Can Cryptocurrency be Explained Simply?

Today’s world is all about cryptocurrencies. People constantly comment on this phenomenon, search for more and more information, and demand ways to join the world of trading with these assets. Because this is what they are – digital assets that started out as alternative peer-2-peer payment systems that aim to eliminate the middleman. They revolutionized the technological field with the cryptography tech used for the creation, concept, and protection of their networks – the so-called blockchain.

We all know that cryptocurrencies and their networks are referred to as the safest and most secure digital presences known. But do we actually understand what this means? Many attempts have been made to explain these cyber assets. The more the information becomes, the harder it gets to sift through all the tech terminology and find the essence of the matter.

If that is the case, can we ever get cryptocurrency explained or is this an enigma that will forever stay attractive and unsolved like a mystery for the ordinary person? There have been many attempts to grasp the essence of this phenomenon, some have succeeded, others have failed. But there are certainly a couple of things you need to know in order to understand what these digital currencies are.

Cryptocurrency Explained in a Few Words

Nowadays, almost every aspect of our lives has been digitalized. So why not money as well? Cryptocurrencies are not money in the traditional sense of the word but they can be used to pay for various goods and services. Mainly because some of them have already been adopted by companies.

Did You Know:

Switzerland is one of the largest cryptocurrency’s ecosystems, adopting crypto, distributed ledger, and blockchain technologies. It is heaven for tech start-ups that want to create their own cryptocurrency through ICO (Initial Coin Offering). As of January 2018, you can also pay your taxes in Bitcoin if you live in the Chiasso municipality in Switzerland.

Yes, we can pay in a digital environment, we don’t need to hold cash but cryptocurrencies promise to eliminate financial systems as we know them. By digitalizing money as a whole, eliminating the physical embodiment of payment methods.

But despite the word ‘currency’ in the name of this digital asset that has made many people associate them only with money, there is so much more to them. Mainly because of the environment that has been created because of them – the blockchain.

Cryptocurrency Explained in More Than a Few Words

The term “Blockchain” has been around since 1991 but it became popular around the time the first cryptocurrency – Bitcoin, was decentralized. In its essence, the chain of blocks is a constantly expanding list of records. Cryptography is used for ensuring their security which has made the chain inherently resistant to data modification and interference.

Curious Fact:

The first huge implementation of the blockchain was made for the Bitcoin cryptocurrency. The network got decentralized in 2009 by a persona known as Satoshi Nakamoto. Till this day, this is still an anonymous figure. There are speculations that it is not a single person, even, but a group of people who stand behind the pseudonym and the creation of the most popular, most expensive coin, that has become a leader by cryptocurrency market capitalization.

To put it simply, the blockchain is the ledger in which every peer-2-peer transaction gets recorded. The recordings are permanent and cannot be modified. Each transaction is validated by a network of peers, in which lies the decentralization of the cryptocurrencies’ nature. No single authority (governmental or financial) or person has the right to make autonomous decisions regarding the blockchain. Consensus protocols are applied for the verification and recording of transactions in the blocks.

The inherent security and safety of the blockchain have turned the technology into a promising resource for companies and institutions that don’t even have something to do with cryptocurrencies. This ledger is suitable for recording other events, medical records, identity information, it has a wide corporate application and some companies are already using it for their managerial processes. Virtually, any type of data and massive amounts of information can be recorded on the blockchain.

Creating a Cryptocurrency or How to Get Bitcoins?

When we are trying to understand how cryptocurrency works in order to try and explain it, we should know how it actually comes into existence. First of all, this is not a physical good, it is a system, running on algorithms and consuming huge amounts of computational and electrical power. It has a limited supply and is usually released through the process of mining.

To understand what is cryptocurrency mining, we should remember that these cyber assets are, in fact, peer-2-peer networks that run in the digital space. New coins or tokens of the available supply are usually created through the process known as mining.

Keep In Mind:

Mining does not happen underground. This is actually the processes of validating transactions. For their work and efforts, miners receive crypto coins as a reward. Mining is associated with huge costs for the purposes of resolving highly complex mathematical equations that become more and more complex with each new block from the chain.

An interesting development in the world of mining is the fact that some cryptocurrencies do not require to be mined and work in a slightly different way. There are still very few of this type but the tendency is for them to become even more. This is due to the fact that the mining process consumes an extreme amount of resources and some don’t deem it worth their while.

Initial Coin Offering & Altcoin News

Even though there are currently some huge names, reigning over the industry, small and new cryptocurrencies get released, as well. This happens quite often through the process known as Initial Coin Offering.

An ICO is a preferred method by start-up tech companies for raising capital to fund their network development. Backers of these crowdfunding initiatives receive tokens when the cryptocurrency is released for their investment. They can back the ICO with either fiat money, predominantly US Dollar, or with Bitcoin. It all depends on the terms of the Initial Coin Offering.

Good to Know:

We have seen the rise and fall of dozens of smaller cryptocurrencies. But those that manage to build a name for themselves stay permanently in all cryptocurrency charts and lists. And a big part of them is considered to promising and beneficial as investments.

Does Cryptocurrency Have a Future?

Given that more and more people read about cryptocurrency explained and how cryptocurrency works every day, the interest in this field is only growing and rapidly. The usefulness and many applications of the technology used in the creation of cryptocurrencies, the cryptography applied, and the value derived from supply and demand, and mining efforts have turned these in investment assets as well.

Cryptocurrencies are not just reshaping the present, they will have a huge impact on the future. Both in terms of financial operations and trading endeavors. Nowadays, thousands of people, if not millions, use cryptocurrency assets for long-term investments and day-trading alike. Global markets and corporations start to adopt the technology of the networks and the coins as payment methods.

If you have ever been skeptic about the future of cryptocurrencies, it’s time to look reality in the eye. Just like the creation of the Internet changed our lives forever, so are going to do cryptocurrencies.

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Jamie Portiss

My name is Jamie Portiss. Let me tell a little bit more about myself. I am a Financial Analyst by profession. Having worked my entire life in the financial services sector, I have managed to build a solid investment portfolio. It all began with a Bachelor’s Degree in Finance and right after graduating from university, I began working as a Junior Financial Analyst at a startup company, dealing with financial solutions. I want to bestow our know-how and understanding of the virtual markets (the cryptocurrency exchange, Bitcoin trading, and Altcoin investment spheres, in particular) with users. All that it takes is to do it the right way!

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