cryptocurrency

CRYPTOCURRENCY FOR BEGINNERS – WHAT IS CRYPTO, HOW TO INVEST IN IT, AND HOW TO MINE IT

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By cryptocurrency is meant both a cryptographic currency and a peer to peer payment system. Therefore, these digital currencies are virtual in the sense that they lack physical support, such as coins, banknotes, and payments by check.

Cryptocurrencies are all based on the same principle: the Blockchain. Cryptocurrencies are a series of numbers stored on a computer in the form of blockchains. The principle is quite simple. Take a database. Allow anyone to make changes to this database, only if you register as a “member”. Set up a very long and complex control procedure that must be respected each time a certain number of changes (blocks) are requested. The process is performed not by one and single controller, but by the army of voluntary members. Once approved, the “blocks” of changes are dated and added to the registry. It is up to the network (all the peers) to validate and confirm each transaction.

These alternative currencies are not regulated in most of the countries in the world. The lack of regulations is the main obstacle for their acceptance at a larger scale.

The crypto value is not pegged to the gold price or any fiat money or central banks or public financial institution. Nevertheless, security and transparency are their main advantages!

This technology is the basis of the vast majority of digital currencies, but Blockchain’s implementation does not stop there. It could, and it does already disrupt the whole financial sector and sectors such as the legal or administrative sector by eliminating the need for trusted third parties. This distributed register technology helps make data processing and transfer more secure and transparent since its database cannot be changed without meeting certain conditions.

Which are the main cryptocurrencies?

How many cryptocurrencies exist today? Their number is close to 2000 today, but it’s not the most exciting part of the story.

When Satoshi Nakamoto created bitcoin, it was just a utopian idea without any competing cryptocurrency to bitcoin. Since then, some 2,000 digital currencies have emerged that challenge the crypto ecosystem’s heavyweights and create disagreements within a crypto community. That can lead to a split within the community, called “fork”, and the emergence of new virtual currencies based on old technologies but with some modifications.

Initially, 21 million bitcoins were created, which is a definite and total number. 17 out of 21 million were mined, and therefore we have 4 million left to mine.

Along with Bitcoin, one of the most popular is Ethereum, which can process transactions and complex contracts and programs.

Despite their large number, there are only a few really popular digital currencies based on their market value.

Bitcoin is a kind of digital gold standard of the digital currencies and the benchmark in the sector. In August 2017, it experienced a “fork” due to a disagreement in the crypto community over the transactions’ speed, making room for a new currency: Bitcoin Cash. Bitcoin Cash got to third place in the Top 10.

Ripple also has a large market capitalization. It’s also a transfer system and digital payment protocol created to ease interbank transactions. Litecoin, Stellar, Iota, Monero are also part of the ten main cryptocurrencies.

How Is The Crypto Created?

People who make cryptocurrency are called miners. Minors are an integral part of the process. Without them, the Blockchain would be frozen. A miner verifies and confirms the transactions that take place on the Blockchain.

For example, imagine that Steve gives 3 Bitcoins to Bill. The transaction will be immediately broadcast over the network, peer-to-peer, made up of nodes – computers specialized in mining cryptos. Nonetheless, it’s just after a certain period that the transaction can be validated by the computers belonging to the mining networks using the algorithms specific to Blockchain. Once committed, the transaction forms a new data block for the register. It is added to others in the existing Blockchain, permanently and immutable.

Behind these computers on the network, miners validate transactions. To confirm a transaction, a miner must find the product of a cryptographic function that connects the new block to its predecessor, and this process is called proof of work. In exchange for the computer power used for mining, they get a reward in tokens.

How to mine a cryptocurrency?

If you want to mine a cryptocurrency, it is usually sufficient to install software on your computer using the processor to be able to solve the necessary cryptographic problem using a relatively large computing power, which will allow you to touch new units of the cryptocurrency.

However, the main cryptocurrencies have become difficult for individuals to mine. The mining of many cryptos has mainly become professionalized. It takes place mostly in Chinese farms formed of buildings on several thousand m2 where tens of thousands of servers run around the clock to mine Bitcoin, Litecoin, etc.

How to Invest in cryptocurrency?

Understanding cryptocurrency is the vital first step to crypto trade or investment. After doing some research regarding the crypto market, choose which crypto you are willing to invest in, and find an online platform offering crypto trading/exchange service and open an account. The process is simple, just as if you would open a bank account at a regular online banking service. You will obtain your digital wallet where your crypto assets will be stored. You will get the private key that corresponds to the “address” of your wallet. The crypto wallet has many forms, such as desktop, mobile, web version, or hardware device connected to your computer via USB. The latter is the most secure version of crypto wallets to opt for.

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