By Janine Grainger
In today’s world of finance, crypto literacy is more important than ever. By understanding the technology behind crypto and its potential, you can learn to navigate this exciting new world with confidence. In this article, we’ve set out to demystify the fundamentals of crypto, including its innovative nature and why it’s worth paying attention to.
What is crypto?
Imagine a digital form of money that allows you to pay for goods and services and send money to friends and family locally or overseas almost instantly with just a few taps of your smartphone. All of this, and more, is possible with crypto! Crypto simply refers to digital currency or virtual money that you can transfer – without intermediaries like banks – over the Internet.
Why do they call it ‘cryptocurrency’?
The term ‘cryptocurrency’ is a combination of the words ‘cryptography’ and ‘currency.’ Cryptography, in layman’s terms, uses advanced maths to prevent unauthorized spending. The technical details of this are complex, but in a nutshell, it means that your transactions are secure and protected by cutting-edge encryption.
How does crypto work?
Unlike traditional payment gateways or finance institutions, crypto enables individuals to act as their own banks and to communicate and transact directly with one another. Using super easy-to-use apps, you can start transacting within minutes, without the need for a ‘middle man’.
Every single transaction you make is recorded on ‘the blockchain’. This is simply a public ledger/record of all crypto transactions that is shared across all participants. It is designed to be transparent, secure, and decentralized. Because it is so widely shared (distributed), it is impossible to tamper with. You can transact directly with other users on the blockchain network whether they are in the same country as you or on the other side of the world.
There are hundreds of digital coins and tokens that operate using the blockchain. Two of the most well-known ones are Bitcoin and Ethereum. Some have broad uses as a digital currency, while others have very specific, niche uses such as lending.
How is crypto different from traditional (fiat) money?
Global accessibility
Anyone can use crypto. Whereas centralized payment services like banks require your identity, address, and other key details to open an account, crypto is ‘permissionless’ and can be used at any time.
Permissionless crypto accounts provide equal access to financial services for everyone regardless of geographical location, socioeconomic status, or access to traditional banking infrastructure. As long as you have internet access, you can participate in the crypto economy. Crypto has effectively spread digital commerce around the globe so that anyone with a mobile phone can start making payments.
Enhanced security and ownership
Since permissionless crypto accounts all make use of cryptographic technology, your account and your transactions are secured using complex advanced mathematical algorithms. If you store your crypto in a crypto ‘wallet’, you have ultimate control over your funds and can manage them independently. Because the blockchain network is decentralized and available to all participants, it is virtually impossible for hackers to shut it down.
No restrictions
Traditional currency is controlled by central banks and the government. Although their operations are usually tightly controlled and scrutinized, they are able to simply freeze your bank account and deny your access to your funds. For instance, in the United States, the government has the right to all your business assets if you pass away and don’t have a will. With cryptocurrencies, you and only you can access your funds.
What’s more, with traditional money, every time you make a transfer, a middleman like your bank or a digital payment service takes a cut. With cryptocurrencies, all the network members in the blockchain are middlemen and none of the limitations imposed by banks, governments, or other centralized authorities apply.
In today’s world of finance, crypto literacy is more important than ever. By understanding the technology behind crypto and its potential, you can learn to navigate this exciting new world with confidence. Don’t be left behind – become crypto-literate today by embracing the future of finance and all that this brave new world offers.
About the author: Janine Grainger is the Co-Founder and CEO, of Easy Crypto. Disclaimer: Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
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