Cryptocurrencies: what they are and how they work?

When we talk of digital currencies, we mean electronic money that are neither produced by government-controlled central banks nor denominated by the currency of any country. They are also known as alternative currencies, and sometimes referred to as altcoins.

Most digital currencies rely on cryptography and are known as crytocurrencies. Cryptocurrencies also rely on a proof-of-work scheme. Most importantly, it is a mathematical process by which the currency is created at a lower rate to make sure the currency does not lose its value by being much in circulation.

The implication is that Litecoin can be more easily processed and added to people’s digital wallets than what is obtainable with Bitcoin. Bitcoin is far more popular and more widely used than Litecoin despite the fact that Litecoin comes at a much cheaper rate. Peercoin

is the third most valuable altcoin. Peercoin, like Litecoin was modelled after Bitcoin in a number of ways, but differs in that there is no hard limit when it comes to the quantity that can be mined. One major certainty about Peercoin is that it has the ability to hit a one percent inflation target in the long run. This feature has been tipped by experts to give Peercoin a longer lifespan as a digital currency.

The fourth most valuable altcoin is Namecoin. Namecoin is a very interesting digital currency being the first major iteration of the Bitcoin which found more usages than just financial transactions and making online payments. Namecoin has a unique feature that enables it manage information access, using all using all Bitcoin techniques to function as a distributed Domain Name System (DNS).

This unique feature will enable Namecoin survive alone if by any chance, Bitcoin fails as a digital money. This type of digital currency model may still witness more variations in the future. Primecoin

on its part has an interesting unique feature. Its mining contributes to a large extent to the society through its implementation of scientific-proof-of-work. Consequently, Primecoin’s new blocks are generated per minute, which ultimately leads to faster transactions and smoother difficulty adjustments. Ripple

is one other type of altcoin that shares no close relationship with Bitcoin and all other digital currencies. Ripple is known to have gained lots of venture capital from Google Ventures, Lightspeed Venture, Andreessen Horowitz and several other venture capitalists. Ripple plays the role of a centralized payment platform and exchange that helps complement all other currencies, whether physical and virtual.

Cryptocurrency

All digital currencies work by the mechanism of mining all those currencies through mining software that generates the currencies on people’s computers. This is taken note of by recording them in the perspective network in order to create the awareness of the existence of such new units of currency.

These coins can be added into an individual’s digital wallet, and be used for completing a wide variety of transactions. The type of transactions these kinds of currencies can be used for its completion can be physical commodities like video games, books, etc. They can also be digital items such as digital salaries for work done as well as domain name registration.

From the above information, it is now very obvious that Bitcoin is not the only digital currency that exists out there, and all things being equal, several others are still going to emerge in the future. The future digital currencies will either be modelled after the existing ones, or made to be entirely new in all ramifications. Digital currencies will continue to increase in popularity with the improvements being made in the digital, e-commerce and technology world daily.

The possibility of digital currencies replacing physical currencies as legal tenders is not something that may be witnessed in the near future, but from all indications, there is a great possibility for more merchant websites to start accepting digital currencies for their different financial payments and transactions.