By James Brownking  September 27, 2022

What is cryptocurrency?

A cryptocurrency a digital asset that can circulate without the need for a central monetary authority such as a government or bank. Instead, crypto is created using cryptographic techniques that people use to shop sell or trade them securely.

How does cryptocurrency work?

Bitcoin and most other cryptocurrencies are supported by a technology referred to as blockchain, which maintains a tamper-resistant record of transactions and keeps track of who owns what. The creation of blockchains addressed an issue faced by previous efforts to create purely digital currencies: preventing people from making copies of their holdings and attempting to spend it twice.

Individual units of cryptocurrencies are often referred to as coins or tokens, counting on how they are used. Some are intended to be units of exchange for goods and services, others are stores useful and a few can be used to participate in specific software programs such as games and financial products.

How are cryptocurrencies created?

One common way cryptocurrencies are created is through a process known as mining, which is employed by Bitcoin. Mining are often an energy-intensive process in which computers solve complex puzzles in order to verify the authenticity of transactions on the network. As a gift, the owners of these computers can receive newly created cryptocurrency. Other cryptocurrencies use different methods to make and distribute tokens and lots of have a significantly lighter environmental impact.

How to choose the right crypto?

Bitcoin is very different from the general cryptocurrency market. While Bitcoin is the first and most valuable cryptocurrency, the market has over 2000 coins.

Nearly 21,000 different cryptocurrencies are traded publicly, consistent with CoinMarketCap.com, a marketing research website. Cryptocurrencies still proliferate. The entire value of all cryptocurrencies on June 13, 2022, was about $972 million, having fallen substantially from an all-time high above $2.88 trillion late in 2021.

While a number of these have total market valuations in the hundreds of billions of dollars, others are obscure and essentially worthless.

If you’re brooding about getting into cryptocurrency, it is often helpful to start with one that is commonly traded and relatively well established in the market, though that’s no guarantee of success in such a volatile space. Cash in of online services and explore the internet, they eventually create a digital identity. This sort of identity is then tied to central entities like Google and Facebook, which make it easier to share data with new services through simple sign-in buttons.

While these digital identity management systems are convenient, they’re relying on centralized intermediaries that hold and control user data. Personal identifiers and attestations are in their hands and that they can decide – or be forced – to share this information with other parties.

Blockchains offer a solution decentralized digital identities. These allow individuals to manage information associated with their identities, create identifiers, control who they’re shared with and hold attestations without counting on a central authority, sort of a government agency.

A decentralized identifier for a decentralized identity can take the shape of an Ethereum account. Users can create as many accounts as they need on the Ethereum network without anyone’s permission and without anything being stored in a central registry. Ethereum transactions on the blockchain are easily verifiable and tamper-proof, making them trustworthy.

Other use cases are out there. Binance in August 2022 catapulted the decentralized identity debate to social media platforms after moving to launch its first soulbound token, BAB, serving as users’ Know Your Customer credentials also know as KYC.

Whether decentralized identities are the longer term of online activity remains to be seen.

Managing decentralized identities

Speaking to Cointelegraph, Witek Radomski, chief technology officer and co-founder of nonfungible token ecosystem Enjin, revealed he sees a future during which the metaverse will see a “blend of social media, email, crypto wallets, and decentralized applications,” suggesting there’ll be a range of digital and decentralized identities.

Per Radomski, the key to identity management are going to be the “preservation and protection of sensitive information,” as different networks have “distinct technical methods to trace digital ownership of data.

Radomski added that individuals entrusting protocols with their personal data should consider that business decisions will be made based on an enterprise’s needs and philosophy, adding:

“The ownership of digital assets is like owning assets within the physical world. Assuming that owners are operating within the bounds of the law, blockchain-enabled digital ownership can’t be interfered with by the government.”

He added that decentralized identities will play a task in preserving individuality, which can “depend on proving that you’re not a bot” and will have online activity as one of the “most compelling testaments to demonstrate this.”

The potential of decentralized identities

Managing digital identities may be a challenge, together mistake can easily lead to a breach of personal information. Centralized entities are known targets, with a recent case seeing the private data of Portugal’s president stolen in a cyberattack. the utilization of decentralized identities eliminates this risk, as only the users are liable for their data.

Being truly decentralized would mean nobody has the power to switch of a button like Luna where the coin lost billions overnight. A great example would be Cult it has liquidity locked for 275 years and the creater has also made it ultra deflationary by charging 0.4% on every transaction and that money is then invested into other decentralised coins.

James Brown is an experienced content writer who has written numerous articles this article is for reaserch purposes and not financial advice. Example of a fully decentrilsed crypto take a look at Cultdao.

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