What is a cryptocurrency?
Cryptocurrencies are digital assets (or digital money) created through cryptographic techniques that let you buy, sell or trade crypto securely. Cryptographic technology ensures data secrecy and integrity, which makes electronic currencies safe to hold and circulate worldwide.
A cryptocurrency is supported by a blockchain, which is a technology made to maintain the record of transactions. These blockchains are made of data blocks. Blocks go through a process of mining, a computerized process that solves complex puzzles to verify transactions on the network. Depending on the cryptocurrency, mining can be more or less rewarding, which determines its value.
These cryptocurrencies are known to pave the path of web3, a new conception of the web made up of blockchain-based platforms and technologies. This change aims to replace centralized corporate programs with decentralized community-run networks. This movement marks the future of transactions made without the involvement of third parties (like banks).
What are the most known cryptocurrencies?
Currently, there are two leading cryptocurrencies in the market: Bitcoin and Ethereum, each with different particularities and uses. The first one, Bitcoin, has facilitated the creation of Ethereum, which is more than a digital currency.
Bitcoin was released in 2009 and worked as stated in the previous paragraphs. With its ups and downs through the years, it has become accepted as payment in some countries. It provides a limited supply of coins, meaning that no more than 21 million Bitcoin can ever be mined or be in circulation.
On the other hand, Ethereum provides a place for digital money, global payments and coding applications. It’s open for everyone to contribute to its development and own, trade and use coins for NFTs or Defi applications. With so many usages, its volatility has led to a great change from a proof-of-work mechanism to a proof-of-stake one, which will make the mining process easier. If you’re curious about the Ethereum price USD, know that it can be influenced by certain factors, such as the cost of production, media coverage and cryptocurrency trends.
Why do cryptocurrencies fluctuate?
Like with physical cash, the value of digital money can oscillate due to some external factors. Their prices will never be constant because their value is given by the number of users and new technologies. Therefore, as people’s technical knowledge develops, so are these crypto applications. Therefore, here are some of the most known reasons for price fluctuations:
- Supply and demand (higher prices, more coin supply, less demand and vice versa)
- Cost of production (if the cost of mining exceeds the result, the value of a cryptocurrency increases)
- Social Media (if influential social figures talk about a certain blockchain, people are more likely to give it a try)
- Trends on cryptocurrencies (with the rise of NFTs and DeFi applications, the Ethereum blockchain also increased in popularity)
What can you do with cryptocurrencies?
As discussed before, different cryptocurrencies offer plenty of transfer opportunities and much more. But is it worth it to invest in these trends? Well, these blockchains have many uses and benefits, such as:
- A peer-to-peer exchange method facilitates low-cost, fast, and private transactions worldwide. By providing a more inclusive financial system, the crypto industry gained popularity even for people who don’t have access to traditional financial systems.
- You can buy technology, e-commerce sites, cars and insurance through secure payments. This is possible thanks to the development of DeFi technologies (decentralized finance) that aim to provide an open, pseudonymous, flexible and fast financial system for all its users.
- You can also exchange NFTs, which are most part of the Ethereum blockchain. These non-fungible tokens are unique, and you can’t find two with the same properties. You can find mostly art under the form of NFTs, but it doesn’t stop here. Through the Ethereum system, you can play games from the blockchain to produce money, as the well-known play-to-earn movement has recently increased in popularity.
How to mine?
Mining might seem simple, but you need to complete a few steps to get results and watch how the market changes so you can think of your next move. Depending on the cryptocurrency preferred, mining is done differently. For example, both Bitcoin and Ethereum use a similar method of verifying data blocks. Still, while Bitcoin miners saw a considerable rise in network hash power and its value went down, Ethereum took care of these concerns regarding mining difficulties and changed to a proof-of-stake technology.
Therefore, if you want to start mining, first choose a cryptocurrency, then:
- Set up your hardware (computer or laptop, but as you get experienced, you need a powerful setup specifically designed for mining)
- Create a digital wallet
- Configure your mining equipment and start mining
The process itself isn’t difficult, as the computer is doing the work for you, but you still need to do regular check-ups and keep on learning about what’s new in the market. Additionally, to get more money, you can also play some games you can find in the Ethereum blockchain, for example, to diversify your portfolio.
If you plan to start mining, the time is now. You only need to do some research, understand how the process works, and decide if it’s worth the investment. More and more people mine and earn digital coins, providing a safe and secure way to earn their existence in the long run or try to invest in a new hobby.