Cryptocurrency : Definition, How Many Are There And Where You Can Buy Them

Cryptocurrency : Definition, How Many Are There  And Where You Can Buy Them

A means of payment that is not under the control of any government. A store of value that works entirely digitally. And in the best case also a unit of account for goods and services. These are ideals that numerous cryptocurrencies strive for. The group is entirely mixed. The idea of ​​cryptocurrency can be implemented in completely different ways.

In its – still short – history, there have already been enormous return opportunities but also dramatic collapses and fraud.

What is cryptocurrency?

Put, a cryptocurrency is an asset that can be traded. Not everyone likes the linguistic proximity to money and currency (you can read more about this question below).

Automatically, you probably have images of Bitcoin or Ether coins in your mind because many articles or films are illustrated with such symbolic photographs.

Cryptocurrencies only exist in digital form and not as cash. Every cryptocurrency has a blueprint, or some rules of procedure, that defines its purpose, how it works, and clarifies such questions as how

  • How are new units of cryptocurrency created?
  • How are transfers checked, processed, and documented?
  • How to change cryptocurrency rules of procedure?

These aspects are also regulated for traditional currencies. However, their rules of procedure are not summarized in a document or program code but result from a large number of laws or simply from general habits.

For example, only the European Central Bank may issue the euro as new cash. It received its mandate from the parliaments of the euro countries, which could also change it or theoretically withdraw it.

Individual commercial banks can create a book or bank money anew when they issue loans.

(This means: If someone pays 100 euros into the bank account, the bank does not store the entire amount but passes a multiple of it on to other customers who take out loans.) And payment transactions in euros are checked and documented differently depending on the type:

How many cryptocurrencies are there?

As of mid-2022, there are over 10,000 different cryptocurrencies. Among them are several non-public and dead files for which there are no current transactions and price data.

Several hundred titles are usually traded on extensive crypto exchanges. The market capitalization of all cryptocurrencies, i.e., the shares in circulation multiplied by the current market value, was almost 900 billion euros in June 2022.

In 2021, this market capitalization was nearly 3 trillion euros due to the higher rates of many currencies.

Are Cryptocurrencies Actually Currencies?

The term cryptocurrency is also viewed critically. We chose to use it in our lyrics because it’s catchy and familiar, but we want to address a few limitations.

Let’s first look at the word component currency: Bitcoin and Co. have in common with conventional or state currencies on the one hand that they can be used as speculative goods.

Accordingly, some traders bet on price movements in the yen, franc, or dollar. Even the exchange itself feels similar because there are always current exchange rates and specialized dealers. But there are significant differences.

If you look at the guarantee, which is linguistically contained in the currency, this takes place entirely differently. A state guarantees – more or less credibly – the value of its currency.

Any government agency does not guarantee the value of a cryptocurrency. Depending on the concept of the respective cryptocurrency, there may be accompanying guarantees: With Bitcoin, for example, the code states that there will be no more than 21 million units.

However, this says nothing about the exchange value of Bitcoin in everyday goods. Stablecoins have some form of regulation that pegs their value to another asset, such as tether to the US dollar.

The guarantee the Swiss National Bank gives for the franc is probably more severe than that of a dictatorship or a developing country. Likewise, the value proposition of the Bitcoin concept is certainly more resilient than any fun coin.

In addition to the function of exchange and store of value, traditional currencies have a third role, namely that of a benchmark.

This means that prices are quoted in the respective currency or recorded in contracts (e.g., the monthly salary in euros or a barrel of crude oil in dollars).

Cryptocurrencies rarely assume this role, which is not the least due to the substantial price fluctuations. Even Bitcoin is usually exchanged at the current daily rate of a national currency such as the euro.

The word crypto is also questioned – albeit less frequently. The argument: Indeed, the projects are primarily based on cryptography, i.e., encryption and technologies. In the sense of “hidden” or “secret,” the use is not to be considered.

After all, a central component of a cryptocurrency is a database, often implemented as a blockchain. Therefore, it is possible to trace every single transaction – utterly different from cash.

With the help of pseudonyms, this is not so wild in everyday practice, but the objection is worth considering.

Alternative names for cryptocurrencies are crypto money (some criticism also applies here), crypto value unit, or English crypto asset and crypto asset.

On the other hand, state currencies such as the euro and francs are referred to as fiat currencies, especially in the crypto industry.

For example, this is intended as a distinction in formulations such as “Here you can deposit Fiat currency and exchange it for Bitcoin.”

“Fiat,” Latin for “it will,” is intended to emphasize that they are not linked to a commodity – which again raises the question of whether cryptocurrencies would then not also fall under this definition.

Which cryptocurrencies are the most important?

The oldest and, by far, the most common cryptocurrency is Bitcoin. Its share of the total market capitalization is roughly 40 percent.

Ether (Ethereum) is in second place, with a share of about 15 percent. The other cryptocurrencies in the top group follow again at a distance.

Since the vast majority of cryptocurrencies fluctuate significantly in value, i.e., have high volatility, the order and market capitalization can also change quickly.

Bitcoin

The name of the oldest, best-known, and most relevant cryptocurrency is formed from the unit of measurement bit for digital data and the English word coin for the coin: Bitcoin abbreviated BTC.

Bitcoin has been tradable since 2009. Bitcoin’s blueprint is written in open-source software. New bitcoins are created through cryptographic arithmetic tasks, and the difficulty level increases over time – which is why large data centers and high energy consumption are required.

These arithmetic tasks also confirm transactions and archive them in the blockchain data list. The technical term for this method is Proof of Work. According to the Bitcoin software, a maximum of 21 million BTC can be created, no more.

Ether (Ethereum)

Ether is the cryptocurrency on the Ethereum blockchain. Ether is also used for payment transactions, but its particular application area is smart contracts, i.e., digital contracts that work like software and can process data.

Ether is particularly important in the area of ​​NFTs. To create these digital certificates, you have to pay transaction fees in Ether. The abbreviation for Ether is ETH.

Dogecoin

The Dogecoin is probably the epitome of the group of fun coins, described by some much more critically as Shitcoins.

Another collective term is meme coin, from the English word for mostly jokingly ironic allusions in social networks. Launched in 2013 as a parody of Bitcoin, Dogecoin is consistently one of the most traded cryptocurrencies.

Hardly any text about Doge can do without a symbolic image of a coin with a dog face, a Shiba Inu. Unlike Bitcoin, Dogecoin has no cap on the total number of units that can be created.

The correct pronunciation for Dogecoin is when you first say “do” so that it rhymes with “show” and then a soft sh like at the end of “garage.”

stablecoins

A stablecoin is a cryptocurrency pegged to another asset, often the US dollar. Stablecoins are thus a kind of link between the remaining cryptocurrencies and the analog currency world.

They make exchanging from one cryptocurrency to another easier if users want to protect themselves against excessive fluctuations in value as an intermediate step.

However, there are different concepts among the stablecoins on how the pegging to the dollar or other assets is regulated. Tether (USDT), USD Coin (USDC), and Binance USD are the most well-known stablecoins.

Where can you buy cryptocurrencies?

Even if neither die-hard crypto fans nor supporters of the traditional currency system particularly like the comparison: there are similarities with conventional exchange offices.

You can exchange critical currencies such as US dollars or euros in many places and more exotic currencies from smaller countries much less frequently.

Regarding platforms for cryptocurrencies, most providers have Bitcoin and Ether (Ethereum) in their range, but even after that, it fans out a lot.

There are exchanges with well over 100 different cryptocurrencies. According to Binance, it even has over 600 on its list.

The Tech Spree

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