The Basics of Cryptocurrency
Cryptocurrency is a currency or to put it simply a method of transaction that utilizes the technology of blockchains and cryptography. By using blockchain and cryptography technologies, cryptocurrencies and their transactions are very secure. These cryptocurrencies have the advantage of being like gold and like a fiat currency.
Like gold, Bitcoin and other cryptocurrencies are finite by their very nature. Meaning that there are only so many that exist; this gives both gold and Bitcoin scarcity. As many collectors know, scarcity provides that something with value. That value will grow as more people desire it. Cryptocurrencies are valuable because the community around them believe them to be valuable, in a lot of ways cryptocurrencies are just another financial security that has price fluctuation, it’s just that Bitcoin has at several points been worth over $9,000 per unit of Bitcoin. At this current time of writing, Bitcoin is hovering over $10,000 per unit of Bitcoin! In fact, as of September 12, 2019, a $200 investment in Bitcoin in 2011 would be worth over $2,046,000.00 today! Yes, that is an astonishing 2 Million US Dollars!
Bitcoin is also like standard fiat currency (paper money) in the way that there is no intrinsic value. The value of these forms of currency comes from both the users and investors. The most significant advantage of using paper money is the ability to make exact change. Being able to divide the specific form of transaction and make a precise payment is the reason paper money exists, and now cryptocurrencies are following in that same tradition. When you sell something, you don’t want to worry about how to make change. Most Bitcoin transactions use less than a tenth of a coin.
The most significant advantage to Bitcoin and other cryptocurrencies like Ethereum is the decentralized nature of the technology. While governments and banks control traditional currencies, the community of crypto users manage the cryptocurrencies. Because of this, more individuals in countries that are experiencing the devastation of hyperinflation, and even deflation are now becoming even more reliant on cryptocurrencies as a means of stability for their financial survival.
One of the most significant disadvantages of cryptocurrencies is also its advantage, that being the security of the currency. After sending a coin to a wallet, there is no way to retrieve that money if the wallet is lost. There is a famous story about an early adopter that threw out a pc that still had their wallet on it. To this day there is a fortune sitting on a garbage pile completely & entirely by accident. While losing your cryptocurrencies forever may seem like a scary thought there are ways to prevent this, such as using a wallet-based app that stores itself off-device or via applying regular back ups to your wallet.
The future looks very bright for Bitcoin and other cryptocurrencies. The technologies behind these innovations are still in the early stages, but as they grow, they will become more and more valuable. There may come a day where cryptocurrencies are not just another currency but the preferred currency. In contrast to government produced and managed currency, cryptocurrencies are often lauded and championed as being the currency of the people. If you are considering an investment into the market of cryptocurrency, consider one of our Smart Wealth Investment preferred affiliates or advertisers. We only allow advertisers and partners on our site whose methods of practice and customer satisfaction ratings that we approve of. Our first priority is to that of our readers.
Blockchain & Cryptography Introduction
What Is Blockchain?
In recent years there has been a new technology that has been making a splash in the investment world, blockchains being the core of that technology. Since the introduction of Bitcoin and other cryptocurrencies, many people are beginning and are wondering how exactly do these cryptocurrencies work? Well, cryptocurrencies are a reward given to miners (computers) who help create a new block in a blockchain. This blockchain is the entire reason that cryptocurrencies are exits.
A blockchain at its base is a distributed ledger developed using cryptography. A blockchain’s blocks are distributed, in the way that it is never completely stored on just one server. Rather the blockchain (ledger) is an openly community controlled system held by the public. There is no one person or government who controls the system. In fact, cryptocurrencies are commonly referred to as “The People’s Currency”. The block can be divided up and stored on any number of computers. Most of these computers do not know which blocks are stored on themselves, making finding the source of a single block very difficult. To be put in other words, a blockchain is a series of information blocks that are secured using a standard encryption method.
The best way to think of a block is to imagine it as a very complex puzzle that is a part of a series of complex mathematical puzzles. Now to solve these puzzles, there are special programs and computers, called miners that work together to solve the problems. When solved each block will contain some information and a reference to the last block. Date and Time stamps are provided and in some cases miscellaneous information is provided as well. Now, these puzzles are hard to solve and require a lot of energy and computing power to solve them. After solving the puzzle, a block becomes stored on a network of computers.
What Is Cryptography?
Cryptography is the practice of hiding information using a code or cipher. In the old days a cryptographer would hide secret messages using a cipher, protecting the message from prying eyes. In recent years cryptographers have exchanged their pens and papers for computers and algorithms. Like their predecessors, modern cryptographers encrypt sensitive information and the encrypted information becomes part of the block that makes up the blockchain.
Why is blockchain valuable?
A blockchain’s value comes from their security. Imagine that you want to store some important document or data but fear that it will become corrupted or manipulated. Well, blockchains are designed to stop that. This level of security, and the fact that a cryptocurrency such as Bitcoin is non-dilutive, allow it to have many layers of intrinsic value.
What kind of information does a blockchain store? The type and amount of data stored on a blockchain vary from one version to another. Some will allow for only minimal data, while others will allow for more data. This information then is distributed among a vast network of computers making the tampering or destruction of the data into a Herculean task (a task very hard to perform).
How can blockchains affect the future?
Blockchains are like any other disruptive technology. We know that it will change something, just not what. Imagine all of the things that will benefit from a near tamper-proof public ledger that is maintained by a community of people dedicated to it. There are already companies in the information security sector that are finding ways to uses blockchains to secure their client’s information. By understanding blockchain, it allows one to understand cryptography thereby having a greater knowledge base of the overall component and value of cryptocurrencies.