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What is Cryptocurrency?

Blockchain technology has become increasingly prominent, so many people wonder if it is difficult to create a cryptocurrency. Things to know about cryptocurrencies will be guided in this article.

1. What is the concept of electronic money?

Many people always believe that a cryptocurrency is a new form of money, but some people do not care much. Before learning how to create cryptocurrency, let’s understand what cryptocurrency is. A cryptocurrency is a form of decentralized digital currency and it has been around for more than a decade. Cryptocurrencies are encrypted to regulate the creation of monetary units and thereby verify the transfer. Anonymity, decentralization as well as high security are among the advantages of cryptocurrencies.

Cryptocurrencies are not regulated by any centralized regulatory body like government or banks, it is completely independent. Cryptocurrencies are an integral part of Blockchain – a decentralized P2P peer-to-peer network that contains aggregated blocks of data that are distributed distributed across multiple computers. This data block stores in chronological order information about transactions so that it follows the protocol to communicate between nodes and receive new blocks. Note, it is not possible to change the data recorded in the blocks until there is no change of the next blocks.

When Bitcoin appeared, it was the first known and recognized cryptocurrency. Bitcoin has an important position in the electronic convenience market.

Up to now, there are more than 1600 cryptocurrencies including the most popular ones like Bitcoin, Ethereum, Ripple… with an increasing number. This information helps companies see the benefits of Blockchain and makes them think about how to create a new cryptocurrency.

2. What is the difference between Coin and token?

Coin and token are two classifications of cryptocurrencies, so they both have a number of differences.

What is Coin?

A cryptocurrency is called a coin when it operates on its own Blockchain, where all transactions are made. Specifically, Bitcoin (btc), Ethereum (eth), Neo all work on their own blockchains. Hence they are called coins.

Coins like Ethereum, NEO work on existing Blockchain infrastructure and are used to verify transactions, ensuring they are always safe.

What are tokens?

Tokens can also be referred to as electronic currencies but are not entirely correct as there is a difference you should understand. In essence, Tokens created on Blockchain are available thanks to the creation of smart contracts, the most popular of which is Ethereum. The token of the Token built on the regular Ethereum platform will be ERC-20.

In addition, other blockchains such as NEO, Tron… can create similar tokens on Ethereum’s blockchain. The token generated on the Ethereum platform is called ERC20 Token, while NEO uses the NEP-5 Token token. Therefore, anyone can create tokens on these blockchains.

3. How cryptocurrencies work

Cryptocurrencies are an integral part of Blockchain and ledger technology, built on consensus algorithms that generate new blocks. Anyone who wants to participate in a P2P peer-to-peer network must accept a block in order for it to be registered in the Blockchain. Some of the most popular consensus types are PoW – proof of work, PoA – proof of authority, PoS – proof of stake, DPoS – delegating proof of stake.

Every time new blocks are created, cryptocurrency is released and used as a reward to motivate Blockchain users to participate in the consensus mechanism and close the block. This is about allocating processing power, stakes and other resources to create reliable transparency of Blockchain in the verification of new blocks. This reason is the birth condition of Bitcoin to solve all of the above problems.

At that time, Cryptocurrency owners can transfer assets between addresses and addresses of the blockchain, which can be exchanged for fiat money (fiat money such as VND, USD) or participate in cryptocurrency transactions.

Following the information in the article introduced above will help you gain more knowledge about the cryptocurrency market.