What is Cryptocurrency? How Do I Get Started Trading?
The simple explanation of cryptocurrencies is that they are electronic money. They can be exchanged in digital form for cash. However, you may not know what cryptocurrencies are or how they work.
Each day, hundreds of millions of dollars change hands via currency trading using the major currencies. It’s a fairly safe way to make transactions and many people use it as a form of investing. However, there is no physical cash involved – it’s all electronic.
A cryptocurrency is the first type of Blockchain. The Blockchain is a decentralized database that everyone in the industry has come to know and love. This decentralized database stores transactions.
Each block of data in the Blockchain is called a “Coin”. There are two types of blockchains. One is known as a public Blockchain where everyone can see everything and the other is called a private Blockchain where only a select few people have access to the data.
Cryptocurrency is a form of currency exchange. Everyone must have money in a currency they control, otherwise they cannot participate in the cryptocurrency market. Currency exchanges happen everyday on the real world. The exchanges take place in digital form.
Before a cryptocurrency exchange happens, people agree on the exchange rate before a particular currency comes up for trading. A currency exchange happens once someone exchanges one cryptocurrency for another.
A cryptocurrency exchange is conducted by a centralized authority. These centralized authorities have the power to control the currency that is traded on their Blockchain. Some of the most popular exchanges are Bitfinex, Coinbase, and Kraken.
Exchanges are managed by computers that keep track of all the currency transactions that happen in the world. These computers have the ability to send information to the whole network. Once this information has been received, the decentralized database processes the information and creates a block.
A block is composed of a specific currency. Blocks are created in sequence; when a block is created, another block follows immediately afterwards. The number of blocks that follow each other is referred to as a “coinbase”.
The actual transaction is the completion of a block. A block can also be known as a transaction.
On average, cryptocurrency exchanges will take several hours before the exchange rates are finalized. This is a feature that allows buyers and sellers to make sure they get the best price available. The duration of a cryptocurrency exchange depends on the speed of the transaction and the volume of activity that take place.
Cryptocurrency exchanges are subject to many fluctuations in exchange rates. Price fluctuations are a great benefit to investors.