One of the big problems with cryptocurrency is that it’s hard to use. You have to download software, setup accounts, and manage complicated passwords. And once you’ve done all that, you’re still not quite sure what to do with your money.
That information is now easy to find: a tutorial for beginners is one click away. But this isn’t just about making it easier for beginners: it’s about making it easier for people who already know how cryptocurrencies work, but are having trouble applying their knowledge.
Cryptocurrencies can be understood as an application of cryptography. But it’s difficult to get started if you don’t know what cryptography is or why you would want to use it. Cryptography is a way of breaking messages into pieces so that even if someone figures out what they mean, they won’t have enough information to reproduce them. Cryptocurrencies use cryptography in another way as well: they let anyone issue their own coins and make transactions between them without any central authority controlling either the money supply or its value. The result is that anyone with access to the internet can start using them with minimal technical expertise.
Cryptocurrency has become popular with the rise of Bitcoin, but there are many different kinds of cryptocurrency. In this section you’ll learn about the most common ones.
Cryptocurrency is a form of digital money. It’s not the same as a bank account or a savings account, although it potentially can be used for either one. It is not money in the same way that dollars, euros, yen, or pounds are money. That’s because it is not based on any state-issued currency or legal tender law. Instead, it is based on cryptography: specifically, a way of encoding and transporting information so that no one can read it but only you and those you choose to give it to.
Cryptocurrency uses cryptography to make sure that no one can read it except you and those you choose to give it to. As such, it exists only when something else (usually a computer) has agreed that there should be enough cryptocurrency locked up in your wallet or wallet service account so that you have enough to do what you need to do with whatever currency you plan to use.
Cryptocurrencies are a form of money. They are based on cryptography. But they are not money in the usual sense, which is something you can hold in your hand that you can give to someone else and can use as payment for things. Cryptocurrencies are more like shares: you trade them for other cryptocurrencies or for more conventional forms of money. Cryptocurrencies aren’t real money but they do have value, because they are useful as a medium of exchange.
Cryptocurrency is an investment. It has grown very rapidly in recent years, but there are many different kinds, some of them better than others, and there is no simple way to compare them all or to choose the best one. Cryptocurrencies have no central authority: no government or bank decides who gets how much of what. And there is no way to predict what will happen to any cryptocurrency in particular; it might go up tomorrow or it might go down tomorrow.
Cryptocurrency is often described as being “like gold”. It isn’t exactly like gold, because there is no fixed supply and you can’t store it securely. But it does have similar properties — most importantly that its value depends on people’s confidence in it rather than its usefulness as a medium of exchange — and this similarity
Cryptocurrencies are complicated things. There’s a lot of money in them, and you can’t get rich without understanding them. So probably the best way to understand them is to make one.
There are several ways of doing this. The simplest is to use a paper wallet. This is a piece of paper with your private key printed on it. You can print it out yourself if you have a printer and some paper, or you can get one from an online service like Blockchain.info or Coinbase that has already done the work for you. But there are easier ways. You can buy a special encrypted file from someone who has already done the work for you, or you can buy pre-encrypted paper wallets from companies like Foldcoin or Bitaddress.org or CryptoCurrency Voucher (in the UK) or Coinapult (US).
All these things are available in free software, so you can download them on your phone and use them safely offline, without trusting any company at all. Once you’ve got your wallet and your keys, you’re ready to go.
So how do we get riches? Why not just buy something and sell it for more when there’s more demand? There’s no reason why anyone would want to give us money for stuff
The first thing to understand about cryptocurrencies is that they are not money. They do not have the same properties, like fungibility and portability, that make money the most useful form of wealth. Cryptocurrency is a digital payment system. If you think of money as a kind of digital payment system, then it becomes easier to see what it is good for and how it can be used.
Cryptocurrency is all about giving control over your own money to you. The big promise of Bitcoin, which started the cryptocurrency revolution, was that there would be no more banks and fees and borders and currency exchange rates. No more taxes, either; your Bitcoin would be yours forever.
Now that systems like Bitcoin are becoming more popular, government authorities are starting to worry about them. They want to know what cryptocurrencies are made of, and how they work, so they can regulate them in the interests of their citizens.
Bitcoin is the most well-known cryptocurrency, but there are many others. Some of them are better than Bitcoin, which has a larger network because it was the first one (Bitcoin was launched in January 2009). You can buy things with Bitcoins, but Bitcoin is not the only way to make money from cryptocurrencies. You can also mine them or you can do arbitrage between currencies.
The value of Bitcoin has risen recently, and now some people are making a lot of money by buying and selling Bitcoins. But the value of Bitcoins has been going up and down a lot, so the news media have had fun describing the ups and downs of Bitcoin as a roller coaster.
Cryptocurrencies such as Bitcoin have one big advantage over traditional currencies: they are not controlled by any government or central bank. Governments used to control gold and paper money. Nowadays governments also control digital money: for example, every transaction that goes through Visa or MasterCard goes through Visa’s servers or MasterCard’s servers, which are controlled by Visa or MasterCard. Cryptocurrencies can be bought without going through those servers; that is their biggest advantage over traditional currencies.
Cryptocurrencies are a new kind of money. They are not backed by gold or by the state. They have no central bank or government-run mint. Instead, they are “mined” by computers competing to solve cryptographic problems.
The first cryptocurrency was bitcoin, designed in 2009 and released in January, 2009. It was created by an individual or group of individuals who called themselves Satoshi Nakamoto.
Although bitcoin is a form of money, it is not money as we know it. If you want to spend some bitcoin today, you don’t need to go through a bank or any other intermediary: you just send someone else some bitcoin. You could be sending money across the Internet without ever leaving your computer. And it is not only easy to convert bitcoin into dollars; it is easy to buy anything online that accepts bitcoins with bitcoin. That’s because every merchant who accepts bitcoins also accepts dollars (and vice versa).