What is Bitcoin? — A Basic Overview of Cryptocurrency
The words “bitcoin” and “cryptocurrency” have been popping up in the news more and more lately. You’ve likely come across headlines or perhaps you even heard of the recent real estate transaction in Texas — the first of its kind — completed entirely in Bitcoin!
The transaction was for the purchase of a newly built custom home, and the full purchase price was transferred to the seller/builder via Bitcoin. The seller then converted the coin into USD. The broker for the purchase said: “In all of my 33 years of closing transactions, I honestly couldn’t have expected something so unique to go so smoothly. In a matter of 10 minutes, the Bitcoin was changed to US Dollars and the deal was done!” [1]
In 2011, Bitcoin took parity with the US dollar [2] and a $20 investment back then would now be worth more than $135,000 (as of November 10th, 2017).[3] The world’s newly minted bitcoin millionaires are now hunting for big-ticket items to buy with their cryptocurrency. And what better place to drop some cash, virtually or otherwise, than some luxury real estate?[4]
So, what is bitcoin?
Well, it’s a type of (and was the first) cryptocurrency.
Okay, but…
What is CryptoCurrency?
CryptoCurrencies are the Digital or alternative currencies that don’t have any physical form. Cryptography is used for such currency to make secure transactions. In such transactions, information or transaction details are converted into code that is uncrackable. So everything in such transaction is traced by a code. Usually, CryptoCurrency is not controlled by any country, so the value of such currency is determined by the market.
Why was CryptoCurrency Invented?
Cryptocurrency started with the invention of Bitcoin in 2009 by the unknown entity known as “Satoshi Nakamoto”. A start-up company producing a new form of money – digital currency was born. This decentralized currency is not controlled by governments or any organization and as such is open to all. It has never and will never be afforded copyright. Currently used by over hundreds of thousands of people per day, and there is no middle man or no credit company. Bitcoin is an accepted currency on such major sites as WordPress, Piratebay, Reddit, and OK Cupid. Today there is a whole host of other digital currencies which work on the same basis but use different code eg. Litecoin and Primecoin.
Cryptocurrencies are legal all over the world with the exception of Iceland; although there have been restrictions made to their usage in other countries such as China. The biggest downfall of a Cryptocurrency is the potential for fraud through inside party infiltration of security systems: however, whilst this is logistically possible, but the cost would be sky high and unbelievable skill level would require. “Miners”, or members of the public, rewarded for successful handling of cryptocurrency, use resource-intensive software to help secure the network allowing it to mathematically solve equations and directly impede attempted fraud.
A cryptocurrency only has value in its exchange – it has no inherent value – much the same as a ‘conventional’ currency. A dollar is only worth what someone is willing to give you for that dollar. If everyone stops accepting the dollar – it becomes worthless. Hence cryptocurrency is only worth what someone will exchange for it. There is no Federal Reserve to issue new digital currency, theoretically making it more stable. New cryptocurrency is released, Bitcoin, for example, releases more each year but the exact amount decreases proportionally year on year; the Federal reserve reissues in a reactionary fashion whenever it is required Thus, the more business and people that accept a form of a cryptocurrency – the more stable it will become.
What makes CryptoCurrency Different
So what makes cryptocurrency so different from just using regular digital money? Well, there are a few key differences that we will cover in this article. Firstly, there’s no central bank anywhere that determines its value or controls the flow in which new money is being created. This makes the manipulation of the amount of money in existence not controlled by for the usual institutions we are used to. For
Firstly, there’s no central bank anywhere that determines its value or controls the flow in which new money is being created. This makes the manipulation of the amount of money in existence not controlled by for the usual institutions we are used to. For example, the US dollar is controlled by the Federal Reserve, but Bitcoin, which is one of the most popular cryptocurrencies today, is controlled by an algorithm that no individual person, company or country can change.
The value of a fiat cryptocurrency is really just based on what other users are willing to give up for it. No countries are involved, so the welfare of a particular nation’s economy doesn’t affect currency value. Since value is based solely on supply and demand, it functions like the way commodities do in the stock market.
Another aspect that differentiates cryptocurrencies from regular currencies is the low transaction fees to transfer money all over the world. The fee is independent of distance, country borders etc.. This makes it much easier to transfer enormous sums of money globally or to make micro payments between people who live in different countries.
What are the most popular CryptoCurrencies?
• Bitcoin: Bitcoin was started in 2009 by Satoshi Nakamoto, and this is the company who started this all. Bitcoin is the most popular Cryptocurrencies that is accepted widely, and it is also easy to get.
• Litecoin: Litecoin started in 2011 and this cryptocurrency can be mined. You can use this to transact goods and services.
• Monero: Do you care more about privacy and don’t want to be traced easily? Bitcoin is not for you. Monero usage ring signature technology that makes the transaction more secure and untraceable.
• Dash (Digital Cash): Dash Currency is another secure way to transact. It usage anonymization technology. Dash Cryptocurrency is more secure and fast. It was known as DarkCoin, but now they have changed the name to not make people assume its connection with the Dark Web
• Ripple: Ripple is actually a RTGS (Real Time Gross Settlement System), a Currency Exchange and Remittance Network. It is also used by many banks to reduce costs. It’s not very secure if you don’t want to get traced.
• Dogecoin: This cryptocurrency is widely used to give charity or collect the donation. It was initially made as “Joke Currency”, but now has gained much popularity.
• MaidSafeCoin: You can exchange Safecoin for providing resources, like your Storage Space, CPU, Bandwidth etc.. The Process of getting Safecoin and providing resources is called Farming.
• Ethereum: Etherreum is another popular Cryptocurrency that you can trust, but it has recently seen many ups and downs.[5]
Is cryptocurrency the future of transactions? We don’t know for sure, but it certainly is shaking up some industries and traditions.
To track the values of cryptocurrency (think stock ticker but for digital currency), visit cryptocompare.com
Sources:
[2] Wikipedia
[3] Investing.com
[4] Realtor.com
[5] Techgrapple.com
