Exploring a new city as a first-time traveler can be scary. However, having a roadmap with descriptions of places to see and cuisines to try can be all the help you’ll need. The world of cryptocurrency is like visiting a new city.

Living in your old city all your life can make you view the city as the ideal world. Yet more exciting cities lie ahead of you. They can make the experience worth remembering. All you need to do is take that bold step. Book a flight. Begin exploring the goodness of life through your travel experience.

How does that sound?

Thrilling, right?

This article will be a roadmap to guide you as you explore cryptocurrency. At the end of this article, you'll see reasons why you need to accommodate digital currencies. These include crypto. You’ll understand practical ways to explore cryptocurrency. You’ll learn about buying, selling, and trading it.

Fiat Currency vs Cryptocurrency

Cryptocurrency is a type of digital or virtual currency. A holder of this currency does not need to own physical cash. Like fiat currency, cryptocurrency is also a medium of exchange and storage. The differences between fiat and cryptocurrency are as follows:

• Fiat currency operates within the confines of a central body. Cryptocurrency cuts across a central body.

• A central government creates and issues fiat currency notes. Individuals or groups create cryptocurrencies.

• Fiat currency is a currency that is specific to a certain country. Cryptocurrencies are digital money. Anyone from anywhere in the world can use and own them.

• A central bank owns and controls a fiat currency for its citizens. Individuals own and control their own cryptocurrency.

• Examples of fiat currency are the naira, euros, pounds, and dollars. Examples of cryptocurrencies are Bitcoin, Ethereum, Litecoin, and Dogecoin.

However, there are limitations attached to using a fiat currency. When a user engages in an online transaction, the following reasons may limit them:

• Unstable network

• The daily transfer limit exceed

• System malfunction

• High charge rate

The advent of cryptocurrency seeks to address the shortcomings of a fiat currency.

What is Cryptocurrency?

The term "cryptocurrency" refers to a type of currency. It is "cryptography" (like a secret code) and "currency" (like dollars or coins). It uses this secret code to keep payments safe and offers a different way to buy and sell things.

Imagine cryptography as a special math code that hides information. It turns it into a secret message that only the right person can understand.

Now, let us attempt to narrow down what cryptography can mean to you:

Have you ever seen a movie where the government sends a coded message to a secret agent? Only the agent can decode it. This coded message is possible due to cryptography. The code can be a string of letters, like a puzzle to track down a culprit.

One of the most important aspects of cryptography is that it secures data

Advantages of Cryptocurrency

The advent of cryptocurrency made it possible to change the financial ecosystem. It seeks to give individuals the ability to be in charge of their finances. It also aims to enable them to take part in every financial decision. The following are the benefits of crypto:

• No third-party interference

• Ease of transactions

• Security of user identity

• Less costly to transact

• It’s decentralized

• Financial autonomy is possible

• It is secured

Understanding How Cryptocurrency Works on the Blockchain

Having gained an understanding of what cryptocurrency is, let’s take a look at how it works-

A cryptocurrency is a decentralized form of transaction between two or more people. You can save, invest, or spend your fiat currency. A cryptocurrency holder can also decide to save and invest their crypto. A crypto transaction takes place on the blockchain.

Cryptocurrencies are like digital money. They use something called blockchain to keep everything safe and secure. Blockchain is like a super-secure digital ledger. Cryptocurrency and blockchain often go together. Many people around the world are familiar with and use them.

Cryptocurrencies are digital assets on the blockchain. Each group of transactions in the blockchain connects to the next one. Once you connect them, you cannot change them. It's like making a chain of unchangeable digital blocks!"

Let us illustrate:

Imagine Participant A wants to send 5 BTC (bitcoins) to Participant B. The blockchain is like a big digital network. It tells everyone about the transaction. All the connected computers (nodes) check and make sure the transfer is real.

By verifying, they try to see if Participant A has that amount of BTC in his crypto wallet. If Participant A does not have up to 5 BTC, the transaction becomes invalid. Then, the blockchain will store and record the transaction.

Also, when a user verifies a block, they can get crypto that they can use for exchange or storage. Miners and validators compete to get the block added to the blockchain. This process is known as the consensus mechanism. The miner or validator who adds a block to the blockchain receives minted crypto as a reward.

