Question 1

What is cryptocurrency?

Accepted Answer

Cryptocurrency is a digital alternative to traditional money and financial assets. Also known as virtual currency, cryptocurrency offers a decentralized money system and a means to store monetary assets. Based on blockchain technology, there are over 5,000 cryptocurrencies in circulation today. Used as a medium of exchange for transactions, individual coin ownership records remain stored in a database that serves as a computerized ledger. Cryptocurrency makes it easier to secure purchases, create additional coins as needed, and verify the transfer of coin ownership, thanks to strong cryptography. You can use cryptocurrency to purchase goods and services. However, many people use cryptocurrency to invest in other non-centralized monetary system assets like precious metals or stocks. Cryptocurrency is still relatively new, offering exciting possibilities.

Question 2

How is the blockchain used for cryptocurrency?

Accepted Answer

Cryptocurrency relies on the blockchain for two things — maintaining its distributed ledger system and providing a way to earn the cryptocurrency. As it relates to the distributed ledger, the blockchain grants access to all transactions for the participants within the blockchain. It's said to do this securely with the use of nodes, which are the computers run by blockchain participants to validate transactions. These nodes can solve computational puzzles, by coming up with hashes, which are strings of 64 numbers with a base of 16, as opposed to base 10, which people typically use. In this way, nodes on the blockchain validate different aspects of transactions. This may include details such as the validity of the amount being transacted, the parties involved in the transaction, the value of the currency being sent, and that the sender’s crypto wallet has the needed funds. Thanks to this blockchain system, participants can mine to earn crypto by successfully solving for the correct hash.

Question 3

What are the most popular cryptocurrencies?

Accepted Answer

As more people explore the world of cryptocurrency, it isn’t unusual to feel overwhelmed by the sheer number of available options. Within the past decade, this novel currency option has exploded amid a world of uncertainty over many issues, including finances. With at least 5,000 available cryptocurrencies, it might help to try to come up with the most popular to give you some direction as you start out. Some top options include the widely known and accepted Bitcoin (BTC), smart contract-based Ethereum (ETH), the blockchain-heavy Polkadot (DOT), and Cardano (ADA), known for quick transactions and smart contracts. As you do your research, remember to try to find one that fits your trading or transaction style or strategy, budget, and short-term and long-term investment plans.

Question 4

What jobs require knowledge of cryptocurrency?

Accepted Answer

Most of the jobs requiring knowledge of cryptocurrency stem from developing or managing crypto-related projects and products. For example, account executives who work with cryptocurrencies need to have enough knowledge to design solutions and provide an accurate perspective on the crypto markets. Another crypto-specific job is a chief artificial intelligence engineer. This role requires you to program algorithms that run artificial intelligence systems, and these are often used to support investors as they make cryptocurrency trading decisions. Similarly, a financial analyst needs to have a knowledge of cryptocurrency because they need to be comfortable providing a range of solutions to clients and executives, including crypto investing opportunities.

Question 5

What is the main purpose of cryptocurrency?

Accepted Answer

The main purpose of cryptocurrency is to remedy the problems inherent to traditional currencies by putting both the power and responsibility in the hands of the currency holders. It is a decentralized digital currency that uses cryptography and a blockchain platform for security. Rather than being owned and regulated by a government, it is owned by everyone on the blockchain. Instead of representing debt, as is the case with the credit markets, its value is determined by what consumers are willing to trade. By nature of its design, transactions are confidential and virtually fraud-proof—and they are protected against identity theft.

Question 6

What is cryptocurrency mining?

Accepted Answer

Cryptocurrency mining is the validation of cryptocurrency transactions on a blockchain network and then adding them to a common ledger. This prevents double-spending and false transactions. Because cryptocurrencies are decentralized, they rely on miners to validate or verify each transaction before being added to the ledger. Honesty and integrity are guaranteed by the fact that miners compete with each other to verify a transaction and crack the accompanying code that serves as proof of the validity of the transaction. The first miner to successfully do so gets to add the block to the chain. Miners are rewarded with currency as an incentive to do the work and invest in the significant computing power mining requires.

Learn more about Cryptocurrency

Free Cryptocurrency lessons