All you need to know about what cryptocurrencies are, the way they work, and just how they are valued. By now 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 among the lesser-known 1,300-plus investable cryptocurrencies.
But exactly how much do you actually know about them? Considering just how many questions I’ve received from the blue through the aforementioned group of people on the last month, the correct answer is probably, “not a lot.”
Today, we’ll change that. We’re likely to walk through the basics of cryptocurrencies, step-by-step, 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 trying to accomplish, and how they’re being valued.
Let’s begin. What are cryptocurrencies?
To put it simply, 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 because you can’t physically hold a bitcoin, it doesn’t mean they aren’t worth anything, as you’ve probably noticed from the rapidly rising prices of virtual currencies over the past couples of months.
How many cryptocurrencies are available? The number is always changing, but according to CoinMarketCap.com as of Dec. 30, there have been around 1,375 different virtual coins that investors could buy. It’s worth noting the barrier to entry is extremely low among cryptocurrencies. Put simply, this means that for those who have time, money, and a team of individuals that understands how to write computer code, you have an opportunity to develop your personal cryptocurrency. It likely means 香港比特幣 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, nevertheless it wasn’t truly successful until 2008, when bitcoin was conceived. The foundation of bitcoin’s creation, and all of virtual currencies who have since followed, was to fix numerous perceived flaws using the way money is transmitted from a single party to another.
What flaws? For instance, take into consideration how long it can take for a bank to settle a cross-border payment, or how banking institutions have already been reaping the rewards of fees by acting as being a third-party middleman during transactions. Cryptocurrencies work around the traditional financial system through the use of blockchain technology.
OK, just what the heck is blockchain?
Blockchain is 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, inside an encrypted fashion, within this digital ledger. The same thing goes for other cryptocurrencies.
Consider blockchain technology since the infrastructure that underlies virtual coins. It’s the building blocks of your house, as the tethered virtual coin represents all the products built on top of the foundation.
Exactly why is blockchain a potentially better option compared to current system of transferring money?
Blockchain offers a number of potential advantages, but is made to cure three major difficulties 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 over the globe. The reason this is done is twofold: 1.) it ensures that no one person or company will have central authority more than a virtual currency, and 2.) it acts as a safeguard against cyberattacks, in a way that criminals aren’t capable of gain control over 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 that transaction fees might be lower 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 one or more or two days every week. And, as noted, cross-border iclbje can take place for days while funds are verified. With blockchain, this verification of transactions is definitely ongoing, meaning the opportunity to settle transactions much more quickly, or maybe even instantly.