A digital currency is a type of currency that exists in digital form. That is, it is not a physical coin or paper bill. Instead, it is an electronic record of value that is stored in a blockchain, a decentralized database that keeps track of all digital currency transactions.
Bitcoin, the first and most well-known digital currency, was created in 2009. Since then, thousands of other digital currencies have been created. Some of the most popular include Ethereum, Litecoin, and Bitcoin Cash.
How Do Digital Currencies Work
All digital currencies work on a decentralized peer-to-peer (P2P) network. This is a network of computers that anyone can join. When you join a P2P network, your computer becomes a node in the network and helps to verify transactions.
For example, let’s say Alice wants to send Bob some digital currency.
First, Alice’s wallet creates a unique digital signature for the transaction. This signature is a string of numbers and letters that mathematically proves that the transaction came from Alice’s wallet.
Next, the transaction is broadcast to the P2P network. Every node in the network checks the transaction to make sure it is valid. Once the transaction is verified, it is added to the blockchain.
The blockchain is a public ledger of all digital currency transactions. It is decentralized, which means that it is not stored in any one place. Instead, it is stored on the computers of all the nodes in the network.
Finally, Bob’s wallet receives the digital currency from Alice’s wallet. The transaction is complete!
Digital Currency List
Now that you know how digital currencies work, let’s take a look at some of the most popular ones.
Bitcoin is the first and most well-known digital currency. It was created in 2009 by an anonymous person or group of people known as Satoshi Nakamoto.
Bitcoin is a decentralized currency, which means it is not subject to government or financial institution control. Instead, it is controlled by the network of computers that verify Bitcoin transactions.
Bitcoin can be used to buy goods and services, or it can be traded for other currencies (both digital and traditional).
As of December 2017, the value of one Bitcoin was over $11,000!
Ethereum is a digital currency that was created in 2015. It is similar to Bitcoin in that it is a decentralized currency that can be used to buy goods and services or traded for other currencies.
However, Ethereum has some key differences from Bitcoin. First, it has a built-in programming language that allows developers to build decentralized applications (dapps) on the Ethereum network. Second, it uses a different algorithm for mining, called proof-of-work (PoW).
As of December 2017, the value of one Ethereum was over $700!
Litecoin is a digital currency that was created in 2011. It is similar to Bitcoin in many ways, but it has a faster transaction time and a different algorithm for mining (called Scrypt).
Litecoin can be used to buy goods and services, or it can be traded for other currencies (both digital and traditional).
As of December 2017, the value of one Litecoin was over $200!
What Are the Benefits of Digital Currencies
First, they are fast and convenient. Transactions can be made quickly and easily, without the need for a bank or other financial institution.
Second, digital currencies are very secure. Transactions are verified by the network of computers that make up the P2P network. This means that it is very difficult to counterfeit or double-spend a digital currency.
Third, digital currencies are decentralized. This means that they are not subject to government or financial institution control.
This can be seen as a benefit or a drawback, depending on your point of view. Some people view decentralization as a good thing, because it gives power back to the people.
Finally, digital currencies are becoming more and more popular. As more people use them, their value is likely to increase.