In a layman’s perspective, Cryptocurrency can be understood as any other currency that is used to buy goods, make investments, lend, borrow, or gift. A major difference is that cryptocurrency does not have any physical form and therefore, you can neither feel it nor see it (except as a computer code). Cryptography is a form of encryption that ensures integrity, confidentiality and non-repudiation of the final output created. While mathematics is at the core of cryptography, it also uses multiple sciences. The underlying technology is known as blockchain in combination with a decentralized ledger. The activities within the blockchain are not controlled by any supervisory authority and not backed by any federal government.
History of cryptocurrencies
A Japanese entrepreneur going by the pseudonym Satoshi Nakamoto was initially credited with inventing the first ever cryptocurrency Bitcoin. However, later in 2016, Craig Wright claimed that he was the person actually behind the invention. In the absence of any negation, Craig’s claims have apparently been accepted as true. More importantly, the blockchain technology brought along, an enhanced trust factor with it. With every participant in the decentralized required to do his/her part of the job, and everyone within the network had access to all the transactions within the block. Double spending was a major problem that payment networks faced and the blockchain technology found near acceptance for this segment. Read here for a detailed history of mining and how it is changing the world to a decentralised monetary system.
Every transaction is reckoned as a file and has the public keys or wallet address of the sender as well as recipient and the amount involved. Senders are also required to sign off the transaction using their unique private key. Once all the relevant entries for a transaction are made, it is broadcasted to the network and the network should confirm the transaction before it becomes effective. However, within the network only accredited miners have the ability to confirm transactions. A cryptographic puzzle is used to ensure the genuineness of the individual confirming the transaction. After a transaction is confirmed, all nodes within the network add the transaction to their database.
A confirmed transaction is permanent and cannot be altered by anyone. Miners are paid a transaction fee and a reward.
To make it short, the consensus system in cryptography ensures the legitimacy of each transaction and the system would automatically reject a transaction even if a single node within the network fails to agree. Details of the process are pretty complex for a layman to comprehend. However, what is important is that cryptography provides complete trust opposed to blind trust on which most other systems depend.
Proliferation of cryptocurrencies
While Bitcoin was on a solo run during its early days, in the last few years beginning around 2015, the cryptocurrency space has seen many siblings with the total population now edging up to about 1500. This headcount excludes some of the also-ran cryptos that failed to find a foothold. In February 2018, some of the cryptocurrencies occupying the top slot include Litecoin, Ethereum, Zcash, Ripple, Dash, and Monero,
The final weeks of 2017 and the early weeks of January 2018 witnessed frenzied activity in cryptomarkets with Bitcoin surging to $20,000 per coin. But in the second half of January 2018 things started changing rapidly and Bitcoin slumped to $6,000 before recovering to $10,000. As we write this in February 2018, the cryptocurrency markets are experiencing significant volatility for multiple reasons.
Investing in Bitcoin or other cryptocurrencies also called as Altcoins
There are many people around the globe who hold the view that cryptocurrencies present a very attractive investment opportunity and there are even stories of several people have made millions of dollars from small investments below the $1,000 mark, about a decade or less ago. Undoubtedly Bitcoin sits right on top of the crypto world and still rules above the $10,000 after a seesaw game that saw the price going to $20,000, then falling down to $6,000 and again moving to $10,000 plus. Thus, the cryptomarkets are experiencing significant volatility now. While many exchanges trade in Bitcoins, investing in other cryptocurrencies may not be as easy. Coinbase, Kraken and Bitfinex are some of the leading crypto exchanges. In some parts of the globe, you may even find Bitcoin ATMs making your transactions even more convenient. The cryptocurrencies you buy can be stored in what is called ‘wallets’. ‘Wallets’ work more like a physical wallet except that they do not have a physical form. You can also buy a crypto token and jump in a can across the planet without to worry about transaction cost. Check TaxiCash, an Australian cab solution that offers driverless taxis, cashless travel and inexpensive ride anytime using this blockchain technology.
Investments in are considered high-risk, particularly since they have no federal backing and in recent times, there have been many governments around the globe taking a harder stand against some of the cryptocurrencies. More importantly, you may also want to check out local laws and regulations governing cryptocurrencies before making an investment decision.
Mining crypto coins is a significant opportunity presented by the crypto craze today. However, only those who have the required technical know-how can take advantage of this opportunity. Having said that, reading Investopedia will explain the process in depth. Miners receive a transaction fee plus reward with most cryptocurrencies though the terms may vary with specific coins. Beginners in this field can consider Litecoin, Feathercoin and Dogecoin for a start because they are cost-effective today. With just consumer grade computer systems one can look at earning about $10 dollars every day. Coin mining has many competitors around the globe and therefore you should be willing to put in persistent effort before you can carve out your space. With more computing power and technical ability at your disposal, you can explore high-end coin mining activities to rake in the moolah. Notice also that significant amount of electrical energy is consumed in mining crypto coins.
There is no dearth of resources on cryptocurrencies if you have quality time to go through a learning cycle. A mere search of cryptocurrencies will open up a world of knowledge to get you started with the learning process. Click here to update on cryptocurrency exchange rate and the market. Focusing more on the blockchain technology that drives cryptocurrencies may work to your advantage since that is slated to be the biggest technology that will impact our lives in more ways than one, in the days to come.