Cryptocurrency (Bitcoin)
What is Cryptocurrency?
Cryptocurrency is a digital asset that utilizes blockchain technology to record transactions in a transparent and decentralized manner.
Blockchain
Blockchains are a form of Distributed Ledger Technology (DLT), whereby a universal ledger is maintained and verified by various users simultaneously. This eliminates the need for a central authority to process and approve transactions. The system relies on individuals and institutions contributing their computing resources to store and verify ledger transactions. In return for conducting these tasks, participants have the ability to earn rewards, usually in the form of the underlying cryptocurrency. This is known as mining.
Bitcoin
Blockchain was originally created to support bitcoin, a well-known cryptocurrency introduced in 2009. Bitcoin can be acquired either through trade or by “mining” the currency. As of May 2018, there are currently 17,077,563 bitcoins in circulation, with a total bitcoin supply of 21,000,000, as determined by the creator. Click here for the most recent Bitcoin circulation data. Current forecasts estimate that supply will plateau around 2040, as the currency becomes more and more difficult to mine. Bitcoins can be broken down into smaller sub-units known as “bits.” One bitcoin consists of 1,000,000 bits, allowing individuals to more easily obtain the currency.
Mining
Mining is the process of computer hardware performing mathematical calculations for the Bitcoin network to confirm transactions and increase security. Participants who use their computing power and or rent resources for mining are called miners. As of today, data mining makes up 0.4% of global energy consumption. As the electricity required to “mine” a single bitcoin is extensive, concentrations of data miners are found in areas where electricity is cheap, with a high concentration of data miners located in China.
Initial Coin Offering (ICO)
ICOs involve raising capital through designing and selling digital currency. In contrast to an ordinary initial public offering (IPO), issued currency does not represent ownership stake in an organization. Instead, the digital assets can be used to conduct transactions with others whom recognize and accept the respective currency.
Early-stage businesses are progressively choosing ICOs over traditional methods of raising capital. The growth of ICOs is due to, in part, a lack of regulatory oversight. Most businesses are assuming that the coins and tokens they are distributing do not qualify as securities, and therefore, are not subject to ordinary securities law requirements. One such obligation is to provide purchasers with detailed documentation, including a prospectus, which outlines liability for misrepresentation. Start-ups prefer ICOs because the process is time-efficient, conducted over the internet, limits documentation, and allows them to avoid conferring rights to the purchaser.
Trading Digital Currencies
In order to trade digital currencies you need:
A cryptocurrency wallet.
A cryptocurrency exchange to conduct trades on.
A cryptocurrency wallet provides a secure destination to store, send, and receive digital currency. Unlike what you might expect, cryptocurrency is not really “stored” in a wallet. Instead, your wallet houses a private key (secure digital code unknown to others), which shows ownership of a public key (public digital code linked to a sum of currency). Therefore, your cryptocurrency wallet stores your private and public keys, provides you with trading capabilities, and tracks personal transactions using a ledger.
Cryptocurrency exchanges are online platforms where you can exchange one cryptocurrency for another (or for fiat currency). A few popular exchanges are:
Coinbase: a USD denominated digital currency exchange.
Xapo: Switzerland’s primary digital currency exchange
Coinsquare: Canada’s primary digital currency exchange.
Sources:
Blockchain explained in plain English: understanding how blockchain works and identifying myths about its power are the first steps to developing block chain technologies- By Steve Wilson, May 22, 2017- ZDNet
How to Trade Cryptocurrency- For Beginners- Cryptocurrencyfacts.com
Blockchain Basics- lisk.io
Cryptocurrency Glossary: Dictionary of Cryptocurrency and Bitcoin Terms- coinsutra.com