CRYPTOCURRENCY - THE FUTURE IS NOW
For those simply want to understand how to buy things simply, cheaply, safely and privately using crypto currency online.
As of March 1, 2018, there are about 400,000 cryptocurrency transactions per day, half of them Bitcoin.
"Bitcoin is an electronic cash system that uses a peer-to-peer network (called blockchain) to prevent double-spending. It’s completely decentralized with no server or central authority." - Inventor Satoshi Nakamoto's earth shaking announcement, January 2009
Rather than speculate and gamble, how can you use cryptocurrency to buy things cheaply and safely without great risk?
Anyone can purchase a few hundred dollars worth of bitcoin or another cryptocurrency to get the hang of it, like buying things, exchange to dollars, or rupees or to another cryptocurrency. All can be done 100% online.
Cryptocurrencies (Buy Crypto) are a global phenomenon. Everyone who has a portion of their faculties has heard of Bitcoin. Nearly everyone knows someone who knows someone that made a ton off Bitcoin. Now, everyone from Chinese Billionaires to drug addicts gambling on credit have entered the cryptocurrency market.
Crypto currencies gained traction and took off because, in many ways, there were much superior to traditional and flawed fiat currencies. As the market realized the inherent value of Bitcoin, in its integrity and method of creation, value was created on trust, utility and function. When speculators, the day traders, the coke head wall street brokers, etc. entered the arena in mass, this created great volatility, volatility that is associated with volatile characters, characters that are not especially mentally stable.
So today the market is very volatile, there are massive ups and downs from berserk reactions to dodgy news. The focus on this article is to explain the fundamentals of crypto currency and how to use them safely to purchase products, rather than to gamble on what has become a very complex market.
Today, every major bank, accounting firm or financial entity is either dealing in cryptocurrency or seriously considering it.
“Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others, and confused the heck out of the rest of us.” – Thomas Carper, US-Senator
But beyond the noise and the press releases the overwhelming majority of people – even bankers, consultants, scientists, and developers – have a very limited knowledge about cryptocurrencies. They often fail to even understand the basic concepts.
So let‘s walk through the whole story.
- What are cryptocurrencies?
- Where did cryptocurrency originate?
- Why should you learn about cryptocurrency?
- And what do you need to know about cryptocurrency?
What is cryptocurrency and how cryptocurrencies emerged as a side product of digital cash
Few people know, but cryptocurrencies emerged as a side product of another invention. Satoshi Nakamoto, the unknown inventor of Bitcoin, the first and still most important cryptocurrency, never intended, perhaps, to invent a major currency.
In his announcement of Bitcoin in late 2008, Satoshi said he developed “A Peer-to-Peer Electronic Cash System.“
His goal was to invent something; many people failed to create before workable digital cash.
Satoshi‘s innovation which rocked the world, is a decentralized digital cash system that had proven integrity in the creation, transfer and handling money, all of which are issues with fiat currencies created and manipulated in private by unknown elites and entities. In other words, Satoshi's bitcoin was seen by many people as more trustworthy than traditional currency.
"After more than a decade of failed Trusted Third Party based systems (Digicash, etc), they see it as a lost cause. I hope they can make the distinction, that this is the first time I know of that we’re trying a non-trust based system." – Satoshi Nakamoto
Satoshi based his digital cash system without a central entity on a Peer-to-Peer file sharing network, with hundreds, then thousands, then millions of users online contributing their computer power to keep track of everything, redundantly, and encrypted. Thus cryptocurrency was born.
One critical issue that Bitcoin addressed was the issue of double or triple or quadruple spending of the cryptocurrency. Based on only trust that a user would not cheat on transactions would obviously not work, even for one second. No one over the age of 5 years old would use that currency. With bitcoin there is no one place where transaction records are stored. Records of a bitcoin are kept in tons of places. And every bitcoin transaction has to go through the peer to peer system. Every peer (computer) has a complete history of all transactions and the balance of every account.
A transaction is a record like Bob gives X Bitcoin to Alice signed by Bob‘s input of his private key. The ledger round the world, the peer to peer system are updated. You can't mess with one computer, say and change the records, because in the transaction, that bad data is immediately identified, while the real transaction ledger is backed up in a million places.
