Everything 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 one of the lesser-known 1,300-plus investable cryptocurrencies.
But how much do you really know about them? Considering just the amount of questions I’ve received out from the blue from your aforementioned group of people within the last month, the correct answer is probably, “not just a lot.”
Today, we’ll change that. We’re planning to walk with the basics of cryptocurrencies, in depth, and explain things in plain English. No crazy technical jargon here. Just sticks and stones examples of how today’s cryptocurrencies work, what they’re ultimately seeking to accomplish, and how they’re being valued.
Let’s get started. 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 within 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 in the last couples of months.
The number of cryptocurrencies are there? The number is definitely changing, but according to CoinMarketCap.com at the time of Dec. 30, there was around 1,375 different virtual coins that investors could potentially buy. It’s worth noting the barrier to entry is extremely low among cryptocurrencies. In other words, this means that if you have time, money, and a team of people that understands crafting computer code, you own an opportunity to develop your own cryptocurrency. It likely means 加密貨幣交易所 continue entering the space as time passes.
Why were cryptocurrencies invented?
Technically, the idea of an electronic peer-to-peer currency was being tinkered with decades ago, but 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 several perceived flaws using the way cash is transmitted from one party to a different.
What flaws? For instance, take into consideration how long it can take to get a bank to settle a cross-border payment, or how financial institutions have already been reaping the rewards of fees by acting as being a third-party middleman during transactions. Cryptocurrencies work across the traditional financial system by using blockchain technology.
OK, what the heck is blockchain?
Blockchain is the digital ledger where all transactions involving an online currency are stored. If you buy bitcoin, sell bitcoin, use your bitcoin to purchase a Subway sandwich, etc, it’ll be recorded, in an encrypted fashion, within this digital ledger. The same thing goes for other cryptocurrencies.
Think about blockchain technology since the infrastructure that underlies virtual coins. It’s the cornerstone of your property, as the tethered virtual coin represents all the products built on top of the foundation.
The reason why blockchain a potentially better option than the current system of transferring money?
Blockchain offers a number of potential advantages, but is designed to cure three major issues 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 details are stored. Instead, data from this digital ledger is stored on hard drives and servers all around the globe. The reason why this is accomplished is twofold: 1.) it makes sure that nobody person or company will have central authority spanning a virtual currency, and two.) it behaves as a safeguard against cyberattacks, in a way that criminals aren’t capable of gain control 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 thought 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 one or more or two days a week. And, as noted, cross-border iclbje can be held for days while funds are verified. With blockchain, this verification of transactions is usually ongoing, meaning the opportunity to settle transactions far more quickly, or possibly even instantly.