At the time of writing, Bitcoin, Ethereum, and Litecoin are all up by a factor of ten compared to their prices at the beginning of the year. These are the big three. There are lots of smaller cryptocurrencies that have lately started to get a lot of press attention. But these three have become so popular that you can buy them in most online exchanges and online wallets.
Q: Who is buying all this cryptocurrency?
A: There are a lot of different people buying cryptocurrency. People who think that it is going to work out well for them. People who think that the price will go up in the future, and that they can buy in cheap and sell in high. People who are speculating that if they get into it now, they might be able to cash out before it crashes. And people who want things that don’t need to be regulated by governments or banks.
Q: How many people do you suppose there are?
A: I don’t know, exactly. But there are enough of them that most cryptocurrencies have small communities of devoted insiders who know everything there is to know about their particular coin (or coins).
Cryptocurrencies are digital or virtual currencies that are not tied to any government, central bank or single organization. They have been used on the Internet since the 1990s and can be traded between users without going through a financial institution.
With Bitcoin the first cryptocurrency was created in 2009, by an unknown programmer using the pseudonym Satoshi Nakamoto. This cryptocurrency uses encryption to create units of currency (bits) and ensure that no more than 21 million coins will exist.
Bitcoin has made many people rich but it is still very new and has faced some serious problems. Not everyone likes Bitcoin because it is volatile and may lose value rapidly. For this reason, it can also result in some people losing a lot of money.
However, there is nothing wrong with making money from something which is new and not yet popular; only the latest trend will be profitable to invest in.
In a very broad sense, blockchain technology is the same as any other technology. It’s a way of organizing information in a reliable way and making it available to people who need it. (It’s like an operating system that the government can’t change.)
But blockchain is different from any other technology because it has a different purpose: to use the power of this technology to create something new: money that isn’t controlled by governments or banks. It turns out that this kind of money is hard to make using conventional methods, so cryptocurrency—the first example of which was Bitcoin—is now becoming the focus of research and development efforts in many different fields.
The biggest and most obvious difference between Bitcoin and all the other cryptocurrencies is that it’s the first one to be based on a real, working technology. Which means it has real-world uses, like sending money overseas.
There are a few other differences, too. Bitcoin has been around longer, which means that its price history is longer. That gives you a way to figure out what the price should be–it’s just like knowing how much your stock would have gone up if you’d bought it back in July 2007.
It’s more valuable than any of its rivals because it seems to be more popular than any of them. And there are some other advantages:
One is that Bitcoin has no central authority, so its value can’t be taken away by governments or banks. This makes it more reliable as a store of value (though not necessarily as a payment system).
There are many different types of cryptocurrency. Bitcoin and Ethereum are the two most popular, but they are different. Both run on a blockchain technology. A blockchain is a way of storing data that’s almost like a spreadsheet: each entry is linked to the previous one, and once it’s added, it can’t be changed. It’s like a timestamped database that everyone can see, but no one can change or delete except by agreement of all the people who have access to it.
A blockchain is also an app: you could write any kind of program and put it on the blockchain instead of doing it in your own computer. For example, you could do an accounting program that would automatically keep track of all transactions without any help from banks, governments or anyone else. Or you could build a stock market where anyone with an internet connection could buy and sell shares real time without paying commissions or fees. This was Satoshi Nakamoto’s original idea for Bitcoin: basically, he imagined a world where everything would be run by software on computers connected to the internet.
What is cryptocurrency? It’s a form of digital money** that uses encryption to make sure that only the owner of a particular (and growing) virtual wallet can use it. These virtual wallets are kept on computers all around the world, so they don’t have to be held in one place. And unlike conventional money—cash, gold, or diamonds—cryptocurrency isn’t just pieces of paper or pieces of metal. It exists only as data.
As you might imagine, this is handy when you want to buy stuff online: You don’t need to carry your credit card and passport with you, and you don’t need to worry about someone copying your details and stealing your money. Instead, you send your virtual wallet address (an email address) and the amount of money you want to transfer, and then the seller sends it there.
But even though these things are digital, they are not actually encrypted. They are just bits of data that anyone who has the Internet can look at. If I could get my hands on those bits of data, I could put them together in any order I wanted and still be able to read them.
And if I had enough computing power, I could try this out by making many different guesses about what the bits might mean