Cryptocurrencies
2018 -
the
internet is filled with posts, blogs, news, opportunities about Bitcoin and Cryptocurrencies.
Cryptocurrencies
are making their way into our everyday live, and no matter how much we want to
ignore it or to avoid talking about it, it is just impossible.
Every video
that you watch on Youtube,
has an ad on
the side about some new coin coming out.
More and more people are talking about
it every day.
Every day there are news about prices going up
and down, countries trying to put regulations to the crypto currencies.
The crypto
space is in it’s infancy and all the crypto currencies are in their developing
stages.
So instead
ignoring it, why you don’t learn a little bit more about crypto currencies and
the crypto world, the world of tomorrow.
I wanted to write a small blog just to
tell you some of the basics about the cryptocurrencies but it is impossible to
cover even the basics in a single post.
That is why
I have decided to divide it into a few posts so you will have some basic
knowledge about cryptocurrencies and you will not look like you are from Mars
when people around you will start talking about it.
The first post I have
divided into 5 topics:
What is Cryptocurrency?
How do Cryptocurrencies work?
How are the Cryptocurrencies Value Determined?
What is Cryptocurrency used for?
Why Cryptocurrency?
What is Cryptocurrency?
How do Cryptocurrencies work?
How are the Cryptocurrencies Value Determined?
What is Cryptocurrency used for?
Why Cryptocurrency?
- What is Cryptocurrency?
With simple
words Cryptocurrencies are digital money
where the transactions are done online. It is a medium exchange just like all
the other currencies, only designed for exchanging digital information through
a process called cryptography. There were been some attempts in the 90’s but
they all failed for different reasons. The first successful crypto currency was
Bitcoin by Satoshi Nakamoto in 2009, described as a peer to peer electronic
cash system.
- How do cryptocurrencies work?
Cryptocurrencies are completely
decentralized.
The decentralized system that Satoshi Nakamoto came up with,
means that the network it is powered by it’s users without having any third
party, a central authority or a middle man.
So neither the bank or the
government have any power over the system. The thing with the centralized
system is double spending.
That means
that the person spends twice. In this traditional way there is a trusted third
party – a central server that keeps a record of the balances and transactions.
This method always entailed an authority that is in control over your funds and
personal detail
In decentralized network like Bitcoin
and all the other cryptocurrencies, every person needs to do this job. And this
is done through the Blockchain Technology, a public ledger (account book) of
all the transactions that happened
within the network, available for everyone
Example: Cryptocurrencies like Bitcoin
have their own network of peers (members). Every peer has a record of the
complete history of all transactions as well as the balance of every account. A
transaction includes where A gives X amount to B and it is signed by A’s
private key. After it has been signed, the transaction is broadcasted in the
network. This information is send from one peer to every peer on the network.
And this transaction needs to be confirmed. The confirmation is everything.
When the transaction is not confirmed, it has possibility to be hacked or
forged.When the transaction is confirmed then
it is impossible to be hacked or be reversed, it is a part of a permanent
record on the Blockchain
This means that the cryptocurrencies
are not secured by people or a trusted third party, they are secured by complex
mathematical equations. It is a 100% secure and can not be compromised. The
transaction is confirmed by miners, and this is their job on the network – to
confirm the transactional information in the network. For every completed transaction monitored by
the miners they are rewarded, fir instance with a Bitcoin. So the miners have a
major role in the crypto system.
-
Let’s have a look what to miners do?Everyone can be a miner. Miners
(workers) are needed because of the decentralized network where they have no
authority to delegate tasks and the cryptocurrencies need some type of a system
to prevent any type of abuse.
For example if a person creates thousands of
peers and spread false transactions it will disrupt the system immediately, and
everyone will know the person who is sending those false transaction. In order
to be a miner you need to solve a cryptologic puzzle. If you solve this puzzle
you can create a block and add it to the blockchain. (more on miners and
blockchain in another article).
- How are the cryptocurrencies valued determined?
- How are the cryptocurrencies valued determined?
The value of the cryptocurrencies is
determined by the market. The price like any other product depends on demand
and supply. So if more people demand certain currency, and the supply is
getting smaller then the value increases. More units are mined by the miners to
balance the flow. Most of the cryptocurrencies are limiting their supply. For
example Bitcoin issued only 21 million bitcoins, so the amount of Bitcoins is
decreasing in time and the final bitcoin is to be mined in the year of 2140.
This explains why Bitcoin value is higher to the other cryptocurrencies.
- What are cryptocurrencies used for?
- What are cryptocurrencies used for?
You can spend crypto
currencies on many things , since the transactions are done online. There are 3 different transactions that can
be done when using cryptocurrencies:
1. Bitcoin Trading
2. Personal Spending
3. Crowd Funding
2. Personal Spending
3. Crowd Funding
- Bitcoin Trading can be very profitable for
professionals and beginners. The market is still new and there are many trading
platforms exchanges where you can trade for yourself, companies that can trade
for you certain fees. If you own any Bitcoin there is no verification required
and you can start trading instantly. Because Bitcoin is not a flat currency,
that means that the price is not related to the economy or the policies of any
single country. Unlike the stock market there are no official Bitcoin
exchanges. There are hundreds of exchanges around the world that operate 24/7.
Because there is no official Bitcoin exchange the price is not official and the
currency can go up and down very rapidly.
-
The second thing you can do with Bitcoin is
personal spending. You can use Bitcoin to buy almost anything that accepts
bitcoin. From cars to travel tickets. You can have a look on the internet which
companies are accepting Bitcoin for their payments and you can start shopping
immediately.
- Crowd Funding is where you can donate money. There
are platforms that you can donate Bitcoin, Litecoin and other coins depending
on the platform. Also many of the new ICO’s are crowd funded. They are selling
tokens in pre sale(crowdsale) to raise enough money for that certain coin to come
to life. This might have some risks with it, because there are a lot of new
coins coming out every day. So you need to be aware of which coin you are going
to invest your money to.
- Why Cryptocurrencies?
Cryptocurrencies are digital gold.
They are the future.
First of all about the revolutionary
properties.. You can always have a control of your account and how the system
works and operates. And this is because of the decentralizes network of peers
that keeps consensus on the accounts and transactions made. If you compare it
to a physical bank account that can be changed and it is controlled by people
that you don’t see and governed by rules that you don’t even know.
Second are their monetary properties.
The currencies are controlled in supply, so there is a big chance that the
value of the cryptocurrencie is highly appreciated over time
Finally their transactional
properties. Cryptocurrency transaction is fast and global. All of the
transactions are propagated immediately in the network and they are confirmed
in a minutes. Since the transactions are managed by a global network of
computers, and they do not take into account your physical location. You can
send crypto currencies from one side of the world to another in just a few
minutes.
Thank you for reading.
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