Everything you need to know about what cryptocurrencies are, how they work, and how they’re valued. By now you’ve probably learned 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 exactly how much do you know on them? Considering just the amount of questions I’ve received out of the blue through the aforementioned population group within the last month, the reply is probably, “not a lot.”
Today, we’ll change that. We’re likely to walk with 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 just 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 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 through the rapidly rising prices of virtual currencies within the last couples of months.
The number of cryptocurrencies are available? The amount is definitely changing, but according to CoinMarketCap.com as of Dec. 30, there was around 1,375 different virtual coins that investors may potentially buy. It’s worth noting that this barrier to entry is especially low among cryptocurrencies. Quite simply, this means that if you have time, money, and a team of people that understands crafting computer code, you possess an chance to develop your personal cryptocurrency. It likely means 香港交易所 continue entering the space over the years.
Why were cryptocurrencies invented?
Technically, the idea of an electronic peer-to-peer currency was being tinkered with decades ago, however it wasn’t truly successful until 2008, when bitcoin was conceived. The foundation of bitcoin’s creation, and all sorts of virtual currencies which have since followed, was to fix numerous perceived flaws with the way money is transmitted from one 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 finance 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 through the use of blockchain technology.
OK, exactly what the heck is blockchain?
Blockchain will be the digital ledger where all transactions involving a virtual currency are stored. If you pick bitcoin, sell bitcoin, use your bitcoin to buy a Subway sandwich, and so on, it’ll be recorded, within an encrypted fashion, within this digital ledger. The same goes for other cryptocurrencies.
Think about blockchain technology since the infrastructure that underlies virtual coins. It’s the building blocks 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 choice compared to current system of transferring money?
Blockchain offers numerous 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 from this digital ledger is stored on hard drives and servers all over the globe. The main reason this is accomplished is twofold: 1.) it helps to ensure that no one person or company could have central authority spanning a virtual currency, and two.) it acts as a safeguard against cyberattacks, such that criminals aren’t able to 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 needed to oversee these transactions, the idea is the fact transaction fees might be lower compared to what they currently are.
Finally, transactions on blockchain networks may have the opportunity to settle considerably faster than traditional networks. Let’s keep in mind 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 take place for days while funds are verified. With blockchain, this verification of transactions is definitely ongoing, meaning the chance to settle transactions a lot more quickly, or maybe even instantly.