Cryptocurrency is one of those terms that is so prevalently discussed at this stage of the game that if you don’t know what it means, it’s easy to feel like you’re way out of the loop.
As with anything related to finance or investing, there are a lot of details and complexities to understand about cryptocurrency, but just to get you started, the following is a brief overview of the basics.
The core concept of cryptocurrency goes back to 2008 when something dubbed Bitcoin was introduced. It was billed as a peer-to-peer electronic cash system, and the idea behind Bitcoin was the establishment of a digital cash system that was decentralized.
It had been tried before, but it had always failed up to the introduction of Bitcoin.
Cryptocurrency utilizes something called cryptography to ensure transactions are secure and verified.
The overall basis of cryptocurrency is something that’s entered into a database, and people can’t alter it without certain conditions being met. It is in many ways like a traditional currency.
What is An ICO?
Another term you might hear when talking about cryptocurrency is an ICO. So, what is an ICO?
An ICO is a way to crowdfund using cryptocurrency. With an ICO, a portion of newly issued cryptocurrency is sold to investors. In exchange, they receive legal tender or another kind of cryptocurrency,
One of the most prominent ICOs that brought this idea to the mainstream happened with the messaging app Kik, which was in September 2017.
ICO may be regulated, or it may be outside of regulation, and in some countries, it’s completely banned.
The SEC is mixed with their recommendations regarding ICOs. They do tell consumers that some of this activity can be a scam and is often a pump and dump scheme, but at the same time they do also admit that ICOs often offer fair investment opportunities.
How Do You Buy It?
You can buy Bitcoin and cryptocurrencies from other people in marketplaces, and also through exchanges.
After you buy Bitcoin, you can use an online trading service or an online wallet to trade it.
Throughout the world, there is an increasing number of businesses that are accepting cryptocurrencies like Bitcoin, and there are also even Bitcoin and Litecoin ATMs that are popping up globally.
Miners are an essential part of the cryptocurrency landscape because they’re responsible for confirming transactions. They will look at a transaction, verify that it’s legitimate and then disseminate it in the network.
Once a miner has confirmed a transaction, it’s added to a database where it becomes part of the blockchain.
When a miner does this work, they are given Bitcoins or whatever the cryptocurrency is that they’re working with.
Anyone can theoretically be a miner because there’s no centralized authority as there is with traditional currency, but there is something called Proof-of-Work that’s required to prevent fraud or forged transactions.
So, does this cover everything you need to know about cryptocurrency? Absolutely not, but it does give an overview of the biggest terms to know if it’s something you want to learn more about.