What Are Cryptocurrencies?
Cryptocurrency refers to a digital, or virtual, medium of exchange. It’s meant to work similarly to traditional currencies in that you use it in the trade of goods and services. These digital currencies use cryptography for security and verification of all transactions. Cryptography is also the means of controlling the release of new units of said cryptocurrency. Cryptocurrencies are essentially data controlled by limited entries in a public database, but no one can enter new data until specific conditions are met. Cryptocurrencies are more easily defined by what they are not. They are a currency, but none are printed, there is no backing government and usually no central agency, and there is not and never was a physical commodity backing the value of cryptocurrency. Cryptocurrencies are money but they are not money as we picture it.
Most Popular Cryptocurrencies
Everyone has likely heard of Bitcoin at this point. It is an established part of our cultural lexicon and has been referenced across popular culture. However, it is but one of many cryptocurrencies in use right now, albeit the best known. Right now, financial experts estimate the top five most important cryptocurrencies to be aware of are as follows:
Bitcoin was the first modern implementation of a cryptocurrency and boasts the first practical use of blockchain technology. It has become the best-known cryptocurrency and is also the biggest business within cryptocurrencies, with a market cap of approximately $200 billion.
Etherum shares Bitcoin’s blockchain technology but features smart contracts. Smart contracts automate the application and execution of agreed-upon rules when implemented. This offers protection to all parties involved, which eliminates confusion and may save legal difficulties should transactions go awry.
Litecoin is actually based on Bitcoin but is meant to be more of a peer-to-peer payment system—fast and easy to use. It is plagued by volatility but has grown significantly in the last few years.
Bitcoin Cash is a potential successor to Bitcoin. Bitcoin was difficult to scale up and Bitcoin cash is meant to address that specific issue. So far, the two cryptocurrencies work simultaneously but separately.
Ripple is the cryptocurrency used within the Ripple network, a payment system different from most other cryptocurrencies in that it is designed for use by financial institutions, not consumers. It is also not truly decentralized, as it is managed by a company.
The Future of Cryptocurrency
Cryptocurrencies like these are putting on a fascinating show right now, but as to what the future may hold for these and other digital currencies, no one knows. They are alluring, and seem to be gaining value, but are constantly beset by raging volatility and uncertainty. Most experts advise that you hold no more money in cryptocurrencies than you can afford to lose in a collapse situation. We at APMEX encourage you to continue watching and researching cryptocurrencies before taking the plunge yourself.