All that you should learn about what cryptocurrencies are, the way that they work, and how they’re 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 she or he is getting rich quick with virtual currencies like bitcoin, Ethereum, Ripple, or one of the lesser-known 1,300-plus investable cryptocurrencies.
But just how much do you really learn about them? Considering just how many questions I’ve received out of the blue from your aforementioned group over the past month, the correct answer is probably, “not really a lot.”
Today, we’ll change that. We’re likely to walk from the basics of cryptocurrencies, step by step, and explain things in plain English. No crazy technical jargon here. Just sticks and stones types of how today’s cryptocurrencies work, what they’re ultimately seeking to accomplish, and how they’re being valued.
Let’s get going. What exactly are cryptocurrencies?
To put it simply, cryptocurrencies are electronic peer-to-peer currencies. They don’t physically exist. You can’t get a bitcoin and hold it inside your hand, or pull one out of your wallet. But simply because 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 in the last couples of months.
The amount of cryptocurrencies are there? The quantity is always changing, but based on CoinMarketCap.com since Dec. 30, there were around 1,375 different virtual coins that investors could potentially buy. It’s worth noting that this barrier to entry is particularly low among cryptocurrencies. Quite simply, which means that if you have time, money, and a team of men and women that understands creating computer code, you own an possibility to develop your own cryptocurrency. It likely means new cryptocurrencies continue entering the space after some time.
Why were cryptocurrencies invented?
Technically, the idea 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 sorts of virtual currencies who have since followed, was to fix several perceived flaws using the way money is transmitted in one party to another.
What flaws? For example, think about how much time it can take for any bank to settle a cross-border payment, or how finance institutions have already been reaping the rewards of fees by acting as a third-party middleman during transactions. Cryptocurrencies work around the traditional financial system by using blockchain technology.
OK, what the heck is blockchain?
Blockchain will be the digital ledger where all transactions involving a virtual currency are stored. If you buy bitcoin, sell bitcoin, make use of bitcoin to buy a Subway sandwich, etc, it’ll be recorded, inside an encrypted fashion, in this particular digital ledger. The same thing goes for other cryptocurrencies.
Think about blockchain technology as the infrastructure that underlies virtual coins. It’s the foundation of your home, while the tethered virtual coin represents all the products built additionally foundation.
The reason why blockchain a potentially better choice compared to the current system of transferring money?
Blockchain offers numerous potential advantages, but is made to cure three major difficulties with the existing money transmittance system.
First, blockchain technology is decentralized. In simple terms, this means there isn’t a data center where all transaction data is stored. Instead, data out of this digital ledger is stored on hard drives and servers all over the globe. The main reason this is accomplished is twofold: 1.) it ensures that nobody person or company could have central authority over a virtual currency, and 2.) it acts as a safeguard against cyberattacks, to ensure that criminals aren’t in a position to gain control of a cryptocurrency and exploit its holders.
Secondly, as noted, there’s no middleman with blockchain technology. Since fmlxdu third-party bank is necessary to oversee these transactions, the thought is the fact that transaction fees could be less than they currently are.
Finally, transactions on blockchain networks may have the opportunity to settle considerably faster than traditional networks. Let’s remember that banks have pretty rigid working hours, and they’re closed at least one or two days a week. And, as noted, cross-border transactions could be held for many days while funds are verified. With blockchain, this verification of transactions is usually ongoing, which means the chance to settle transactions a lot more quickly, or possibly even instantly.