In this article, I’m going to explain the very basics of crypto. In future articles, we’ll go more in-depth, and explore all aspects of it.
What Is Cryptocurrency
Cryptocurrency is a digital cash medium. These are restricted entries in a database that no
one can alter without meeting specific conditions. It is a web-based exchange platform that uses cryptographic functions to conduct budgetary transactions. Cryptocurrencies leverage blockchain technology to achieve decentralization, transparency, and immutability. You don’t need to have a bank or any other middle man with this money. That’s because of crypto’s innovation and technology. As I said earlier, blockchain is decentralized, meaning there’s not
one individual in charge of it.
What Started All
You’ve likely heard about Bitcoin, it’s the most well-known cryptocurrency. An anonymous person who called themselves Satoshi Nakamoto invented it in 2008. Their goal was to develop a peer-to-peer online payment system. Peer-to-peer (or P2P) means that it is distributed and functions independently of any financial institution. Consider this as an example: you go to a restaurant for dinner and pay with your credit card. You’re not actually giving any money to the owner of the restaurant, the bank is With cryptocurrencies, there are no banks or government controlling the money, avoiding the need for a middle man.
A cryptocurrency such as Bitcoin is made up of a peer network. Each peer has a record of all transactions overall history, and the balance of each account. A transaction is a record that states, “Ana gives X Bitcoin to John” and is signed by Ana’s private key. A transaction is transmitted on the network after it has been signed, and it’s sent from one peer to all others. This is the core principle of p2p-technology.
In the crypto world, there are people called miners. They solve complex cryptographic and math problems, using a machine with special software. New bitcoins are generated once the equations are solved. Miners not only generate new coins, but they also use their computers to verify transactions and prevent fraud 24 hours a day, this is achieved by gathering all transactions made over a period of time and placing them in a block list. The task of the miner is confirming such transactions and writing them into a general log. So Instead of one person or institution regulating all, thousands of computers worldwide are linked to a network, and all have to come to an agreement on which transactions are valid.
Cryptocurrencies can be traded in many markets. A market is a place where you can buy or sell your crypto in exchange for standard currencies. There are many exchanges that a user can use: some of the most common are Coinbase, Kraken, and BITTREX.
With the hype of Bitcoin in 2017, a lot of misunderstanding about Bitcoin and crypto came about. Let’s clear some of these up.
- Bitcoin is the only function of blockchain — blockchain is so technologically sophisticated that bitcoin is simply an example of what blockchain can do and how it can operate.
- Cryptocurrencies are only beneficial for “dirty money” — since many cryptocurrencies are anonymous and therefore do not reveal your identity while making a transaction, there’s a misunderstanding that this makes crypto attractive to criminals. However, any citizen can benefit from it. That’s why it was invented in the first place. For example, if you don’t trust your bank or country because of fraud, political disturbances, instability, or if you think you are charged too many fees, the best way to store your money may be through the blockchain and cryptocurrency assets.
- All transactions are anonymous — some people assume that all crypto-activity is anonymous when in reality many cryptocurrency transactions are on a public blockchain. While it is true that many currencies like Monero offer user privacy, ensuring that no outsider can see the transaction’s amount source or destination, many cryptocurrencies are not yet operating this way. To make it clear that we are not contradicting the debunked myth above, many cryptocurrencies are in fact anonymous, it’s just not all of them, it depends on which one you end up choosing.
Some Cons Of Crypto
- Volatility — in 2017 main cryptocurrencies prices rose above 1000% and then plummeted. Nevertheless, as the excitement has calmed down, variations in prices have become more consistent and followed the dynamics similar to stocks
- Lack of regulation
- You should always study beforehand, and weigh the risks when you decide to invest, trade or just hold on to crypto, or any other investment.
Some Pros Of Crypto
- There are no banks or brokers taking cuts.
- Transactions are cheaper and faster.
- Unlike the 3 billion people who are unable to access traditional financial services, anyone can use crypto if they so choose.
- A central authority can not control the currency, rendering crypto extremely promising.
- Reduces corruption.
- Gives people charge of their own money
Cryptocurrencies are here to facilitate and speed up transactions and as a new way of investing. But before anything else, I encourage you to read about some more topics if you choose to invest in them in order to make your journey as safe as possible. Some of these are cryptocurrency wallets, cryptocurrency exchanges, selecting your cryptocurrencies, analyzing,
investing, and profit. Which is what the next few articles will be about. If you have any questions or recommendations don’t be afraid to reach out!