Making Sense of Cryptocurrency

Let’s start with some quick definitions

Cryptocurrency is a kind of digital currency which uses cryptography for transactions and generating new units.

In principle they can be exchanged for goods and services online. Eg: Bitcoin

Unlike USD and Euro that can be used physically. Cryptocurrency is only digital, and its supply is not determined by a central bank.

Most cryptocurrencies use distributed ledger technology, called blockchain.

Most of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices upward.

Let’s find out how some cryptocurrencies work

PoW (Proof of Work) Bitcoin mining is the process by which new coins are created and entered in circulation.

It is also a system that involve the use of computer processing power and energy resources to solve mathematical problems, verify transactions and secure a cryptocurrency network.

In return for carrying out these tasks’ miners are rewarded with cryptocurrency tokens.

The concept of Bitcoin can threaten the dominance of fiat currencies and government control over the financial markets.

For this reason, Bitcoin is completely illegal in certain places.

One additional potential risk from the growth of bitcoin mining (and other proof-of-work systems as well) is the increasing energy usage required by the computer systems running the mining algorithms.

There are, however, efforts to mitigate this negative externality by seeking cleaner and green energy sources for mining operations.

Section 2: Ethereum Launched in 2015

Ethereum is an open source blockchain based platform that enables smart contracts and distributed applications (DApps) to be built without any downtime, fraud, control, or interference from a third party.

Ethereum is not only a platform it also has its own associated cryptocurrency (ETH)

In addition, Ether is released via the mining process, like Bitcoin.  But earlier last year Ether has switched to Proof-of-Stake model, which is more environmentally friendly, there is no longer miners but validators

The Proof-of-Stake (PoS) has been created as an alternative to Proof-of- Work (POW). It is a consensus algorithm that is particularly secure and achieves a lot more scalability.

It doesn’t require specialized hardware or massive mining rigs like PoW does, which makes it much more accessible to the average person.

PoS also eliminates the economic barriers for entry because you can buy your way into the network by buying coins through an exchange rather than mining them yourself.

Section 3: Dogecoin launched in Dec 2013

Created seemingly as a joke, Dogecoin has surprised more than one.

Indeed, from its opening price at around 0.0005588 USD in 2013 the price has rose today at 0.1727 with many fluctuations in between.Its underlying technology is derived from Litecoin and has the same proof-of-work mining process.

Notable features of Dogecoin which uses algorithm, are its low price and unlimited supply. Dogecoin has a loyal community of supporters who trade it and use it as a tipping currency.

Dogecoin is an “inflationary coin,” while cryptocurrencies like Bitcoin are deflationary because there’s a ceiling on the number of coins that will be created.

Every four years the amount of Bitcoin released into circulation via mining rewards is halved and its inflation rate is halved along with it until all coins are released.

Cryptocurrency Lexical Field

MEMECOINS

As suggested by the main, they are mainly inspired by internet memes.

Usually, they have no inherent value or utility. However, when they are backed by a huge community the value can increase other time.

Most people investing in them because of the low price, and the potential to achieve huge profit if they grow.

Ex:  Dogecoin and Shiba Inu