Cryptocurrencies and Bitcoin

 

 

 

 

 

What Is A Cryptocurrency?

Cryptocurrencies are just lines of computer code that hold monetary value. Those lines of code are created by electricity and high-performance computers.

Cryptocurrency is also known as digital currency. Either way, it is a form of digital public money that is created by painstaking mathematical computations and policed by millions of computer users called 'miners'. Physically, there is nothing to hold. 

'Crypto' comes from the word cryptography, the security process used to protect transactions that send the lines of code out for purchases. Cryptography also controls the creation of new 'coins', the term used to describe specific amounts of code.
Governments have no control over the creation of cryptocurrencies, which is what initially made them so popular. Most cryptocurrencies begin with a market cap in mind, which means that their production will decrease over time thus, ideally, making any particular coin more valuable in the future.

What is bitcoin?
Bitcoin is a new currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. Transactions are made with no middle men – meaning, no banks! There are no transaction fees and no need to give your real name. More merchants are beginning to accept them: You can buy webhosting services, pizza or even manicures.

One of the advantages of Bitcoin is that it can be stored offline on a person's local hardware. That process is called cold storage and it protects the currency from being taken by others. When the currency is stored on the internet somewhere (hot storage), there is high risk of it being stolen.
On the flip side, if a person loses access to the hardware that contains the bitcoins, the currency is simply gone forever. It's estimated that as much as $30 billion in bitcoins have been lost or misplaced by miners and investors. Nonetheless, Bitcoins remain incredibly popular as the most famous cryptocurrency over time.

How Bitcoins Work

Bitcoins are completely virtual coins designed to be 'self-contained' for their value, with no need for banks to move and store the money. Once you own bitcoins, they behave like physical gold coins: they possess value and trade just as if they were nuggets of gold in your pocket. You can use your bitcoins to purchase goods and services online, or you can tuck them away and hope that their value increases over the years.
Bitcoins are traded from one personal 'wallet' to another.

A wallet is a small personal database that you store on your computer drive (i.e cold storage), on your smartphone, on your tablet, or somewhere in the cloud (hot storage).

For all intents, bitcoins are forgery-resistant. It is so computationally-intensive to create a bitcoin, it isn't financially worth it for counterfeiters to manipulate the system.

Bitcoin Values and Regulations

A single bitcoin varies in value daily; you can check places like Coindesk to see today's value. There are more than two billion dollars worth of bitcoins in existence. Bitcoins will stop being created when the total number reaches 21 billion coins, which will be sometime around the year 2040. As of 2017, more than half of those bitcoins had been created.
Bitcoin currency is completely unregulated and completely decentralized. There is no national bank or national mint, and there is no depositor insurance coverage. The currency itself is self-contained and un-collateraled, meaning that there is no precious metal behind the bitcoins; the value of each bitcoin resides within each bitcoin itself.
Bitcoins are stewarded by 'miners', the massive network of people who contribute their personal computers to the Bitcoin network. Miners act as a swarm of ledger keepers and auditors for Bitcoin transactions. Miners are paid for their accounting work by earning new bitcoins for each week they contribute to the network.