Cryptocurrencies are an exciting new technology poised to disrupt the way financial transactions occur. Whether money is sent, spent, invested, or more, cryptocurrencies represent a paradigm shift in how we think about money. Cryptocurrencies have been around for over 8 years, and they currently have a market value of around $170 billion. Recent media spotlight paved the way for more and more people to take note and delve a bit deeper into the world of cryptocurrency and its purpose. Here, at CryptoUniverse, we aim to provide a step-by-step guide to cryptocurrency and to explore some of the most popular altcoins that are currently revolutionizing the way we perceive money .

What is a cryptocurrency?

Cryptocurrencies are distributed digital currencies, much like a form of digital cash. They allow for seamless, direct, and extremely fast transactions between parties. You have full control over your payments and balance, you can spend and earn with ease and transparency and you don't need to rely on a central authority to validate your transactions, as all validation is done by the cryptocurrency network. As such, while a bank might have a database that's an obvious target for hacking for someone to steal your money, cryptocurrencies aren't susceptible to these attacks. Additionally, cryptocurrencies can process transactions in a matter of seconds or minutes, and not hours or days as it may take to send money today.

Cryptocurrencies, often referred to as coins, are stored in digital 'wallet' that you use to manage your payments. Your wallet is protected by a private key - think of it like an extremely complex password - that only you know about. You can spend or send money by submitting a transaction from your wallet to someone else's. Like cash, you can spend the money however you want - whether lending to a friend, paying for lunch, or even paying an employee. Unlike cash though, as cryptocurrencies are digital you can pay with a wallet app on your phone, with a special keychain, and in other ways that make cryptocurrency easier to use.

How Do Cryptocurrencies Work?

Cryptocurrencies were developed as an application on top a cryptographic invention known as blockchain, hence the name cryptocurrency. Blockchain is a technology that will support multiple technologies - cryptocurrency is just one of them. But importantly cryptocurrencies, as we have them today, would not be possible without the blockchain technology. So, what is blockchain?

A block is a complex mathematical problem based on a cryptographic technology (called a 'hash') which computers aim to solve. Once the mathematical problem is solved, the block is 'complete'. The important property of a block is that if you change any information inside of it - like transaction data - becomes invalid, or broken. The only way to fix it is to replace the incorrect data with the correct, original, data. When a new block is created, it takes data from the previous block, creating a link - hence the term blockchain. In a blockchain, if any data in any block is altered, the entire blockchain from that point onwards is broken. You can think of it like a tower of wooden blocks, if you break one block in the middle of the tower, all the blocks above it topple over. The only way to 'fix' the tower is by correcting the data that was tampered with. In fact, blockchains are often measured in terms of 'height' which is the total number of blocks in the tower. So, the older the data is, the more secure it becomes. Generally, a block will be considered 'valid' once enough additional blocks are added to the chain in order to ensure security. In cryptocurrencies, the blockchain is used to store an immutable transaction ledger for the currency.

People called miners solve these mathematical problems. They are responsible for bundling together transactions and then solving the mathematical puzzle. Mining can be very computationally difficult and thus requires powerful computers to solve these puzzles. The computers cost money and importantly require electricity to run. In order to incentivize people to mine, they are given a prize for their work - either in new coins, transaction fees, both, or otherwise. Part of a miner's job is also to ensure that transactions are valid. They do this by ensuring that the person attempting to send coins has enough to send - they can examine the existing blockchain to determine a wallet’s balance. Because the blockchain is available for anyone to view, every transaction made by every wallet is visible to all. While this may seem like a privacy concern as someone can track your balance and spending, you can actually have as many wallets as you want, and there are technologies and specific cryptocurrencies that exist to provide complete anonymity while still maintaining the integrity of the blockchain.

Now that you have a bit of a better understanding of what cryptocurrency is all about, you may want to do some further research and eventually get started by buying some crypto. In order to do this, you first need an electronic wallet; to create one, sign up to a Bitcoin Wallet Service ( Coinbase, Blockchain and Xapo ) and download the app. Always remember to secure it, as you don't want any thieves hacking your electronic wallet. You can use Google Authenticator or a security key, for example, YubiKey, to ensure full protection for your cryptocurrencies.

Congratulations!

By purchasing cryptocurrency, you are actively participating in the revolution of the financial sector! You are now ready to enter the exciting world of cryptocurrency, invest, trade and, most importantly, have fun while enriching your knowledge - and hopefully your wealth too. Remember to always stay informed and explore new currencies that enter the market, which is in a continuous expansion.

Good luck!