NB: We use a digital wallet to store cryptocurrencies

When can you use cryptocurrency?

You can use cryptocurrencies to transact at any time of the day. A holder of Ethereum in Nigeria can transfer it to someone in China from home. Use a phone, computer, or any device with an internet connection. This ensures smooth transactions. Also, be sure you have enough crypto.

Popular Cryptocurrencies

Bitcoin: Satoshi Nakamoto could be either an individual or a group name, linking to the inventor. The most widely used and well-known cryptocurrency is called Bitcoin. One interesting fact about Bitcoin is that most people who own it prefer to hold it for the long term. They do this while believing that the value of Bitcoin will appreciate over time.

In 2009, creators launched Bitcoin as open software. Satoshi minted the first 50 coins, which had no value then. However, the first transaction entails a software developer, Laszlo. He buys two pizzas for 10,000 bitcoins.

Bitcoin's early success led to the creation of other cryptocurrencies. People referred to these other models of Bitcoin as alternative coins, aka altcoins. Being the first of its kind, demand for Bitcoin in the market increased as of 2010.

Bitcoin's first loss in 2013 widened its visibility to the whole world. People wanted to learn more about cryptocurrency. Also, the release of 21 million BTC has resulted in 19 million currently in circulation.

Bitcoin transactions do not happen the way we do at our traditional bank. Here, the sender is more like “writing on a sheet” (of paper) for all to see. This is for those connected to that network, showing that digital cash is going out.

That “sheet of paper” is a kind of database called the blockchain. Everyone who peered at that network gets a copy of that sheet. The blockchain uses a mechanism called mining when it adds new information to that sheet.

Also, once you add data or information to the block, changing it becomes difficult. For this to be possible, the blockchain includes a pointer to the previous block in every next block. The pointer is called a hash of the previous block. This makes the blockchain secure.

Ethereum: Ethereum launched in 2015. Vitalik Buterin is a computer programmer. We know him as the founder of the Ethereum network.

Based on blockchain technology, Ethereum is open-source software. It has ether as its native currency. Although Ethereum is not the largest cryptocurrency, people consider it the second largest. This is because the Bitcoin network was first created and popularized. It also has more users holding its native coin, BTC.

Even so, Ethereum has a certain advantage over other cryptocurrencies. Ethereum has shifted from being a digital currency. Now, it also accepts programs that run on its blockchain. A common example is smart contracts. Smart contracts are programs that self-execute transactions. They do this after meeting certain agreed-upon conditions.

Smart contracts are computer programs that work on the Ethereum network. Developers and creators can use these smart contracts to create different things. They can create special apps, like Decentralized applications (DApps). Decentralized finance (DeFi) is one type of DApp.

Litecoin: Two years after the creation of Bitcoin, Litecoin was formed. In 2011, an ex-Google engineer, Charlie Lee, created Litecoin. Bitcoin served as the basis for Litecoin. That makes it an altcoin.

After that, Litecoin was developed using a copy of the open-source code for Bitcoin, with a few modifications made to solve the scaling problem with Bitcoin. This indicates that Litecoin can handle transactions with greater speed than Bitcoin.

Litecoin seeks to address significant changes. However, the Bitcoin model from which it was created has a wider market value. This is because of its rise in demand. Bitcoin’s higher demand and lesser supply affect the market size of Litecoin.

The fact that Litecoin has a distinct cryptographic algorithm is another significant feature. Additionally, it uses a separate hashing value. Litecoin uses Scrypt, whereas Bitcoin uses SHA-256.

Litecoin has released 84 million coins. They have already mined and are currently using more than 70 million. Based on demand and supply factors, the market value of Litecoin is often lower. These principles say that the higher the demand, the lower the supply. The good thing about Litecoin is that it can serve its purpose depending on the user’s financial goals.

Conclusion

This article has introduced you to a comprehensive understanding of cryptocurrency. People consider Bitcoin to be the first official cryptocurrency ever used. People refer to all other cryptocurrencies as altcoins. However, cryptocurrencies have opened the world to a whole new level of interaction. All thanks to the blockchain for making this possible.

People from all around the world are interacting and trading at the same time. Cryptocurrency has lots of benefits in the future. We expect that you, as users, should not be left out. Begin now to explore and learn more about this digital currency.