What is a cryptocurrency?
The term cryptocurrency is used to describe a wide variety of digital assets that use cryptographic technologies
to verify that transactions between participants are legitimate and adhere to the rules established by the particular
cryptocurrency’s protocol. For example, Bitcoin is designed in such a way that users cannot spend the same coins
multiple times and cannot arbitrarily create new BTC coins.
How does a cryptocurrency work?
There are numerous cryptocurrency designs in use today. The most popular cryptocurrency is Bitcoin, which uses an
energy-intensive process called “mining” to secure transactions and verify all activity on the Bitcoin blockchain.
Other cryptocurrencies don’t use mining, and instead use staking or other methods of reaching consensus about
the state of the ledger of transactions. Different cryptocurrency designs offer different trade-offs between
decentralization, scalability and security. Most cryptocurrencies can be categorized as either Proof-of-Work
(mining) and Proof-of-Stake (staking). An example of a Proof-of-Work cryptocurrency is Bitcoin, while an example
of a Proof-of-Stake cryptocurrency is Polkadot.
What is blockchain and how it is it connected with cryptocurrency?
A blockchain is a distributed ledger that is used for recording transactions. Transactions are stored in periodically-generated
blocks, which are linked with each other through various cryptographic methods. Blockchains are useful for achieving
decentralized consensus, in which a large set of participants can agree on the correct state of the ledger.
When a new block is added to a blockchain, the data contained within it cannot be changed without changing all of
the subsequent blocks. Different blockchain designs employ different methods of making this exceedingly difficult.
For example, Bitcoin miners need to deploy hardware and perform resource-intensive tasks to have a chance of
adding a new block to the Bitcoin blockchain.
Blockchain is a very broad term, and there are many different blockchain designs in use today. Bitcoin was the first
implementation of a blockchain architecture in practice.
How are crypto prices calculated?
Cryptocurrency prices are usually calculated through an average of prices on different cryptocurrency exchanges.
Most cryptocurrency exchanges operate on a 24/7 basis and allow users to exchange between different cryptocurrencies
or between cryptocurrencies and fiat currencies like the US dollar and the euro. Crypto data aggregators such
as CoinCheckup collect data from many different exchanges to ensure that they are displaying the most accurate
crypto prices possible. Top cryptocurrencies such as Bitcoin and Ethereum tend to be priced similarly across
different exchanges, while there can be bigger discrepancies for less popular cryptocurrencies, known as altcoins,
with low liquidity.
Which is the best cryptocurrency?
There are countless potential use cases for cryptocurrencies – they can be used as an alternative to fiat currency
for everyday transactions, traded in a speculative fashion, used in decentralized applications, etc. The best
cryptocurrency for you will depend on what you want to do with it. In general, cryptocurrencies can be divided
into two main segments. Cryptocurrencies like Bitcoin and Litecoin are primarily designed for monetary-style
transactions, while cryptocurrencies like Ethereum and EOS are designed to support more complex decentralized
applications(dApps).
Who invented cryptocurrency?
Satoshi Nakamoto is widely regarded as the inventor of cryptocurrency. Satoshi Nakamoto is the pseudonym used by
the inventor of Bitcoin, but the true identity of Satoshi Nakamoto is still unknown – it’s not even clear if
Satoshi Nakamoto is one person or a group of people. Satoshi Nakamoto published the Bitcoin whitepaper in 2008
and launched the Bitcoin blockchain in 2009. Over the years, many developers and entrepreneurs were inspired
by Bitcoin and created new cryptocurrencies that attempt to improve on the original Bitcoin concept.
What is the market cap of cryptocurrency?
Market capitalization or market cap is one of the metrics that we use to compare different cryptocurrencies with
each other. At CoinCheckup, we use market cap as the primary metric for ranking cryptocurrencies. We also calculate
the total crypto market cap to estimate the size of the entire cryptocurrency market.
How is crypto market cap calculated?
The market cap of any given cryptocurrency is simple to calculate. We take the price of a single unit of cryptocurrency
and multiply it by the amount of units that are currently in circulation. The formula for calculating a cryptocurrency’s
market cap is
Market Cap = Price * Circulating Supply. Let’s take the Bitcoin market capitalization as an example.
At the time of writing, the Bitcoin price is $11,378 – this is how much you would have to spend on average to buy
1 BTC on a crypto exchange at the moment. Currently, there are 18.52 million BTC in circulation. If we multiply
these two numbers, we get $210.7 billion – this is the current market capitalization of Bitcoin.
Does market cap matter in cryptocurrency?
Market cap matters, but it is not the only metric that should be used to compare different cryptocurrencies. Generally,
market cap is a useful metric for comparing the relative size of cryptocurrencies – if Coin A has a market cap
of $1 billion and Coin B has a market cap, it is an indication that Coin A is more widely adopted and valued
more favorably by the market. However, it can also be a signal that Coin B is potentially undervalued, depending
on the specific properties of the cryptocurrencies that we are comparing.
How can a cryptocurrency increase its market cap?
A cryptocurrency’s market cap increases in two different scenarios. The first and most straightforward scenario is
price appreciation – if a cryptocurrency’s price per unit increases, so will its market cap. The second scenario
is an increase in circulating supply. If new coins enter circulation, the cryptocurrency’s market capitalization
will increase, although this comes with a major caveat. In an efficient market, an increase in supply is likely
to have a negative impact on the price per unit.
