What Is Cryptocurrency?

Cryptocurrency, or “crypto,” is any decentralized digital currency. Cryptocurrencies rely on cryptography or advanced mathematical algorithms, making them difficult to crack.

People use cryptography in daily life to protect passwords and keep data private on phones and computers.

Crypto, unlike traditional currencies such as the US Dollar, is not issued or controlled by a central government or bank. Instead, crypto is managed by massive, free-to-join networks of computers.

These computers maintain a shared ledger of all transactions on the network called a “blockchain.” The computers earn rewards in exchange for confirming that new transactions are valid. Most computers in the network need to agree when a new coin is produced or a new transaction is completed. Thus, the more computers that join the network, the more secure it is.

Most cryptocurrencies are finite in quantity, so some people view them as a hedge against inflation.

Cryptocurrency transactions are irreversible and permanent, recorded on a public blockchain.

Cryptocurrency is accessible to all individuals as it utilizes a public ledger known as the blockchain. Additionally, anyone has the ability to join the network of computers and generate new crypto.

Anyone with internet can participate in crypto, no matter where they are, their government, or credit score. This makes the ecosystem more fair, equitable, transparent, and global.

How Does Cryptocurrency Work?

Cryptocurrency works through a decentralized computer network that verifies and records transactions using cryptography. When a transaction initiates, it broadcasts to the network and miners verify it.

Miners solve math problems with algorithms. The first miner to solve it gets new cryptocurrency as a reward. Once the transaction verifies, it records on a public ledger known as a blockchain. The network maintains this ledger and users cannot alter or delete it.

What Is A Wallet?

A cryptocurrency wallet is a digital wallet that stores, sends, and receives cryptocurrency. It consists of public and private keys used to sign and verify transactions.

A cold wallet is a cryptocurrency wallet not connected to the internet. It’s safer from hacking, but less convenient than a hot wallet.

A hot wallet connects to the internet and is a type of cryptocurrency wallet. It is more vulnerable to hacking or other security breaches but also more convenient than a cold wallet.

What Is A Blockchain?

A blockchain is a public ledger of transactions maintained and verified by a decentralized, peer-to-peer network of computers. Computers collaborate to verify new transactions using various “consensus mechanisms” that differ depending on the specific blockchain.

Learn more about Blockchain and how it works here.

What Is A Cryptocurrency Exchange?

A cryptocurrency exchange is a platform that allows users to buy, sell, and trade cryptocurrency with other users. It operates similarly to a traditional stock exchange but with cryptocurrency instead of stocks.

However, regulatory authorities heavily regulate stock exchanges, while cryptocurrency exchanges lack any central regulatory authority.

What Is A Decentralized Exchange?

A decentralized exchange is a crypto exchange that works on a decentralized network without needing a central authority for transactions. This makes it more secure and less vulnerable to hacking or other security breaches. However, cryptocurrency exchanges do not have any major regulatory authority.

What Is A Digital Asset?

Anything stored digitally, uniquely identifiable, and capable of storing value is a digital asset. Cryptocurrency is one form of digital asset, but there are others.

What Is A Smart Contract?

A smart contract is a self-executing contract written in code and stored on a blockchain. It automatically follows the agreement when conditions are met, without needing a third party to enforce it.

Smart contracts on blockchain enable secure and transparent contract execution without intermediaries such as lawyers or banks. Instead, the terms of the agreement are encoded into a program and stored on a decentralized blockchain network.

Smart contracts have many potential applications, from finance and insurance to real estate and supply chain management. They can potentially revolutionize how we do business, enabling faster, more secure, and more transparent transactions.

What is A Stablecoin?

A stablecoin is a cryptocurrency designed to maintain a stable value relative to a specific asset, such as the US dollar, gold, or another cryptocurrency.

This stability is achieved through various mechanisms, such as using a reserve of the underlying asset to back the stablecoin or through algorithms that adjust the supply of the stablecoin in response to market conditions. These will be unavailable via WeStreet’s Crypto Portal when launched.

Difference Between Bitcoin & Other Cryptocurrencies

Bitcoin was the first cryptocurrency to be created and is still the largest and most widely known cryptocurrency. It operates on a decentralized, peer-to-peer network and uses a blockchain to maintain a secure and transparent ledger of transactions.

Cryptocurrency is a general term for digital or virtual currencies that use cryptography for security and are not controlled by any central authority. Many other cryptocurrencies have different features, such as anonymity, smart contracts, or low fees, but they are usually less established, less liquid, and more volatile than Bitcoin.

Two main differences between Bitcoin and other cryptocurrencies:

Purpose: While Bitcoin was created as a decentralized digital currency, other cryptocurrencies have been developed for different purposes, such as innovative contract platforms (e.g., Ethereum), privacy-focused transactions (e.g., Monero), or faster transaction times (e.g., Litecoin).

Technology: Different cryptocurrencies use different underlying technologies to achieve their goals. For example, Ethereum uses an other consensus mechanism than Bitcoin, and its programming language allows for the creation of decentralized applications (apps).

What is the role of cryptography in the Bitcoin and crypto networks?

Cryptography is the science of secure communication and data protection. Cryptography plays a critical role in the Bitcoin and crypto networks by ensuring the security and authenticity of transactions and maintaining the integrity of the blockchain.

Transactions are secured using public-key cryptography, which uses two mathematically related keys: public and private keys. The public key is shared freely and used to encrypt transactions, while the private key is kept secret and used to decrypt them.