{"id":1428,"date":"2021-07-05T10:53:55","date_gmt":"2021-07-05T10:53:55","guid":{"rendered":"https:\/\/devza.com\/blog\/?p=1428"},"modified":"2021-11-15T16:15:57","modified_gmt":"2021-11-15T16:15:57","slug":"guide-to-understanding-cryptocurrency","status":"publish","type":"post","link":"https:\/\/devza.com\/blog\/crypto\/guide-to-understanding-cryptocurrency\/","title":{"rendered":"Cryptocurrency 101: The Absolute Beginner\u2019s Guide"},"content":{"rendered":"Reading Time: <\/span> 3<\/span> minutes<\/span><\/span>\n

What\u2019s crypto<\/strong>currency:<\/strong><\/h3>\n\n\n\n

Well, first, to clear some doubts, a cryptocurrency is its own currency. It is not a way to transfer Dollars or any other currency.<\/p>\n\n\n\n

Second, it\u2019s decentralised as there is no single authority in control of it.<\/p>\n\n\n\n\n\n\n\n

Basically, it\u2019s a digital asset. You can use it to pay for stuff, and the records of your payment would be stored in a decentralised ledger, a computer database secured using strong cryptography. This same cryptography verifies the transfer of coins and controls the creation of additional coins.<\/p>\n\n\n\n

This is how it works:<\/strong><\/h3>\n\n\n\n

Because there is no physical coin involved, crypto exists as a pure digital entity. It is currently primarily considered to be a speculative asset. This is due to the fact that the use of crypto as a full fledged currency or as a store of value seems inevitable.<\/p>\n\n\n\n

However, cryptocurrency, unlike gold, is not a tangible asset (no one has ever touched a Bitcoin because it only exists digitally).<\/p>\n\n\n\n

A transaction is in effect a piece of information broadcast into the cryptocurrency network, of who sent how much to whom. This is then verified by individual pieces of the network.<\/p>\n\n\n\n

The users of crypto are only identified by their wallets \u2013 their individual accounts. Therefore, all transactions can only be between wallet addresses.<\/p>\n\n\n\n

As all these transactions are compiled into the blockchain, which is the public ledger mentioned before, anyone can verify these transactions.<\/p>\n\n\n\n

It is this verification, in which an individual\u2019s computer \u2013 a \u201cnode\u201d – is used, that is known as mining.<\/p>\n\n\n\n

A crypto miner donates their computing power to work on verifying a bundle of transactions. They look for a way to make it easy to verify a transaction and make it difficult to fake one. This is called \u201cproof of work\u201d.<\/p>\n\n\n\n

When a user displays this \u201cproof of work\u201d, they get coins for letting the network use their computer to verify transactions.<\/p>\n\n\n\n

This is the way that new crypto is added into circulation.<\/p>\n\n\n\n

You might have to read the above explanation multiple times. That\u2019s okay. Technobabble is typically hard to parse.<\/p>\n\n\n\n

A brief history of Bitcoin:<\/strong><\/h3>\n\n\n\n

The first cryptocurrency was Bitcoin.<\/p>\n\n\n\n

And we don\u2019t actually know who created it.<\/p>\n\n\n\n

The original Bitcoin whitepaper was apparently written by one Satoshi Nakamoto. However, this is most likely a pseudonym, and could possibly refer to multiple researchers.<\/p>\n\n\n\n

The Bitcoin network was created on 3rd<\/sup> January 2009, when the genesis block \u2013 or the starting block \u2013 of the blockchain was mined.<\/p>\n\n\n\n

Embedded in this block was the text “The Times 03\/Jan\/2009 Chancellor on brink of second bailout for banks”. This is a headline published by The Times.<\/p>\n\n\n\n

It can be considered as a timestamp, or more like a mockery on the instability caused by traditional banking systems.<\/p>\n\n\n\n

After mining about a million bitcoins, Nakamoto disappeared in 2010.<\/p>\n\n\n\n

He (or they) handed the network alert key and control of the code repository over to Gavin Andresen, who then sought to decentralise control.<\/p>\n\n\n\n

How many cryptocurrencies exist:<\/strong><\/h3>\n\n\n\n

Well, there are more than 2,500 cryptocurrencies in existence.<\/p>\n\n\n\n

To make things easier, let\u2019s just go over the most popular ones.<\/p>\n\n\n\n

  1. Bitcoin<\/li>
  2. Litecoin<\/li>
  3. Ethereum<\/li><\/ol>\n\n\n\n

    Bitcoin (BTC) is often referred to as \u201cdigital gold\u201d, or the gold standard for digital currency. It is the world\u2019s most popular cryptocurrency. It currently has a market cap of over $642 billion and one Bitcoin costs about $34,323.<\/p>\n\n\n\n

    Litecoin (LTC), is a fork from Bitcoin. It\u2019s a way to make the Bitcoin algorithm quicker and cheaper, by block mining every 2.5 minutes, which is 4 times faster than Bitcoin. It\u2019s designed to have a lower transaction volume than Bitcoin so that people can observe the effects of a virtual currency without having to support an actual economy.<\/p>\n\n\n\n

    Ethereum works a lot like Bitcoin but has more features, such as the ability to power smart contracts and decentralised applications or dApps. It\u2019s a platform for \u201cinitial coin offerings\u201d \u2013 here, you can start your own cryptocurrency, and is one of the main platforms for the NFT \u2013 \u201cNon-Fungible Token\u201d \u2013 craze.<\/p>\n\n\n\n

    Why cryptocurrency is getting so popular:<\/strong><\/h3>\n\n\n\n

    Besides making people feel like they are on the cutting edge of things, crypto is popular for several reasons \u2013<\/p>\n\n\n\n