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What is a cryptocurrency?

A cryptocurrency is a digital currency that keeps records about balances and transactions on a distributed ledger, which is most commonly in the form of a blockchain. Cryptocurrencies enable peer-to-peer transactions between participants across the globe on a 24/7 basis.

A distributed ledger is a database with no central administrator that is maintained by a network of nodes. In permissionless distributed ledgers, anyone is able to join the network and operate a node. In permissioned distributed ledgers, the ability to operate a node is reserved for a pre-approved group of entities.

Top cryptocurrencies such as Bitcoin and Ethereum employ a permissionless design, in which anyone can participate in the process of establishing consensus regarding the current state of the ledger. This enables a high degree of decentralization and resiliency, making it very difficult for a single entity to arbitrarily change the history of transactions.

How does cryptocurrency work?

Cryptocurrency works through networks of nodes that are constantly communicating with each other to stay updated about the current state of the ledger. With permissionless cryptocurrencies, a node can be operated by anyone, provided they have the necessary technical knowledge, computer hardware, and bandwidth.

However, not all cryptocurrencies work in the same way. While all cryptocurrencies leverage cryptographic methods to some extent (hence the name), we can now find a number of different cryptocurrency designs that all have their own strengths and weaknesses.

The two major categories of cryptocurrencies are Proof-of-Work and Proof-of-Stake. Proof-of-Work coins use mining, while Proof-of-Stake coins use staking to achieve consensus about the state of the ledger.

In order to send and receive a cryptocurrency, you need a cryptocurrency wallet. A cryptocurrency wallet is a software that manages private and public keys. In the case of Bitcoin, as long as you control the private key necessary to transact with your BTC, you can send your BTC to anyone in the world for any reason.

How are crypto prices calculated??

Crypto prices are calculated by averaging cryptocurrency exchange rates on different cryptocurrency trading platforms. This way, we can determine an average price that reflects cryptocurrency market conditions as accurately as possible.

Cryptocurrency exchanges provide markets where cryptocurrencies are bought and sold 24/7. Depending on the exchange, cryptocurrencies can be traded against other cryptocurrencies (for example BTC/ETH) or against fiat currencies like USD or EUR (for example BTC/USD). On exchanges, traders submit orders that specify either the highest price at which they’re willing to buy the cryptocurrency or the lowest price at which they’re willing to sell. These market dynamics ultimately determine the current price of any given cryptocurrency.

CoinCodex tracks more than 350 crypto exchanges and thousands of trading pairs to make sure that our data is as reliable as possible.

Generally, cryptocurrency price data will be more reliable for the most popular cryptocurrencies. Cryptocurrencies such as Bitcoin and Ethereum enjoy high levels of liquidity and trade at similar rates regardless of which specific cryptocurrency exchange you’re looking at. A liquid market has many participants and a lot of trading volume – in practice, this means that your trades will execute quickly and at a predictable price. In an illiquid market, you might have to wait for a while before someone is willing to take the other side of your trade, and the price could even be affected significantly by your order.

For smaller alternative cryptocurrencies or altcoins, there can be noticeable price discrepancies across different exchanges. At CoinCodex, we weigh the price data by volume so that the most active markets have the biggest influence on the prices we’re displaying.

Who invented cryptocurrency?

The cryptocurrency was invented by Satoshi Nakamoto, which is the pseudonym used by the inventor of Bitcoin. Even though digital currency concepts existed before Bitcoin, Satoshi Nakamoto was the first to create a peer-to-peer digital currency that reliably solved the issues facing previous digital money projects. Bitcoin was initially proposed in 2008 and launched in early 2009.

Following the invention of Bitcoin, thousands of projects have attempted to imitate Bitcoin’s success or improve upon the original Bitcoin design by leveraging new technologies.

Disclaimer: The Bitcoin Victory content is meant to be informational in nature and should not be interpreted as investment advice. Trading, buying, or selling cryptocurrencies should be considered a high-risk investment, and every reader is advised to do their own research before making any decisions.