I recently started a blog about digital currencies with common questions that might be on people’s minds. I am hoping to reach out to a lot of people who are curious about digital currencies and know very little about them.
In the future, I hope to offer more detailed guides and content on the blog but for now I just want to answer some of the most common questions that I have seen online through my research.
I hope you enjoy!
What is a cryptocurrency?
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
What is Bitcoin?
Bitcoin was the first cryptocurrency created and was released in 2009. With the use of blockchain technology, Bitcoin and other cryptocurrencies have become highly popular and widely accepted over the past few years.
What is an altcoin?
The term “altcoin” is an abbreviation of “Bitcoin alternative,” and thus describes every single cryptocurrency except for Bitcoin. Altcoins are referred to as Bitcoin alternatives because most altcoins hope to either replace or improve upon at least one Bitcoin component. There are over 1,000 altcoins in existence today.
What is a cryptocurrency? A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of a cryptocurrency, and arguably its most endearing allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
How does a cryptocurrency work? A cryptocurrency works as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Cryptocurrencies are classified as a subset of digital currencies and are also classified as a subset of alternative currencies and virtual currencies. The first decentralized cryptocurrency was Bitcoin (BTC), which was created in 2009 and went live in January 2009. Today there are thousands of alternative cryptocurrencies with various functions or specifications. Some of these are clones or forks of Bitcoin, while others are entirely new.
What is Bitcoin? Bitcoin (BTC) is known as the first open-source, peer-to-peer, digital cryptocurrency that was developed and released by a group of unknown independent programmers named Satoshi Nakamoto in 2008. Bitcoin uses SHA-256 cryptographic hash function to secure transactions
Can I send and receive coin on my phone?
Yes. There are apps for that.
How do I get coin?
You buy it, trade for it, or earn it (i.e., get paid in coin). Also, you can mine it. For more information, read this post: How to Get Coin
Are there any transaction fees?
Some wallets and exchanges will charge a fee when you send or receive coin to your wallet or exchange account. For example, Coinbase charges a 1% fee per transaction, Bitfinex charges 0.20% per transaction, and Shapeshift charges the miner fee for each transaction. In general, the fee will be less than $1 USD but the amount depends on the size of the transaction and how congested the blockchain is at the moment. Each block on the blockchain has a maximum limit of transactions that can go through at one time so if there are lots of transactions waiting to be confirmed, then you may have to pay more in fees to get your transaction through quicker than everyone else’s transactions.
What is a cryptocurrency?
A cryptocurrency is a digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of this security feature. Many cryptocurrencies are decentralized systems based on blockchain technology, a distributed ledger enforced by a disparate network of computers. A defining feature of a cryptocurrency, and arguably its biggest allure, is its organic nature; it is not issued by any central authority, rendering it theoretically immune to government interference or manipulation.
How does the blockchain work?
The blockchain is perhaps the main technological innovation of Bitcoin. Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin. The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server. The bitcoin design has inspired other applications, and blockchains which are readable by the public are widely used by cryptocurrencies. Private blockchains have been proposed for business use. Some marketing of blockchains has been called “snake oil”.
Types of Cryptocurrency
Bitcoin is not the only cryptocurrency. In fact, Bitcoin has been around for almost a decade and many more cryptocurrencies have been created since then. Even so, Bitcoin is still the most popular and widely used cryptocurrency today. It has the highest market value and most users.
The top 5 cryptocurrencies by market value are:
1) Bitcoin (BTC)
2) Ethereum (ETH)
3) Ripple (XRP)
4) Litecoin (LTC)
5) Bitcoin Cash (BCH)
The number of cryptocurrencies available over the internet as of 19 August 2018 is over 1600 and growing. A new cryptocurrency can be created at any time. By market capitalization, Bitcoin is currently (April 10, 2018) the largest blockchain network, followed by Ethereum, Ripple, Bitcoin Cash, Litecoin, and EOS.
Receiving cryptocurrency from another party can be a sale of the cryptocurrency. For example, if you receive Bitcoin in exchange for goods or services, you will have to report the fair market value of the Bitcoin received as gross income.
Cryptocurrency donations are not tax-deductible for donors at this time. The IRS has stated that virtual currencies are to be treated as property for tax purposes and general tax principles applicable to property transactions apply to transactions using virtual currency.