cryptocurrency

What is Cryptocurrency? How is it different from Blockchain?

Pranav Hooda
By Pranav Hooda 11 Min Read

Cryptocurrency is a growing digital asset that you can buy and sell online, but what does that mean? And how do cryptocurrencies differ from blockchain? We’ll answer these questions and more as we dive into the world of cryptocurrency.

1. What is Cryptocurrency?

Cryptocurrency is a digital currency that uses advanced cryptography to secure the transactions and to control the creation of new units. It was invented in 2008 by an unknown person or group of people called Satoshi Nakamoto. Cryptocurrencies are a subset of alternative currencies also known as virtual currencies. The main application of cryptocurrencies is the decentralized digital currency like Bitcoin. 

Some developers designed cryptocurrency as an alternative to Bitcoin in 2017. These alternative cryptocurrencies are intended to gain value through digital gambling. 

Earlier digital assets were pseudonymous. A cryptocurrency is pseudonymized because the information behind the private key is part of the blockchain. People familiar with cryptocurrency should know that there are usually two types of cryptocurrencies based on the value of their unit.

The first type is the unit of cryptocurrency with a fixed supply and there are no more coins to be created. This is the cryptocurrency we often hear about such as Bitcoin, Ethereum, Litecoin, and Monero.

The second type of cryptocurrency has a variable supply. Members of the community have the right to create more coins or restrict the number of coins in circulation after a certain period. In this case, the person who established the currency gets the benefit as they can set a limit for the number of coins and take a cut of the transaction fees imposed on the users.

2. How is cryptocurrency different from blockchain?

Cryptocurrency & Blockchain are two separate things. Blockchain is the technology that powers cryptocurrency. The blockchain is the technology that allows cryptocurrencies to make transactions and transfer funds. Cryptocurrency is a digital currency that uses blockchain as the underlying technology.  

The blockchain is an encrypted database of all cryptocurrency. As time passed, the blockchain increased the security and increased the computations needed to access the blockchain. But, newer cryptocurrencies have also improved the security and the computing capacities of blockchain across the world. 

Blockchains also enable transactions between coins and they can protect “virtually any information exchange,” so it’s useful to record transactions and other vital information about digital assets.

3. How long does it take to mine a cryptocurrency?

It depends on how much of the cryptocurrency you want to mine. Bitcoin is a popular cryptocurrency and it can be mined in a matter of days. Litecoin is also very easy to mine and can be mined in a matter of hours.

The main reason players should consider investing in alt-currencies is to anonymously store value. The Shadow company, the largest unregulated crypto hedge fund, is based on Ethereum, a cryptocurrency privacy tool with a market capitalization of roughly $ 4.8 bn. So this means the company trades more than double of Ethereum. Many alt-currencies, such as Dogecoin and Anoncoin, eliminate the need for a third-party moderator or payment facilitator, as these cryptocurrencies process transactions directly between their users on their blockchain. To this day, the Dogecoin network has a staggering eight billion daily transactions.

While many people will argue about the use of these cryptocurrencies as a tool to anonymously store value, the openness of blockchain allows for better options with all types of assets and the best solutions would be the ones that are easy to access. Explaining why anonymity is needed is debatable but simplifying it with cryptocurrencies presents a task to achieve.

Blockchain provides a way to create user-controlled currencies and trusts. These digital assets are stored digitally and users are able to move assets privately without storing them directly in a financial institution.

On the other hand, There are companies like Nasdaq that have blockchain and decentralized exchange plans based on the Blockchain Architecture Alliance. Looking at the advancement by these public and private companies, futures and options charges are on the way in the future as blockchain-based technology makes its way into trades.

One thing is clear though; despite the hype of massive inflation and hyperinflation of newly created crypto-currencies, the world does not need them. Public opinion seems to be against them, and no politician says they should be accepted anytime soon.

4. Which cryptocurrencies are worth investing in?

If you’re looking to invest in cryptocurrency then you might be wondering which currencies are the best to invest in. Well, it depends on your investment goals. If you’re looking for a cryptocurrency to use as a currency then you might consider Ethereum or Litecoin. If you’re looking for a currency to use as a store of value then you might consider Bitcoin. If you want to invest in a currency for speculative purposes, then planning on buying, holding, or selling large amounts of the currency for a long period of time then Bitcoin may be worth a much higher dollar amount than many other cryptocurrencies. 

Based in Hong Kong, Bitcoin may seem foreign to many Americans. The investment opportunity such as the huge inflation rate vs the anonymity that Bitcoin provides may feel as if it carries some risks. However, when it comes to the best cryptocurrencies to invest in, Bitcoin may be the best. As a store of value, it protects you from inflation even further. It also provides a very stable currency and even added security as a cryptocurrency, but with more anonymity than, say, dollars. This is the true potential of Bitcoin that people may not fully realize.

The best cryptocurrency to invest in 2021 is Monero. The Shadow Conspiracy has listed Monero as one of the greatest cryptocurrencies upon the market. It has also been called the currency of the online black markets as it’s infrastructure has multiple layers of security. Having said that, the main reason I am recommending Monero is because of its low transaction fees. Because most cryptocurrency services charge a small percentage of the transactions as a fee, Monero is much more competitive when comparing fees. With the transaction fees being so low users of Monero enjoy having this low cost compared to other cryptocurrencies. It also has a growing community, which benefits from having an increasing amount of adoption.

You can also see Cryptocurrency’s daily prices by Market Cap on this CoinMarketCap website.

5. How do you get your first cryptocurrency?

There are two main ways of getting into the cryptocurrency world. The first is to buy a cryptocurrency, which you can do with any exchange that deals with fiat currency. The second is to mine cryptocurrencies. You can mine them using a PC or a mining rig that you’ve built yourself. 

There’s three main currencies used by traders that make up the cryptocurrency market. That includes Bitcoin, Ethereum, and LiteCoin. The value of all of these varies daily, so it’s not always easy to tell which is the best to buy and sell based on your personal needs.

Regardless of which one you’re interested in, they all serve different purposes and are useful in different circumstances. What is the purpose of buying Ethereum? To create an autonomous company or contract in the Ethereum ecosystem, basically any type of decentralized app. There are a lot of different companies and projects on Ethereum, which makes it quite valuable in and of itself.

Ethereum can be bought and sold for 1/6 of one bitcoin. The price is based on supply and demand, as there are fewer ether created every year than bitcoin. As of 2018, there were 100 million ether created every year:

“The supply of coins on the market is limited so the price must reflect that scarcity. At the time of writing on Dec 15, 2020, one ether was valued at 0.000212 BTC.” — Genesis Mining

This means you can buy into ether relatively cheap compared with other cryptocurrencies. 

Buying Ethereum can give you the ability to store data on the blockchain and run applications, however, it’s definitely not a “safe haven” to store your money.

Buying Bitcoin is a great way to start your crypto journey. The main use for Bitcoin is investing and specifically buying and selling the cryptocurrency. This has made Bitcoin quite valuable even after ten years as a popular investment.

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Posted by Pranav Hooda
Pranav is a serial explorer of new ideas and internal thought, a visionary and a transformational thinker. He launched his first business at the age of 21, while still learning about it in college. He hustled from the bottom and worked hard to build his company Orento Group. He has been on the forefront of transforming innovation in various industries such as marketing, finance, education and social entrepreneurship. Today he’s an investor, mentor, and speaker who has helped many entrepreneurs to find their vision and start their journey.
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