What is Bitcoin’s market cap?
Bitcoin’s market cap is currently
$209.7 billion. Bitcoin’s market cap is calculated by multiplying the price of 1 BTC with the amount of BTC that
are currently in circulation.
What is cryptocurrency circulating supply?
The circulating supply of any given cryptocurrency is the amount of units that can be transacted with. Let’s explain
by using Bitcoin as an example. In the Bitcoin code, there is a hard limit set that 21 million is the maximum
number of BTC that can ever exist. This is what we refer to as the maximum supply of Bitcoin. However, Bitcoin
is designed in such a way that coins have to be created or “unlocked” through mining. This process will continue
to happen until BTC number 21 million is mined. About 18.52 million BTC have been created so far – this is the
circulating supply of Bitcoin.
What is an altcoin?
The term “Altcoin”, which is short for “alternative coin”, is commonly used to refer to any cryptocurrency that is
not Bitcoin. Thousands of altcoins have been created after Bitcoin was released in 2009.
What is the difference between Bitcoin and altcoins?
Bitcoin is the first cryptocurrency ever created and it has been leading the crypto market cap rankings ever since
the start. Bitcoin is the most commonly adopted cryptocurrency, and is supported by the largest number of businesses
and exchanges. However, some altcoins have managed to grow in value tremendously and now boast billion-dollar
market capitalizations. For example, Ethereum has grown so much that it is rarely even called an altcoin anymore.
In general, altcoins feature new technologies that aren’t present in Bitcoin – the basic design of Bitcoin is
largely the same as it was in 2009.
What is a stablecoin?
Most cryptocurrencies experience high levels of volatility – the price of a cryptocurrency may be down 10% one day
and up 20% the next day. In order to offer an alternative, several companies have developed “stablecoins”. Stablecoins
are cryptocurrencies that are designed to maintain a stable value at all times.
Most commonly, this is achieved by backing each stablecoin with fiat currency. For example, a company that creates
a dollar-pegged stablecoin will hold $1 for each unit of the stablecoin in circulation, and will guarantee that
$1 can be redeemed for one unit of the stablecoin. This results in the stablecoin trading very close to $1 regardless
of crypto market conditions. The first stablecoin was Tether USDT, which was launched in 2014 and continues to
be the biggest stablecoin on the market today.
What is DeFi?
The term DeFi stands for “decentralized finance” and refers to applications that allow users to engage in financial
services through a blockchain platform. DeFi applications make it possible for users to lend, borrow or trade
cryptocurrencies directly through their crypto wallets. Since all the operations are conducted through smart
contracts on a blockchain, users don’t have to trust their funds to any third party. Currently, the most popular
platform for DeFi applications is Ethereum.
What are the top 10 cryptocurrencies?
The top 10 cryptocurrencies are the 10 cryptocurrencies by market capitalization. Due to the volatility of crypto
prices, the top 10 changes quite often. However, it’s worth pointing out that Bitcoin and Ethereum have been
in the number 1 and 2 spots, respectively, for a long period of time.
What cryptocurrency should I buy?
You should buy whichever cryptocurrency will best suit your needs. The answer will be different depending on your
case – are you buying cryptocurrency as an investment or do you plan on actively using your crypto? Even though
there are countless strategies for investing in crypto, most people who decide to invest in crypto usually put
a part of their investment into Bitcoin.
How can I buy a coin I like?
If you want to buy a cryptocurrency but aren’t sure where to get it, CoinCheckup can help you out. Find the cryptocurrency
on CoinCheckup and head over to the “Markets” tab. There, you will be able to find a list of crypto exchanges
where the coin is traded. Make sure to explore multiple options before you decide to deposit your money on a
cryptocurrency exchange – there are hundreds of different cryptocurrency exchanges on the market, and some are
much better than others.
What is the difference between a token and a coin?
A coin is a cryptocurrency that has its own blockchain where the coin is necessary for paying transaction fees and
conducting basic operations. BTC (Bitcoin) and ETH (Ethereum) are examples of coins. Tokens are crypto assets
that are built on top of other blockchains. An example of a token is MKR, which exists on the Ethereum blockchain.
Some tokens like USDT have been issued on multiple blockchains.
What is cryptocurrency/Bitcoin mining?
Bitcoin transactions are bundled into blocks which are periodically added to the Bitcoin blockchain. Bitcoin mining
is the process of adding new blocks to the Bitcoin blockchain.
In order to participate in mining, users must deploy their computer hardware to solve resource-intensive mathematical
problems. The miner whose machine solves the problem first earns the privilege of adding a new block to the Bitcoin
blockchain and receiving the block reward (currently 6.25 BTC). Typically, Bitcoin miners create pools with other
miners and split the rewards generated by the pool according to the computing power provided by each miner. A
Bitcoin block is mined approximately every 10 minutes.
How do I mine Bitcoin?
Technically, anyone can participate in Bitcoin mining. In practice, however, Bitcoin mining is dominated by large-scale
mining operations that use Bitcoin mining ASICs (application-specific integrated circuits). ASIC miners are expensive
to obtain and are massively more efficient at mining Bitcoin than consumer-grade computer hardware. If you are
a hobbyist, we recommend that you consider mining another, smaller cryptocurrency. Most likely, you will have
to join a mining pool if you want to be competitive and earn enough crypto cover electricity and other costs.