When most people think of cryptocurrency, they can also think of encrypted currency. Very few people seem to know what it is, and for some reason everyone seems to be talking about it, as if they know it. 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 the cryptocurrency is for you or not, but at least you will be able to speak with a degree of certainty and knowledge that others will not possess.
There are many people who have already reached the status of a millionaire, dealing with cryptocurrency. Obviously there is a lot of money in this brand new industry.
Cryptocurrency is an electronic currency, short and simple. But what is not so short and simple is exactly how value is obtained.
Cryptocurrency is a digitalized, virtual, decentralized currency produced by the application of cryptography, which, according to Merriam Webster’s dictionary, is “computer encoding and decoding of information.” Cryptography is the basis that makes debit cards, computer banking and e-commerce systems possible.
Cryptocurrency is not supported by banks; it is not supported by government, but by an extremely complex arrangement of algorithms. Cryptocurrency is electricity that is encoded in complex strings of algorithms. What adds monetary value is their complexity and their security from hackers. The way cryptocurrency is made is just too difficult to reproduce.
Cryptocurrency is in direct opposition to what is called fiat money. Fiat money is a currency that derives its value from a government decision or law. The dollar, yen and euro are examples. Any currency that is defined as legal tender is fiat money.
Unlike fiat money, another part of what makes cryptocurrency valuable is that, like commodities like silver and gold, there is only a limited amount of it. Only 21,000,000 of these extremely complex algorithms were produced. No more no less. It cannot be changed by printing more of it, just as the government prints more money to pump the system without support. Or by changing a bank to a digital register, something the Federal Reserve will instruct banks to do to adjust for inflation.
Cryptocurrency is a means of buying, selling and investing that completely avoids both government supervision and banking systems that track the movement of your money. In a world economy that is destabilized, this system can become a stable force.
Cryptocurrency also gives you great anonymity. Unfortunately, this can lead to the misuse of a criminal element that uses cryptocurrency for its own purposes, just as ordinary money can be misused. However, this can also prevent the government from monitoring your every purchase and invading your privacy.
Cryptocurrency is available in quite different forms. Bitcoin was the first and is the standard by which all other cryptocurrencies are modeled. 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 generic name. Everyone’s prices are regulated by the supply of a particular cryptocurrency and the demand for that currency in the market.
The way cryptocurrency is created is quite fascinating. Unlike gold, which must be extracted from the earth, cryptocurrency is simply an entry in a virtual book that is stored in various computers around the world. These records must be “selected” using mathematical algorithms. Individual users, or more likely a group of users, perform computational analysis to find a specific series of data called blocks. Miners find data that creates an accurate model of the cryptographic algorithm. At this point he applied to the series and they found a block. Once the equivalent data set in the block matches the algorithm, the data block is unencrypted. The miner receives a reward from a certain amount of cryptocurrency. Over time, the size of the reward decreases as cryptocurrency becomes increasingly scarce. In addition, the complexity of algorithms for searching for new blocks increases. It is computationally more difficult to find a matching series. Both scenarios combine to reduce the rate at which cryptocurrency is created. This mimics the difficulty and scarcity of extracting goods such as gold.
Now anyone can be a miner. The creators of bitcoin have made the digging tool open source, so it’s free for everyone. However, the computers they use run 24 hours a day, seven days a week. The algorithms are extremely complex and the processor runs at full speed. Many users have specialized computers made specifically for cryptocurrency digging. Both the user and the specialized computer are called miners.
Miners (human) also keep transaction books and act as auditors so that the coin is not duplicated in any way. This protects the system from hacking and insanity. They are paid for this work by receiving a new cryptocurrency every week while maintaining their job. 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 some of the definitions we learned:
• Cryptocurrency: electronic currency; also called digital currency.
• Fiat money: any legal tender; supported by the government, 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 slight variations in their coding.
• Miners: an individual or group of people who use their own resources (computers, electricity, space) to dig digital coins.
o Also a specialized computer designed specifically for finding new coins using a computational 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.
• Digging by people who use their own resources to find coins.
• Stable, limited currency system. For example, there are only 21,000,000 bitcoins produced for all time.
• Does not require any government or bank to make it work.
• Pricing is determined by the amount of coins found and used, which is combined 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. This is a new field, which could be the next gold mine for many of them. If you find that cryptocurrency is something you would like to learn more about, then you have found the right report. However, I barely touched the surface in this report. There is much, much more to cryptocurrency than what I have experienced here.