This is what is know as Blockchain Technology.
Again, in Blockchain technology all transactions are identified in a few seconds or less by the whole network (millions). In a few minutes after exhaustive double checks, a transaction is confirmed. It should be noted that transactions that are unconfirmed can be forged in that very narrow window of time. Once the transaction is confirmed - automatically by the system - it is set in stone, actually more solidly than any block of stone ever was set, hence the name blockchain.
The peer to peer network is created by Bitcoin miners. Bitcoin miners allow the system to use their computing power to run the system and they are rewarded Bitcoin in return. In the beginning Bitcoins were mined easily, but as the value went up and there were more miners, the program automatically made it exponentially more difficult to mine bitcoins.
Six years ago, the average person with a computer might have mined a few hundreds of dollars worth of bitcoins per month. Now, Bitcoin mining is both a cottage industry and a big business, where huge factories containing hundreds of thousands of special computer boards mine away, making millions upon millions of dollars. In this strange twist of fate, where anyone can be a miner, there is no application fee, no authority to tell you cannot do. it is not the elites who cashed in to make millions or even billions of dollars, it was the hackers, people who took a chance, people in the know, but definitely not you conservative know it all type person.
“In the next few years, we are going to see national governments take large steps towards instituting a cashless society where people transact using centralized digital currencies. Simultaneously, the decentralized cryptocurrencies – that some even view as harder money – will see increased use from all sectors.” – Caleb Chen London Trust Media
"The so-called the Proof-of-Work of Bitcoin, it is based on the SHA 256 Hash algorithm."
“It is that narrative of human development under which we now have other fights to fight, and I would say in the realm of Bitcoin it is mainly the separation of money and state.” - Erik Voorhees, cryptocurrency entrepreneur
CRYPTOCURRENCY TRANSACTION PROPERTIES
1.) Irreversible: After confirmation, a transaction can‘t be reversed. By nobody. And nobody means nobody. Not you, not your bank, not the president of the United States, not Satoshi, not your miner. Nobody. If you send money, you send it. Period. No one can help you, if you sent your funds to a scammer or if a hacker stole them from your computer. There is no safety net.
2.) Pseudonymous: Neither transactions nor accounts are connected to real-world identities.,using only addresses, which are random chains of around 30 characters. While it is possible to analyze transaction flow, it is very difficult to connect the real world identity of users with those addresses. With that said, user can be traced to tranactions with some cryptocurrencies, like Bitcoin, abeit, with the greatest of difficulty.
3.) Fast and global transaction are propagated nearly instantly in the network and are confirmed in a couple of minutes. Since they happen in a global network of computers they are completely indifferent of your physical location. It makes no difference if I send Bitcoin to my neighbour or to someone on the other side of the world.
4.) Secure: Cryptocurrency funds are locked in a block chain peer to peer network key cryptography system where only owner of the private key can send cryptocurrency. Strong cryptography and big numbers makes it virtually impossible to break this encryption scheme, which is about a trillion trillion times more difficult than hacking into a regular bank account.
5.) Permissionless: There is no gatekeeper. You don‘t have to ask anybody to use cryptocurrency, software that everybody can download for free, installed it, you can receive and send Bitcoins or other cryptocurrencies.
CRYPTOCURRENCY MONETARY PROPERTIES
1.) Controlled supply: Successful cryptocurrencies limit supply. In Bitcoin, supply rates decrease yearly and creation will halt in 2140ish. All popular cryptocurrencies control the supply of the token by a schedule written into the code (redundantly stored on thousands or more computers)in a way that cannot be manipulated . This means the monetary supply of a cryptocurrency in every given moment in the future can roughly be calculated today. This predictability and integrity is a major reason why people have placed their faith in cryptocurrency over fiat currency. It is a well know fact, that money held in a bank account today will gradually evaporate, through fees, inflation, tax on interest earnings if any. For example, one hundred years ago, a wage of one dollar per day was common. Today, it is difficult to survive on $50 or even $100 dollars per day.
