If you still think that ﬁat is a make of car and a ramp is something that makes it easier to wheel your trolley, you probably haven’t yet begun trading cryptocurrency. And that’s probably because there’s a lot you don’t know about it. One of the reasons that many people are put oﬀ dealing in cryptocurrency is the fact that they can’t see or touch it. Not that we can be blamed – if it took time to muster up the trust to save money in a bank account rather than under the mattress, it’s going to take a whole lot longer to feel comfortable paying for something with virtual currency. That said, once you understand how cryptocurrency works, it makes a great deal of sense.
For example, one of the greatest advantages – and attractions – of cryptocurrency is the fact that no one owns it. This stands in direct contrast to ﬁat money (the money most of us use, such as paper money: one of the major stakeholders here is the government, which decreases the money legal tender). Then you have the organisations which own the traditional payment pathways, like banks. Their ownership of these channels means you have to ask when you want your money, or if you want to use it for a transaction. With crypto, on the other hand, there’s no need to ask permission: if you have the right software (which is free to use), you can act on your own.
That’s one of the main reasons crypto is so popular. There’s also the fact that you can use it to pay for pretty much anything you would usually buy with ﬁat money, and it’s aﬀordable and fast. Say you wish to make a payment for something in Africa, for example, the person you’re paying would receive their money almost instantly, and it would cost you far less than a traditional payment. And, for those who have their misgivings about security when it comes to online transactions, it’s good to know that Binance has a workforce committed to security and compliance to ensure safety and security – even in this age of sophisticated digital fraud. In fact, the currency gets its name from the type of specialised computer coding (called cryptography) which is used to encrypt it and keep it secure.
But what is it, exactly?
Now you know why you should be using crypto – but you might not yet understand what, precisely, we’re talking about when we mention the term. The ﬁrst thing you need to know here are literally thousands of other forms (22 000, to be exact), but bitcoin remains the most widely used because it was the ﬁrst to be introduced (back in 2009): some are more secure or cost-eﬀective, some are faster, some have been designed to handle more complex transactions.
One of the things that typically worries people who are still grappling with the concept of a decentralised currency is what it looks like. That’s obviously a tough one – but it may help to know that, just as the most basic unit of the rand is one cent, the most basic unit of any cryptocurrency is blockchain. That raises another question: what is blockchain? And here’s the surprising answer: it’s simply a database, created on a spreadsheet. One feature that does single out blockchain is that you cannot delete or change any of the cells on the database. You can only add to them – which is why blockchains are called app-end only.
Each cell in the database is called a block, so it makes sense that several together are called a blockchain. Blocks can only be joined if the new one contains a digital ﬁngerprint of the old one; then, they become cryptographically bound. The existence of that ﬁngerprint is why blockchains can’t be changed: if a block is changed, the ﬁngerprint changes. And, of course, because it’s a chain, every single block becomes aﬀected in the same way, so any tweak made to the chain is immediately noticeable. Essentially, blockchain functions as a digital ledger, like a spreadsheet shared over several computers.
Your next question is probably this: if coins and notes are made in a mint, how is blockchain made? The answer is: blockchains are mined through a rather complicated process that requires software able to create blocks.
How to use it?
By now you know that when it comes to uses, there’s very little diﬀerence between crypto and ﬁat money – whatever you can buy with coins and notes, you can buy with crypto, too. You can also trade in crypto, or invest – so, again, it’s quite similar to ﬁat. You can even use it to earn a passive income.
If you’re interested in following any of these routes, it’s a good idea to read up a little more on crypto and ﬁnd out which currency is right for you, as well as how to take part in trades or how to invest. You’ll ﬁnd plenty more information on these topics at the Binance Academy which is available to the public: academy.binance.com.