeps track of all transactions on the network. The transactions are recorded and validated by a decentralised network of private computers (called network nodes).
Each computer keeps its own record of the transactions, and each computer updates the transaction database on their own (without copying someone else’s) whenever a transaction occurs.
Let’s take Bitcoin as an example Every time someone sends or receives bitcoin, a record is kept on the bitcoin blockchain.
The list of transactions in cryptography is key to the operation of most cryptocurrencies because it allows payment transactions between people who don’t know each other to take place without going through a third-party verifier such as a bank.
Read more: What is Blockchain Technology?
Are cryptocurrencies like regular money?
Cryptocurrency may seem like this mysterious, cryptic thing to you. But it’s actually not that different from regular fiat money. Both assets have some similarities.
For example, money is used to pay for goods or services. Cryptocurrency can also be used in the same way.
Of course, cryptocurrency has a few differences compared to fiat currency. Take a look at the table below.
|Cryptocurrencies are decentralised, making the transactions easier and faster.||Fiat currencies are issued and controlled by the government or banks. It makes the transactions safer.|
|The value of cryptocurrency was determined by market supply and demand, competition between other cryptocurrency, and its regulation.||The value of fiat currency was determined on supply and demand, and the stability of the issuing government.|
|Cryptocurrencies are in a digital form and were builded by the Blockchain technology.||Fiat currencies come in the form of paper or coins, and were made by the government.|
|Most cryptocurrencies have a predictable supply limit.||Governments can continuously issue new money to keep the currency stable, but at the risk of devaluing it over time.|
Learn more: A closer look into BTC as a currency.
The History of Cryptocurrency
Bitcoin is the first decentralised blockchain-powered digital currency. However, it was not the first digital currency. In fact, an American computer scientist and cryptographer by the name of David Chaum conceptualised the idea of an electronic cash transfer system in 1989 (called DigiCash at the time).
Of course, Chaum’s electronic cash is still based on the US dollar and relies on US banks. Bitcoin is not based on any currency, and it works without relying on a trusted bank or financial institution. It is a stand-alone, independent currency that relies on network participants (called “miners”) around the world.
Bitcoin beginnings (2008)
In 2008, an anonymous person (or group) called Satoshi Nakamoto created Bitcoin. Satoshi Nakamoto uploaded a white paper, a kind of technical proposal, which describes how Bitcoin works.
According to Nakamoto, the main purpose of Bitcoin was to create an entirely different money transfer system where users don’t have to rely on financial intermediaries. This is why Bitcoin was the world’s first “purely peer-to-peer electronic cash system”.
Emergence of Bitcoin clones (2009-2014)
In early days, Bitcoin was still being used as a medium of exchange. In 2010, Bitcoin was worth less than one US dollar. In fact, in that year, someone spent 10,000 bitcoins to purchase 2 pizzas from Papa John’s (equivalent to $40 at the time).
Bitcoin’s code is open-source, meaning that anyone can copy Bitcoin’s source code, and create a clone of Bitcoin. For example, Litecoin was created by Charles Lee in 2011. It works similarly to Bitcoin (i.e. transactions are processed using a similar protocol). However, it has a total supply of 84 million coins, rather than 21 million as with Bitcoin.
Second Generation Crypto (2014-2020)
In 2015, a new innovation arrived in the world of cryptocurrency — smart contracts. Smart contracts are pieces of code that allow programmers to develop applications that use blockchain technology.
In that year, Ethereum was released into the public, and it uses Ether (ETH) as its cryptocurrency. It’s essentially a platform on which developers can build applications.
As of writing, there are over 18,000+ cryptocurrencies, each with their own function and unique offerings. Today, we can see exciting new innovations like NFTs, decentralised finance applications, crypto debit cards, and many more. Who knows that the future has in store!
Read more about Bitcoin: What is Bitcoin (BTC)? A Complete Guide.
Where to Buy Cryptocurrency?
Nowadays, getting into cryptocurrencies is easier than ever. Buying and selling cryptocurrencies can be done through a variety of ways, such as a crypto exchange or crypto retailer like us at Easy Crypto!
Centralised exchanges are run by companies and are typically regulated more closely than decentralised exchanges. Decentralised exchanges, on the other hand, allow anyone to create a cryptocurrency to sell on the market.
For beginners, It would be great if you start with the combination of decentralised and centralised exchanges – crypto retailers like Easy Crypto.
Crypto retailers simply are crypto. You can easily buy and sell the crypto that you want. Example, if you want to buy R 100 of Bitcoin. The retailers will give you a spot price (the market price right now), then they will send the Bitcoin directly to your cryptocurrency wallet.
Cryptocurrency wallet is the place where you can store your crypto like your usual hard wallet, but It’s digital.
Further reading: Cryptocurrency Wallets for 2022.
How to buy Cryptocurrency?
Buying cryptocurrencies is easier than you think! Here at Easy Crypto we aim to simplify the crypto experience, making the process of buying crypto quick, safe, and easy for anyone.
Follow our guide below just to see how easy it is!
Step-by-step guide on how to buy cryptocurrency:
- Prepare your cryptocurrency wallet
Before you buy cryptocurrency, you need a cryptocurrency wallet. It’s a place where you can store your crypto. Basically, it is like storing your fiat money in your regular wallet, but this time it is in a digital wallet.
Here is a quick guide on how to set up your wallet.
- Sign in to your Easy Crypto Account
If you’re a new user — welcome! Click on the Sign-up button to create an account and proceed with the account verification process.
- Select the cryptocurrency you want to buy
When you want to select the crypto asset. Come to the homepage and select the cryptocurrency you want to buy and enter the amount that you want to spend.
Then at the end, click the Buy Now button.
- Enter your wallet’s receiving address
Once you’ve finished choosing your crypto asset, enter your wallet’s receiving address to the corresponding cryptocurrency you want to purchase.
What’s a wallet receiving address? Your crypto needs a home! Before choosing to buy a cryptocurrency, make sure you download a crypto wallet software that can store it for you. Follow the instructions carefully on how to set up, receive, or transfer crypto.
- Select your preferred payment method
You still have time to invest in cryptocurrencies! Easy Crypto makes it easy and seamless to buy 100+ cryptocurrencies in South Africa.
Check out our YouTube guide below for more in-depth guide:
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated Oct 11, 2022