What is cryptocurrency

What is cryptocurrency 

Cryptocurrency is a virtual digital asset on a decentralized distributed ledger called blockchain, it works in a pear-to-pear system. Unlike traditional fiat currency which can be converted into physical form cryptocurrency cannot be converted instead it can be exchanged or traded on the exchange.

Cryptocurrency or simply crypto-currency is the digital virtual coins and tokens that can be used to do transactions and trading, as the name suggests crypto word is derived from the term cryptography which enables encryption from different coding techniques, most cryptocurrencies are backed by a project and have a limited tokens/coins supply.

The first cryptocurrency was bitcoin which was founded in 2009 and was built by Santosi Nakamoto it was first used to buy the pizza

Types of cryptocurrencies: 

There are two main types of cryptocurrencies

1. Public cryptocurrencies: they are the coins/tokens which are built on a public blockchain and their transactions can be seen by anyone on its explorer, they are permissionless and 95% of the cryptocurrencies are public cryptocurrencies
2. Private cryptocurrencies: These are the coins/tokens built on the private blockchain and their transactions are anonymous to everyone limited to an authority.

Sub Categories of cryptocurrencies:

There are many terminologies used to call some specific types of coins/tokens such as stablecoins, altcoins, meme coins, fan tokens, etc

1. Altcoin: This is the term used for all other cryptocurrencies other than bitcoin, which means all cryptocurrencies are altcoins or alternative coins except the first cryptocurrency Bitcoin.

2. Stablecoins: They are the coins that are pegged to the country-specific fiat currency and are mostly stable in nature means that are low volatile, stablecoins are of three types they are

• Fiet pegged/ Fiet collateralized: that is backed by fiat currency reserve/collateral on the backend such as USD Coin (USDC), Tether (USDT), Binance USD (BUSD), etc.
• Crypto pegged/ Crypto collateralized: that is backed to another cryptocurrency such as MakerDAO's Dai (DAI)
• Algorithmic pegged: they use algorithms such that 1 stablecoin is created when another is burned such as TerraUSD (UST), they are the riskiest among other types of stablecoins.

3. Meme coins: They are coins that are made for fun or there is not any specific reason behind that such as dogecoin (DOGE), these coins pump and dump hard and are very risky and volatility among all other cryptocurrencies. 

4. Fan token: These tokens are made for a specific tournament or event such as football, racing tournament etc Examples - Alpine F1 Team Fan Token (ALPINE), OG Fan Token (OG), Argentine Football Association Fan Token (ARG), etc