Ten years ago the arrival of Bitcoin changed how we view the global monetary system.
With it, a new era was introduced that is reshaping how we connect and exchange value.
Cryptocurrencies are decentralized digital assets that use cryptography as an encryption mechanism for security purposes.
The idea behind Bitcoin was to give back monetary control to the people.
In order for them to function, they use what is known as blockchain technology.
It is these nodes that are continually updating the blockchain when new blocks of transactions are added.
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Read on to understand what all those are.
It is built on a concept called Proof-of-Work, which is created through the process of mining.
to mine a Bitcoin, a node needs to solve a complicated algorithm.
The node that solves the answer first is rewarded with newly minted Bitcoin.
At the moment, 12.5 Bitcoins ($42,000) are rewarded.
Non-Fungible Tokens (NFTs)
This is a bang out of cryptographic token that represents something unique.
Unlike fungible tokens,NFTsare not interchangeable.
NFTs follow the ERC721 token standard on the Ethereum blockchain.
The most popular form of NFT is the virtual cat game CryptoKitties.
NFTs can also be used in art, real estate, and memorabilia.
Tickets, identity, and certification could also see NFTs playing a role.
Utility Tokens
These types of tokens areservices or unitsof services that can be bought.
The most common punch in of utility token is the ERC20 Ethereum standard.
Utility tokens are digital assets designed to be spent within a certain blockchain ecosystem.
Similarly, those who want to use Sias storage must pay a host in Siacoins.
Another example of a utility token is Dentacoin.
Security Tokens
These are tokens that arepresented to investorsin an ICO for the exchange of their money.
They are directly related to the growth of the company.
As such it should fall under the 1934 Security Exchange Act.
This ensures that security token issuers can maintain regulatory compliance.
Another example of a security token is tZero, a blockchain subsidiary of Overstock, an e-commerce retail giant.
Stablecoins
Stablecoinsare the latest bang out of cryptocurrency to have entered the market.
There are three types of stablecoins: fiat-collateralized, crypto-collateralized, and non-collateralized.
The most well-known stablecoin is Tether (USDT), which began in 2015.
Another example of a stablecoin is the Gemini Dollar (GUSD), which is a regulated stablecoin.
Crypto-collateralized stablecoins are those which are linked to the reserves of other cryptocurrencies.
They maintain their one-to-one ratio through over-collateralization.
It is pegged to the US dollar and is backed by Ethereum.
BitUSD is another crypto-collateralized token, which is collateralized by Bitshares.
Non-collateralized tokens are those which are pegged to precious metals such as gold or even oil.
Digix is a stablecoin, but is one that is backed by gold.
One DGX token is valued to the value of one gram of gold on the Ethereum blockchain.
With this knowledge in hand, go forth and see the world of cryptocurrencies with a new understanding.
