Isn’t Bitcoin and Ethereum just a coin, what’s so special about it?
All Crypto are actually pieces of code, there is no physical coin behind them, they are digital currencies. Everything is digital and these coins can be programmed to have functionality behind them.
Cryptocurrency has been all the buzz these days, with claims of making you a millionaire if you buy a certain coin. While this can happen, always do your research on the coin before you invest in it. There are many scams where you can lose all your money or get rug-pulled as they say and a coin can suddenly drop in its value or dump resulting in you losing all your money.
Crypto has value and can be used for different things depending on the functionality of the coin. Starting with Bitcoin, it is built on the Bitcoin ecosystem which allows it to be sold and bought and the functionality ends there. On the other hand, Etherum has many more use cases because of its own ecosystem. Many argue that one is better than the other when in the end it’s all just based on the person’s opinion.
Cryptocurrency is meant to be an alternative to fiat money that’s controlled by a certain group of people. It’s decentralized which means no organization or government owns it. Crypto is so great because it’s a currency for the people. You can become part of the coin governance system by owning a certain number of coins or by staking the coin. As part of the community, you gain certain rights such as voting or you can submit proposals on things that can be approved which can make protocol changes for the currency. Gaining these rights is different for each currency and has to be formulated a certain way to prevent being taken over by a select group of individuals. This type of governance cannot be found in fiat currencies where central authority has full control over everything. Bitcoin was the first of its kind to come out then Ethereum was made and unlocked a new world to be explored.
So how is cryptocurrency different from fiat currency?
There is a limited quantity of crypto and each coin has its own market cap. There will only be 21 million Bitcoin created ever which makes it valuable. Unlike fiat money which has an unlimited amount and can be printed infinitely. This devalues the money as more of it gets printed and inflation becomes a big issue for fiat money. Certain crypto does not get affected by inflation.
While there is already Bitcoin in circulation, in order to get new Bitcoin, it needs to be mined which is a process that involves a computer solving a cryptographic has an algorithm called SHA-256. High tech computers are needed to solve these sophisticated problems and it uses a lot of electricity. Not all crypto needs to be mined because there is a different consensus mechanism that is used depending on the currency and is more efficient called the Proof-of-stake model. There is an incentive to min crypto because you can earn crypto as a reward. Investopedia states “Cryptocurrency mining is painstaking, costly, and only sporadically rewarding.”
Bitcoin has a halving that takes place which halves the rewards the miners get. This ultimately makes Bitcoin more valuable as the demand stays the same, but the rewards decreases.
Crypto is the beginning of a new world that is decentralized and the opportunities it creates are endless.