2.) No debt is attached to cryptocurrency creation: In this way cryptocurrency is similar to gold backed currency, there is no debt attached. But those days are gone, where the elites gradually reduced the amount of gold that backed their currency, and finally got rid it entirely. Thus today, fiat-money, Canadian, US, UK and most every other currency is created when banks give out loans and there is a promise to pay by the debtholder. In this age of deception, the notion that almost all currency based on debt and is created out of thin air obscures the real and obviously money as debt policies of the central banks, like the Bank of Canada, The Federal Reserve, Bank of England, and most every major world bank.
While it is not a given that cryptocurrencies will not succumb to inflation, while there is a relatively low market capitalization and high demand, inflation cannot happen. With that said, some cryptocurrencies will inevitably become less popular, others will evolve and succeed, there will be winners and losers. Thus, at the end of the day, cryptocurrencies, like fiat currencies, are subject to complex or obscure risks that make absolute predictions next to impossible. With that said, fiat currencies have a one hundred history of punishing inflation, with almost no exceptions, and for the moment seldom seen is a cryptocurrency that hasn't gone in the other direction, gained a lot of value.
“While it’s still fairly new and unstable relative to the gold standard, cryptocurrency is definitely gaining traction and will most certainly have more normalized uses in the next few years. Right now, in particular, it’s increasing in popularity with the post-election market uncertainty. The key will be in making it easy for large-scale adoption (as with anything involving crypto) including developing safeguards and protections for buyers/investors. I expect that within two years, we’ll be in a place where people can shove their money under the virtual mattress through cryptocurrency, and they’ll know that wherever they go, that money will be there.” – Sarah Granger, Author
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Ethereum more a family of cryptocurrencies than a single currency. The brainchild of young crypto-genius Vitalik Buterin is in second place in the hierarchy of cryptocurrencies. Its blockchain does not only validate a set of accounts and balances, but of so-called states (of financial affairs). This means that Ethereum can process transactions and complex contracts.
This flexibility makes Ethereum a better instrument for blockchain -application. But it comes at a cost. After a Hack of an Ethereum based smart contract, the developers decided to do a hard fork without consensus input, which resulted in the emerge of Ethereum Classic. There are also several clones of Ethereum. Ethereum itself is a host of several Tokens like DigixDAO and Augur.
Maybe the less popular – or perhaps the most hated project in the cryptocurrency community. Banks seem to like Ripple and are adopting the system increasingly. While Ripples a native cryptocurrency, it is more about a network to process IOUs than the cryptocurrency itself. Ripple Labs created every XRP-token, the company running the Ripple network, and is distributed by them on will. For this reason, Ripple is often called pre-mined in the community and dissed as no real cryptocurrency, and XRP is not considered as a good store of value.
Litecoin is among the first cryptocurrencies after Bitcoin and tagged silver compared to the digital gold bitcoin. Faster than bitcoin, with a larger amount of token and a new mining algorithm, Litecoin was a real innovation, tailored to be the little brother of bitcoin. \
“It facilitated the emerge of several other cryptocurrencies which used its codebase but made it, even more, lighter“.
While Litecoin has fallen back into the pack way behind bitcoin, it is still actively developed and traded and is even hoarded as a backup if Bitcoin fails.
Monero uses the cryptonite algorithm. This algorithm was invented to add the privacy features Bitcoin omitted. Bitcoin has every transaction is documented in the blockchain and the trail of transactions are fully documented. With the introduction of ring-signatures, the cryptonite algorithm was able to cut off the trail.
The first implementation of cryptonite, Bytecoin, was heavily premined and rejected by the community. Monero was the first non-premined clone of bytecoin and thus gained traction.
There are several other incarnations of cryptonote but none achieved the same popularity as Monero. Monero‘s popularity peaked in 2016 when darknetmarkets accept it as a currency. This resulted in a steady increase in the price, while the actual usage of Monero seems to remain small.
“In 2 years from now, I believe cryptocurrencies will be gaining legitimacy as a protocol for business transactions, micropayments, and overtaking Western Union as the preferred remittance tool. Regarding business transactions – you’ll see two paths: There will be financial businesses which use it for it’s no fee, nearly-instant ability to move any amount of money around, and there will be those that utilize it for its blockchain technology. Blockchain technology provides the largest benefit with trustless auditing, single source of truth, smart contracts, and color coins.” – Cody Littlewood, CEO of Codelitt