A Brief Guide to Crypto Currencies
In the last two years the word cryptocurrency has excited many, struck fear into the hearts of traditionalists and caused a whole lot of confusion for many more. Bitcoin is the cryptocurrency which you may have already heard of, notably after its rise in value from $1000 to $20,000 in the space of just a couple of months last year. Bitcoin however is just one of many cryptocurrencies out there and if you are confused about what this means and how you may be able to invest, here is a brief guide about this new form of money.
As with most beneficial inventions the world has seen, cryptocurrency was actually the side-effect of a completely different project which tech-guru Satoshi Nakamoto was working on back in 2008. He was trying to create a peer-to-peer electronic cash system and ended up creating this decentralized cash system, which went on to become Bitcoin.
Explaining cryptocurrencies can be very complex so let’s try and break it down in simpler terms. When creating a digital currency you need a central server which keeps records about accounts, balances and transactions and helps to avoid double-spending, much like a traditional bank does. Cryptocurrencies are a decentralized system which means that they don’t have this server in place, and this was the reason why a digital currency hadn’t been invented prior to crypto. A decentralized server means that all parties involved in a digital currency need to come to a consensus about accounting, transactions and cash movements, when Nakatomo designed the software and strategy which could manage all of this and ensure that there was a constant consensus, the cryptocurrency was born.
What is Crypto Mining?
Crypto mining is the way in which this digital currency comes into being and there are many around the world working hard on solving cryptological puzzles which will help them to mine certain currencies. The reason we have this is because money cannot just be introduced, especially not digital money, and so it need to have a source. Miners must use their computer’s powers to solve these puzzles and when they do they will mine a block of currency, which is then added to the blockchain and is turned into money.
The blockchain is the main system by which cryptocurrency is used and tracked. This is a completely anonymous system which means that money can be bought and sold from the blockchain without any information being required. If you buy Bitcoin for example your transaction will take place via the blockchain. Basically the blockchain is a collection of information blocks which are chained together, these blocks contain information about transactions and purchases and it is central to cryptocurrency.
If you wish to invest then the first step is to learn as much as you can about the many different cryptocurrencies. Once you have done this you’ll need to open a crypto wallet which many sites offer, and then you can begin to invest in the cryptocurrency which you think is going to go up in price.
Cryptocurrency eventually will replace cash so if you don’t feel that you know enough about it, now is the time to do some more research.