Everything you need to know about what cryptocurrencies are, how they work, and how they are valued. At this point you’ve probably heard about the cryptocurrency craze. Either a family member, friend, neighbor, doctor, Uber driver, sales associate, server, barista, or passer-by on the street, has probably told you how he or she is getting rich quick with virtual currencies like bitcoin, Ethereum, Ripple, or one of many lesser-known 1,300-plus investable cryptocurrencies.
But just how much do you know about them? Considering just the amount of questions I’ve received out of the blue from the aforementioned group over the last month, the reply is probably, “not a lot.”
Today, we’ll change that. We’re planning to walk from the basics of cryptocurrencies, in depth, and explain things in plain English. No crazy technical jargon here. Just sticks and stones samples of how today’s cryptocurrencies work, what they’re ultimately attempting to accomplish, and how they’re being valued.
Let’s get started. What exactly are cryptocurrencies?
In other words, cryptocurrencies are electronic peer-to-peer currencies. They don’t physically exist. You can’t pick up a bitcoin and hold it in your hand, or pull one from your wallet. But just since you can’t physically hold a bitcoin, it doesn’t mean they aren’t worth anything, as you’ve probably noticed through the rapidly rising prices of virtual currencies within the last couples of months.
The number of cryptocurrencies are available? The amount is always changing, but based on CoinMarketCap.com at the time of Dec. 30, there were around 1,375 different virtual coins that investors may potentially buy. It’s worth noting that the barrier to entry is particularly low among cryptocurrencies. In other words, this means that for those who have time, money, as well as a team of individuals that understands how to write computer code, you own an chance to develop your own cryptocurrency. It likely means 香港萊特幣 continue entering the space as time passes.
Why were cryptocurrencies invented?
Technically, the concept of a digital peer-to-peer currency was being tinkered with decades ago, but it wasn’t truly successful until 2008, when bitcoin was conceived. The basis of bitcoin’s creation, and all of virtual currencies that have since followed, would be to fix a number of perceived flaws with the way cash is transmitted from a single party to another.
What flaws? As an example, think about how long it can take for any bank to settle a cross-border payment, or how banking institutions have been reaping the rewards of fees by acting as being a third-party middleman during transactions. Cryptocurrencies work round the traditional financial system by using blockchain technology.
OK, what the heck is blockchain?
Blockchain will be the digital ledger where all transactions involving an online currency are stored. If you pick bitcoin, sell bitcoin, make use of your bitcoin to buy a Subway sandwich, etc, it’ll be recorded, in an encrypted fashion, in this digital ledger. The same thing goes for other cryptocurrencies.
Think about blockchain technology since the infrastructure that underlies virtual coins. It’s the building blocks of your house, while the tethered virtual coin represents all the products built on top of this foundation.
Why is blockchain a potentially better choice than the current system of transferring money?
Blockchain offers several potential advantages, but is made to cure three major problems with the current money transmittance system.
First, blockchain technology is decentralized. In simple terms, this just means there isn’t a data center where all transaction information is stored. Instead, data out of this digital ledger is stored on hard drives and servers all around the globe. The reason this is achieved is twofold: 1.) it makes sure that no person person or company could have central authority more than a virtual currency, and two.) it works as a safeguard against cyberattacks, in a way that criminals aren’t able to gain charge of a cryptocurrency and exploit its holders.
Secondly, as noted, there’s no middleman with blockchain technology. Since no third-party bank is required to oversee these transactions, the idea is the fact transaction fees might be lower than they currently are.
Finally, transactions on blockchain networks may get the chance to settle considerably faster than traditional networks. Let’s understand that banks have pretty rigid working hours, and they’re closed a minumum of one or two days a week. And, as noted, cross-border iclbje can take place for several days while funds are verified. With blockchain, this verification of transactions is always ongoing, which suggests the opportunity to settle transactions much more quickly, or maybe even instantly.