Cryptocurrency, blockchain, Bitcoin, mining, spinner… If you don’t know what word in this row is redundant, our article will help to sort it out!
What is cryptocurrency in simple words?
Cryptocurrency is a type of digital currency, electronic money. But unlike traditional systems, where all data is stored on a centralized server, cryptocurrencies are decentralized.
And if an ordinary server in theory can be hacked into or disabled, there is no such danger with the cryptocurrency: copies of the transaction database lie on the computers of all system participants, and they are constantly checked against each other automatically according to special algorithms.
All cryptocurrencies are based on cryptography: very reliable encryption mechanisms. It is almost impossible to hack into such a system, so if there is someone who can do it, our world is in great danger and before the uprising of machines is not far away.
Why did they come up with cryptocurrencies?
With the advent of the Internet, online payments have become popular as well – so there are a variety of electronic currencies (Yandex. Money, WebMoney and others).
Naturally, the creators of these currencies wanted to earn – and assigned high commissions for both money transfers and conversion into real money. “That’s not cool,” thought advanced users.
And in 2009, Satoshi Nikamoto presented his decision to the public: he released the information currency “Bitcoin”, which he proposed to use as a means of exchange.
How does this work? After all, the cryptocurrency is not provided with anything!
Cryptocurrencies have one very interesting feature – they are not subject to inflation, because when you create a limited number of “coins”: they can not be printed.
As for “collateral”, everything is quite simple – in a sense, the cryptocurrencies are provided by those who want to create and buy them, as well as companies that are willing to sell goods and services for the appropriate cryptocurrency.
What does the cryptocurrency rate depend on?
The cost of a particular cryptocurrency is determined by supply and demand in the market.
There are many factors that influence the balance of power of sellers and buyers: the volume of currency issue, technological aspects underlying a particular cryptocurrency, and the possibility of using the cryptocurrency to acquire benefits.
Regulation by different countries, news hype (often artificially created), etc. Like any other financial asset, cryptocurrencies can be bought and sold on special exchanges, where the same rates of cryptocurrencies are determined.
What’s blockchain and how does it relate to cryptocurrencies?
Blockchain is a network of peer computers that stores a distributed database. Every computer has the same copy of the database. All transactions are recorded in this database and stored in the form of a “chain of blocks”.
At each made change (made operation) the database is updated at all participants of the system. Thus, each participant confirms the authenticity of information in the database.
If paper money can be stored without a wallet, it will not work with the cryptocurrency. The first thing a beginner “cryptocurrency” needs to download a special program and start an electronic wallet in it. In this purse the special key allowing to dispose of the virtual money is stored.
Where to keep the cryptocurrency?
Popular wallets: MultiBit HD, Bither, GreenBits, Armory, Blockchain, etc. By the way, having lost your wallet (in this case – a flash drive with information \ piece of code on your hard drive or in the cloud), you lose access to cryptodenge.
Where can I get the cryptocurrency?
There are several ways:
- Mining: Something similar to gold mining, only in electronic form. With the help of special software on your computer, complex calculations are carried out that generate the cryptocurrency. That is, you give some of the power of your computer’s graphics card or processor to solve problems related to the cryptocurrency. As a reward, you get a percentage of the coins for each unit of money you get.
- Two or three years ago, people created entire “mining farms”: a lot of computers were exclusively engaged in the extraction of cryptocurrency. However, as the cryptocurrencies are finite, each successive coin is increasingly difficult to mine – and increasingly powerful computers that consume a huge amount of electricity are needed.
- To understand if you should mine a particular cryptocurrency, you can use a special calculator that evaluates the energy costs
- Exchanges: it is possible to exchange cryptocurrencies (for other or real money) at special exchanges, working on the principle of Forex. Finding stories in which people bought Bitcoins or other cryptocurrencies at the beginning of their creation and then earned a fortune is easy. However, here you can make a mistake and lose money.
- To provide a service \ to sell goods: if you have a wallet, nothing prevents you from demanding bitcoins or other cryptocurrencies as payment for your services.
What can I buy for a cryptocurrency?
Not many enterprises in Belarus are ready to accept the cryptocurrency as a means of payment, but there are already such proposals. For example, the ConsensusLab laboratory together with the network of tire service centers “TyrePlus” have sold the purchase of car tires for bitcoins, in Molodechno you can pay with bitcoins in the cafe Mezzanin, in Lida – to rent a car, in Hrodna – to buy fishing tackles in the store.
There are even more offers in the world. AirBaltic airline allows you to pay with cryptocurrency for a ticket, and you can also buy jewelry on the Reeds Jewelers network, Dell computers and even programs from Microsoft. Google has even developed a special map where you can see where bitcoins are accepted all over the world.