A cryptocurrency is a digital currency that uses cryptography for security. A cryptocurrency is difficult or virtually impossible to counterfeit because of this security feature. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
There are more than 700 cryptocurrencies available for trade in online markets, however only a few dozens have reached a sizeable market capitalisation above $10 million. The most popular example of cryptocurrencies is Bitcoin, further examples are Dash, Monero and Litecoin.
Currently, most people use a trusted middleman such as a bank to make a transaction. Blockchain allows consumers and suppliers to connect directly, removing the need for a third party.
Using cryptography to keep exchanges secure, blockchain provides a decentralised database, or “digital ledger”, of transactions that everyone on the network can see. This network is essentially a chain of computers that must all approve an exchange before it can be verified and recorded.
Many people know it as the technology behind Bitcoin, but blockchain’s potential uses extend far beyond digital currencies.
Bitcoin is a digital currency (also called cryptocurrency) that is not backed by any country’s central bank or government. Bitcoins can be traded for goods or services with vendors who accept Bitcoins as payment.
The Bitcoin network is designed to mathematically generate no more than 21 million Bitcoins and the network is set up to regulate itself to deal with inflation. Bitcoins can be spent by initiating a transfer request from a Bitcoin address in the customer’s wallet to a Bitcoin address in the vendor’s wallet.
Altcoins are the alternative cryptocurrencies launched after the success of Bitcoin. The success of Bitcoin as the first peer-to-peer digital currency paved the way for many to follow. Many Altcoins are created on the back of perceived limitations that Bitcoin has. As a result individual Altcoins differ from each other in order to create different competitive advantages.
Many of the Altcoins are built up on the basic framework provided by Bitcoins. Thus most Altcoins are peer-to-peer, involve a mining process and offer efficient and cheap ways to carry out transactions on the web. But even with many overlapping features, Altcoins vary widely from each other.
Popular examples of Altcoins are Dash, Monero and Litecoin which are also available to trade on Liberalcoins.com.
Dash (DASH) is a privacy-centric digital currency with instant transactions. It is based on the Bitcoin software, but it has a two tier network that improves it. Dash allows individuals to remain anonymous while making transactions, similar to cash. This is particularly attractive for individuals that don’t wish their transaction history and balances to be publicly available.
Dash protects the identity of its user through a mixing protocol utilising an innovative decentralised network of servers called Masternodes, avoiding the need for a trusted third party that could compromise the integrity of the system.
Dash transactions are almost instantly confirmed by the Masternodes network. This is a great improvement on Bitcoin’s system, where confirmations take much longer because all the work is done by the miners.
Monero is an open-source, privacy-oriented cryptocurrency that was launched in April 2014. It leverages ring signatures and stealth addresses to obscure the identity of senders and recipients.
Ring signatures combine or ‘mix’ a user’s account keys with public keys obtained from Monero’s blockchain to create a ‘ring’ of possible signers, meaning outside observers cannot link a signature to a specific user. Therefore, all transactions are untraceable, and unable to be linked to the user.
While Monero users have the ability to keep their transaction history private, they can also share this information selectively. Every Monero account has a view key, which permits anyone holding it to look at the account’s transactions.
Litecoin is a peer-to-peer Internet currency that enables instant, near-zero cost payments to anyone in the world. Litecoin is an open source, global payment network that is fully decentralised without any central authorities.
Mathematics secures the network and empowers individuals to control their own finances. Litecoin features faster transaction confirmation times and improved storage efficiency than the leading math-based currency. With substantial industry support, trade volume and liquidity, Litecoin is a proven medium of commerce complementary to Bitcoin.
Cryptocurrencies are stored in digital “wallets”. Cryptocurrency wallets store the private keys that you need to access a cryptocurrency address and spend your funds. They come in different forms, designed for different types of devices. You can even use paper storage to avoid having them on a computer at all. Of course, it is very important to secure and back up your cryptocurrency wallets.
Liberalcoins provide free wallets to the users of our platform. We however recommend for maximum security of our users to only hold funds in their Liberalcoins wallets if they are actively trading.
A cryptocurrency wallet is a program to send and receive, store and monitor cryptocurrency balances. Just like you need an email program to manage your emails, you need for example a Bitcoin wallet to manage your Bitcoins.
Wallets interface with the Bitcoin blockchain and monitor Bitcoin addresses on the blockchain and update their own balance with each transaction.
The most important things to remember about a wallet: What defines a wallet is where its private key is stored.
A private key is a very long string of numbers and letters that acts as the password to your cryptocurrency wallet. It’s from this number that your wallet gets its power to send your cryptocurrencies to other people. You can also think of it like the secret coordinates for locating your Bitcoins or other cryptocurrencies. In other words, whoever knows your private key has control over your Bitcoins.
The private key is also used to generate your cryptocurrency address – this is just like your email address. It’s something you give out to people who want to send you cryptocurrency. However, even though the address is generated through the private key, there’s no way figure out what the private key is just by examining a cryptocurrency address.
A wide variety of merchants, businesses and services are accepting Bitcoin as payment option. With further demand in Bitcoin the adoption to more businesses accelerates exponentially. Alternatively, if not offered as payment option of the vendor or business you want to engage with, you can trade your cryptocurrency for fiat cash on our website.
Altcoins are scarcely integrated as accepted payment methods. However, with the increasing adoption of digital currency spearheaded by Bitcoin, there is an increasing demand for the top performing Altcoins. This could lead to an acceleration in the adoption of some Altcoins as payment methods. Alternatives are to exchange Altcoins into Bitcoin or exchange some Altcoins into Fiat cash on our website.
There are many reason to support the current movement of cryptocurrencies spearheaded by Bitcoin. The reasons listed especially apply to Bitcoin but may also be applicable for other cryptocurrencies in the near future.
Please note that the different cryptocurrencies have different features which may render them more valuable or usable in the future. This still remains to be seen.
Listed below are a few points on what makes Bitcoin and Altcoins so exciting and interesting.
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