Cryptocurrency

Learn how to invest in cryptocurrencies CFDs and take advantage of price changes.

A cryptocurrency is a type of digital money created from code. They function autonomously, outside of traditional banking and government systems. The cryptocurrency market is constantly expanding and provides many opportunities to informed online traders. Cryptocurrencies use cryptography to secure transactions and regulate the creation of additional units

Bitcoin is the original and by far the most well-known cryptocurrency, was launched in January 2009. Today there are over 1,000 cryptocurrencies available online.

Key features of cryptocurrencies

There are a number of key principles that govern cryptocurrency use, exchange and transactions.

Blockchain technology

A blockchain is the decentralized, public ledger or list of a cryptocurrency’s transactions. Completed blocks, comprised of the latest transactions, are recorded and added to the blockchain. They are stored in chronological order as an open, permanent and verifiable record. A peer-to-peer network of market participants manages blockchains, and they follow a set protocol for validating new blocks. Each ‘node’ or computer connected to the network automatically downloads a copy of the blockchain. This allows everyone to track transactions without the need for central record keeping.

Blockchain technology creates a record that can’t be changed without the agreement of the rest of the network. The blockchain concept is attributed to bitcoin’s founder, Satoshi Nakamoto. This concept has been the inspiration for other applications beyond digital cash and currency.

Crypto mining

Block mining is the process of attaching new transaction records as blocks to the blockchain. In the process – using bitcoin as an example – new bitcoins get produced, adding to the total number of coins in circulation. Mining requires a specific piece of software that is used to solve mathematical puzzles, and this validates the legitimate transactions which make up blocks. These blocks get added to the public ledger (blockchain) about every 10 minutes. As the software solves transactions the miner is rewarded with a set amount of bitcoins. The faster a miner’s hardware can process the mathematical problem, the more likely it is to validate a transaction and earn the bitcoin reward.

Bitcoin and other cryptocurrencies can best be described as potential currencies. The potential uses of the blockchain technology behind cryptocurrencies is also a matter of interest. It’s possible that this technology will be adopted for other purposes, including legal transactions, security programs and voting systems.