When most people think of cryptocurrency, they might think of cryptocurrency. Very few people seem to know what it is and for some reason everyone seems to talk about it as if they know. We hope that this report will demystify all aspects of cryptocurrency so that by the time you finish reading you will have a pretty good idea of what it is and what it is about.
You may find that cryptocurrency is for you, and you may not, but at least you will be able to speak with a degree of security and knowledge that others will not possess.
There are many people who have already reached the status of millionaires dealing with cryptocurrencies. It is clear that there is a lot of money in this completely new industry.
Cryptocurrency is an electronic currency, short and simple. However, what is not so short and simple is how it has value.
Cryptocurrency is a digitized, virtual, decentralized currency produced using cryptography, which, according to Merriam Webster’s dictionary, is “computerized encoding and decoding of information.” Cryptography is the basis that enables debit cards, computer banking and eCommerce systems.
Banks do not support cryptocurrency; it is not supported by the government, but by an extremely complicated schedule of algorithms. Cryptocurrency is electricity that is encoded into complex arrays of algorithms. What gives monetary value is their intricacy and security from hackers. The way cryptocurrency is made is simply too difficult to reproduce.
Cryptocurrency is in direct contrast to what is called fiat money. Fiat money is a currency that gets its value based on a government decision or law. The dollar, yen and euro are all examples. Any currency that is defined as legal tender is fiat money.
Unlike fiat money, the other part of what makes cryptocurrency valuable is that, like commodities like silver and gold, there is only a limited amount. Only 21,000,000 of these extremely complex algorithms have been produced. No more, no less. It cannot be changed by printing more, just as the government prints more money to inflate a system without support. Or by the bank changing the digital book, something the Federal Reserve will instruct banks to do to adjust to inflation.
Cryptocurrency is a means of buying, selling and investing that completely avoids government supervision and banking systems that track the movement of your money. In a destabilized world economy, this system can become a stable force.
Cryptocurrency also gives you a great deal of anonymity. Unfortunately, this can lead to misuse by a criminal element that uses cryptocurrency for its own purposes, just as ordinary money can be misused. However, it can also prevent the government from monitoring your every purchase and violating your personal privacy.
Cryptocurrency comes in several forms. Bitcoin was the first and is the standard by which all other cryptocurrencies are made. All are produced by meticulous alpha-numerical calculations from a complex coding tool. Some other cryptocurrencies are Litecoin, Namecoin, Peercoin, Dogecoin and Worldcoin, to name a few. They are called altcoins as a generalized name. The prices of each of them are regulated by the supply of a certain cryptocurrency and the demand that the market has for that currency.
The way cryptocurrency is created is quite fascinating. Unlike gold, which must be mined from the ground, cryptocurrency is just an entry in a virtual book that is stored in various computers around the world. These entries must be ‘excavated’ using mathematical algorithms. Individual users or, more likely, a group of users perform computational analysis to find specific data series, called blocks. ‘Miners’ find data that produces an accurate pattern for a cryptographic algorithm. At that point they applied to the series and they found a block. After the equivalent data series on the block matches the algorithm, the data block is unencrypted. The miner received a reward from a certain amount of cryptocurrency. As time goes on, the amount of the reward decreases as the cryptocurrency becomes smaller. In addition, the complexity of algorithms in search of new blocks has increased. Computing, it becomes harder to find the right series. Both of these scenarios come together to reduce the rate of cryptocurrency creation. This mimics the difficulties and scarcity of excavating goods like gold.
Now, anyone can be a miner. The originators of Bitcoin created an open source mining tool, so it is free for everyone. However, the computers they use work 24 hours a day, seven days a week. The algorithms are extremely complex and the CPU runs at full tilt. Many users have specialized computers made specifically for cryptocurrency mining. Both the user and the specialized computer are called miners.
Miners (people) also keep transaction books and act as auditors so that the coin does not multiply in any way. This prevents system hacking and rabies. They are paid for this job by receiving a new cryptocurrency every week while maintaining their work. They store their cryptocurrency in specialized files on their computers or other personal devices. These files are called wallets.
Let’s summarize by going through a few definitions we’ve learned:
• Cryptocurrency: electronic currency; it is also called digital currency.
• Fiat money: any legal tender; supported by the state, is used in the banking system.
• Bitcoin: the original and gold standard of cryptocurrency.
• Altcoin: other cryptocurrencies that are based on the same processes as Bitcoin, but with small variations in their coding.
• Miners: an individual or group of individuals who use their own resources (computers, electricity, space) to mine digital coins.
o Also a specialized computer made especially for finding new coins through computer series of algorithms.
• Wallet: a small file on your computer where you store your digital money.
Conceptualization of the cryptocurrency system in brief:
• Electronic money.
• Dig individuals who use their own resources to find coins.
• Stable, finite currency system. For example, there are only 21,000,000 bitcoins produced for all time.
• Does not require the government or the bank to do so.
• The price is decided by the amount of coins found and used in combination with the public’s demand to own them.
• There are several forms of cryptocurrency, with Bitcoin coming first.
• It can bring great wealth, but, like any investment, it carries risks.
Most people find the concept of cryptocurrency fascinating. It is a new field that could be the next gold mine for many of them. If you think cryptocurrency is something you would like to know more about, then you have found the right report. However, I barely touched the surface in this report. There is much, much more about cryptocurrency than what I went through here.