Read the complete write-up of Cryptocurrency, what is Cryptocurrency?, Types of cryptocurrency, How it works, risks, holding, as well as other information you need to know.
Introduction
Cryptocurrency is a digital currency that uses encryption to regulate and verify transactions. There are many different types of cryptocurrency, and they are all based on the principle of a distributed ledger. A distributed ledger is a database that is decentralized and maintained by a network of computers, rather than one centralized authority. If you are new to Cryptocurrency this may make you wonder;
What is cryptocurrency?
Cryptocurrency is just an abbreviation for “cryptographic currency.” Cryptocurrency is defined by the amount of processing power, storage space, and other resources it takes to use it. The amount of processing power required to mine cryptocurrency is measured in GH/s (giga-hashes per second). A typical cryptocurrency transaction requires at least 10-15 GH/s of processing power.
Read:
Cryptocurrencies are centralized databases. In other words, the cryptographic techniques used to secure them cannot be altered by any one person. As a result, they have no single administrator, and no one person can hack the information or control its distribution. At least some parts of the cryptocurrency system are open source, allowing anyone to examine the code.
Types of cryptocurrency
- Litecoin
- Bitcoin
- Bitcoin Cash
- Ethereum
- Ripple
- Monero
How does cryptocurrency work?
Think of the process of moving money from a bank to your account as a single transaction. The system has a few different steps. The bank needs to first create a new electronic contract that contains an escrow amount to be transferred to your account. The escrow amount can be either cash or currency. The escrow amount is a predetermined amount of money that will be held by the bank until the transaction is complete. The bank uses the first step in the process to verify that the funds were sent to your account. It also verifies that the funds were deposited to your account. The final step is to send you a confirmation message via email or a text message. The transaction completes when the escrow amount is cleared from your account and you receive the money.
What are the risks?
While cryptocurrencies provide a secure, efficient, private and inexpensive payment method, the anonymity of the transaction, along with the proliferation of sketchy sites has led to the government’s concern. In January 2017, the Federal Bureau of Investigation issued a warning that cryptocurrency exchanges may be “currency manipulators” and may be violating federal securities laws. New proposals to regulate cryptocurrency could include: Mandatory KYC/AML requirements for all cryptocurrency exchanges. Mandatory registration of the initial Cryptocurrency exchanges. An end to anonymity for all cryptocurrency users. Anyhow, on the other hand, companies offering these products have incorporated consumer protection and KYC/AML requirements, and many are regulated or otherwise legitimate.
How does HODLing work?
HODLing is short for “hold on for dear life.” It basically means that you buy and hold on to a cryptocurrency long enough until the price is high enough that you can sell and profit. This allows you to enjoy the benefits of Bitcoin without putting any of your own money at risk. A simple analogy is if you buy a house, you won’t put money down, and won’t pay any money for the house itself until the price is high enough to cover the transaction and make a profit. There are several exchanges that allow people to buy and sell cryptocurrencies. The popular ones to buy and sell Bitcoin include Coinbase, Kraken and Bitstamp. The other major exchanges to buy and sell Ethereum are ShapeShift and Bittrex.
How does mining work?
Mining refers to a way of validating transactions and generating a block, which represents the state of the ledger. All computers that are part of the network (called the network), work together to verify these transactions and block new ones, which is the process of mining. Once a block has been verified, it is added to the ledger and the miners share in the block reward (50% of the transactions in the block). This reward is based on the amount of computational power the computer uses in verifying a block. Thus, by mining the block, you get the computing power you need to verify other blocks. As you can see, there are two ways to mine: Building a specific piece of hardware called ASICs (Application Specific Integrated Circuits) or Super Computer.
Conclusion
I don’t care what you think about cryptocurrencies. They have plenty of real world use cases. They can help increase efficiency, streamline operations, and even lower costs. So much so, that analysts are predicting cryptocurrency could hit the $3.7 trillion global market in the next decade. Meanwhile, Ethereum just raised $150 million in funding from Goldman Sachs, Fidelity, Andreessen Horowitz, Union Square Ventures, and more. And this is just a fraction of all of the recent activity in the industry. I’ve also been reading a lot about bitcoin lately. What do you think of cryptocurrencies like bitcoin? Have you heard about the bitcoin futures trading world? As you can see, I’m on board with cryptocurrencies. And I’m convinced they could eventually hit the mainstream.