Cryptocurrency markets are fluctuating dramatically and dramatic losses have occurred in certain cases. Cryptocurrency is a type of digital currency that is designed to be secure, private, and anonymous. Named because cryptography is used to control the creation of the currency, it eliminates the need for a banker or centralized authority like a government or bank.
A cryptocurrency can be volatile with drastic changes in value when compared to other currencies like gold or stock market shares but they are not backed by anything tangible. They were invented as an alternative way of trading money without the involvement of banks and governments.
Cryptocurrencies can be transferred through a computer or smartphone without an intermediate financial institution. They use blockchain technology as a way to record transfers. A network of computers around the world uses blockchain to manage transactions and to confirm them. This process is called mining and miners are rewarded with transaction fees and newly created bitcoins.
Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. This process makes it nearly impossible for third parties to make fraudulent transactions since no one can change the record of the transaction once it is entered on the blockchain. Cryptocurrencies like Bitcoin are open source, meaning anyone can take part in improving their currency and help make things more transparent for everyone using it.
There are currently over a thousand cryptocurrencies in circulation that have transaction capabilities, meaning they can be used as payment instead of just being stored as an investment. They can be traded, transferred, stored and exchanged like normal currencies.
Bitcoin was the first cryptocurrency and is still the most popular. It was created in 2009 by an unknown person using the name Satoshi Nakamoto. The latest record shows a price of over $8,800 for one bitcoin, which equates to a bitcoin price of $1 million per coin when it first started trading on exchanges six years ago. As Bitcoin became more popular over the years, more and more people wanted to get in on the action so other cryptocurrencies were created with different features.
When Bitcoin was created, it was an open-source project, meaning anyone could take part in creating the software that made it work while staying anonymous. The name Satoshi Nakamoto became a pseudonym because of all the attention and scrutiny brought on by the creation of Bitcoin. There are now over 786 cryptocurrencies in total at present and around 542 are actively traded on exchanges. Some of them were created using Bitcoin's original software code while others were created through forks.
In early 2018 the value of many cryptocurrencies dropped significantly due to fears of increased regulation and other threats to their values. This caused some investors to panic sell their holdings hoping to get out before they lost more money from the price drop.