In a nutshell, Crypto currency is a computer created digital currency (money) that you can use just as you use Fiat money (aka, real money)
Why are they called Crypto Currencies?
Crypto is a shortened name for Cryptography. Cryptography is a branch of computer sciences, a method of sending information in an encrypted secure format so that only the intended party can read it. To read the original message, the receiver decodes it using a Hash Table or key. For example, a message could be sent with this in plain English: “Call me at 2 PM Wednesday”. Once encrypted and sent, what is sent could be “_^%--+ft>}”. This makes the message useless to anyone who intercepts it.
How are they created:
They are created using a technology called Blockchain. Blockchain technology is like a ledger used for keeping financial records. However, unlike a normal ledger, Blockchain uses what is called Decentralized concept. What this means is that, instead of keeping records in one central place, same records is kept in thousands of computers across the world within the network. You may hear people use the acronym, DEFI to describe this.
DEFI stands for – Decentralized Finance. Decentralized Finance or DEFI, does not rely on any governments (Yet), Banks, or any existing financial models. Instead, it uses Blockchain to offer same services as your existing Banks, and government issued money.
How many Crypto currencies are there?
Although people use BITCOIN when referring to digital currencies, there are more than 600 and counting Crypto currencies and counting. Bitcoin is the most popular and most expensive one, hence, people tend to refer to Crypto currencies as “BITCOIN”. BITCOIN being the most popular is followed by ETHERUM in popularity, but there are many others that you can buy or invest in.
Who Controls and Governs Crypto Currencies?
Currently, nobody governs or controls it. It is governed and controlled by people who create them.
Who can create Crypto currencies?
Anyone, including You, with the resources and technical knowledge can create one.
Are they Legal?
Yes, they are legal in most countries.
Can they be used to buy things? Yes, some companies have started accepting them, but acceptance is not as common and as widespread as your government issued money.
How do I buy a Crypto Currency?
Step 1: You need government issued normal money.
Step 2: Open an account with an exchange that trades (buys and sells) Digital Currency, (Crypto Currencies).
Step 3: Deposit your money into your newly opened account from Step 2.
Step 4: Buy a Digital currency of your choice.
When you sell, the Currency you bought in Step 4, the money is converted back to regular money and deposited back into your account.
Bitcoin Mining. What is it?
Bitcoin “mining” conjures up, images of people with shovels digging for “Bitcoin”. Actually, Bitcoins is not “mined” from the ground. Bitcoin “mining” is the process of creating Bitcoins using sophisticated computers that solve very complex algorithms and equations using a process known as “HASHING”. Essentially, using hashing techniques, Computers withing the Bitcoin network guess the correct “Hash” for the algorithm. These guesses are made at very high speeds at more than one million times. Once the correct Hash is made, a Coin is created and then transmitted to all the Systems in the Blockchain ledger. The Hash is then locked to avoid what is known as “Double Spending”. This makes each coin unique.