What You Need to Know About Cryptocurrency
First thing’s first, what is cryptocurrency? Cryptocurrency is a term used to describe currency that only exists on the internet – call it virtual money or even digital money if you wish but its accurate term is cryptocurrency. This is where it gets complicated; it is a medium of exchange, but unlike dollars or pounds sterling, exchanges are made through what’s known as cryptography, a system (which is 100% secure) designed to control the creation of new coins. It was back in 2009 when the first cryptocurrency was created – Satoshi Nakamoto was fed up with fees that came with peer-to-peer payments so designed the world’s first online currency with no fees: Bitcoin. You can also look into Metamask if you have further interested in this subject.
How Do Cryptocurrencies Work?
Many people look upon this digital currency the same way as they would a credit or debit card; you make purchases online only the bank handles the complex stuff. Cryptocurrencies are designed for those who truly understand the inner workings of complex systems, but luckily for you, we have simplified how it works to give you a better understanding into the world of digital currencies.
First stop – the public ledgers, this is where the identities of coin owners are stored, only its system is encrypted to the highest standards and unlike banks, every transaction is scrutinised to ensure the legitimacy of transactions and to ensure the spender is only spending the coins he/she owns. This is what’s called a transaction block chain.
Next up – transactions. The transferring of funds from one digital wallet to another is called a transaction, but before it’s claimed, the public ledger must verify its legitimacy. Each transaction comes coded with a cryptographic signature, and this piece of encrypted data is proof the funds came from the owner of the wallet. How long does verification take? Roughly 10-minutes.
Final call – the mine. Once transactions are verified, they are then added to the public ledger – this is called mining, but before you can become a ‘miner’, you must solve an increasingly complex mathematical equation. Anyone can attempt this and the first to do so will see that transaction added to the block of transactions on the ledger.
Other Types of Cryptocurrencies
- Litecoin also known as LTC, was launched in 2011 and can often be found described as “silver to Bitcoin’s gold”.
- In 2012, Ripple (aka XRP) was launched, a digital currency that doesn’t require mining.
- April 2014 saw the launch of Monero (XMR), a private, untraceable, and secure digital currency.
- Dash or Darkcoin as it’s often referred to, also made its way onto the Cryptocurrency scene in 2014 and is what’s known as a secret version of Bitcoin.
- Ethereum (ETH) emerged in 2015 and can be used to trade anything.
- Zcash (ZEC for short), is a 2016 invention and claims to provide additional layers of security to transactions.
The Pros and Cons of Cryptocurrencies
- Cryptocurrencies can be used for lifestyle choices such as entertainment on online casinos
- Cryptocurrencies are anonymous
- Security is at the forefront of digital currency, with each cryptocurrency being built from scratch
- This digital currency is legal and is not owned by the government – it is owned by the users
- Low transaction costs compared to other e-wallets such as PayPal or Skrill
- Anyone with access to a computer can use this currency
- High reward for high risks with a volatile market – even frugal choices can pay off sometimes
- Trading anywhere in the world is made easier with cryptocurrencies and you can find a great article on forex trading here
- The only currency deemed as decentralised, meaning it cannot be inflated nor defaulted on the choices of any government
- Transactions are almost impossible to fake, making it one of the most secure currencies ever
- Withdrawals can be made on online casinos through cryptocurrencies
- Extremely complex currency to understand
- The value of cryptocurrencies is never per-set, meaning it can increase and decrease and as such, it could become taxable income
- Cryptocurrency may be on the increase around the globe, but only certain companies accept it as a form of payment
- Mining is not cheap – not only do you need to have a superior set of mathematical solving skills, but the computer systems to handle it too and we’re talking tens of thousands per unit!
- Cryptocurrency market is highly volatile meaning the value of coins can soar or plummet without warning
- If a coin is lost or something happens to it, there’s nothing anyone can do about it, making it very hit and miss. If your bank note rips, you can at least change it at the bank!
- Recovering lost coins is not an option and there is no system in place to protect the value of those coins either
- Cryptocurrency is software based and we all know software is open to flaws and hacks.