What is a cryptocurrency?
Bitcoin is just one of many ‘crypto currencies’. What is it? Long story short, it’s digital currency that was created, and proven to be unhackable, and no one owning it (no central bank)
A cryptocurrency like Bitcoin (BTC) is a digital currency that runs parallel to USD, with it’s own exchange rate (usually volatile) that is not owned or operated by a central bank, like our current Federal Reserve notes that replaced the gold standard. The first cryptocurrency of this nature was created by Satoshi Nakamoto, which may be one person, or a group, but is widely accepted as an anonymous pseudonym.
Bitcoin has a document called the ‘White Paper‘ that explains the process and implementation of Bitcoin. Many cryptocurrencies have a similar ‘white paper’ to describe their methodology, as well as elaborate the structure of the coin, it’s creation date, value (perceived) and so on.
These currencies can be obtained via computer mining, and via exchanges. The transactions are verified by what’s called a blockchain, which is stored on all of the computers which are also mining, storing the currency. This ensures correct transactions, and prevents fraudulent transactions by verifying each one with many other computers. These are called confirmations, and the average time it takes to pay someone in Bitcoin is 3 confirmations or 20-45 minutes.
As of this writing, Bitcoin is worth $8,000 and started at 10c US in 2009.
So Bitcoin, Blockchain, etc, but are all cryptocurrencies the same?
No. Some don’t even use a blockchain (not a good sign) and some have a hidden blockchain. While it still protects transactions, it can ensure the privacy of the transactions better than the well known Bitcoin. zCash (ZEC) is is private blockchain Crypto with approximately $300-400 in value currently, and it’s been rising steadily. There are over 1300, and some of them are for specific purposes like online trading within a video game, or tokens that can be used for trade of coupons. The primary purpose of the currency is to be used as an exchange.
To obtain new coins, the coin collections are built so that instead of earning them, they are mined, just like coal in coal mine, except by having computers do complex calculations over and over until they hit a block, which then rewards the user with coins. Mining the first coins, if you were the only computer would net you instant coins. Now that crypto – currency is so popular, the probability of you finding a block of Bitcoins is extremely low. Usually nowadays, people choose to join mining pool, which is a group of individuals combining computer power to split the coins when they are mined. This allows them to increase (or in some cases guarantee) a payout, albeit far less than mining on your own.
Mining is done by using the CPU (The brain of your computer, usually 2 or 4 cores made by Intel or AMD) or GPU to solve the complex calculations. A CPU with 4 cores can process 4 calculations per instance, but these cores are very powerful, which is not a requirement of the mining process, so instead, miners use video cards, which have 1000 cores, much weaker than CPU, but can process many more calculations per second, allowing you to get more coins more quickly. Usually the power of the mining ability is rated in hashes. A $800 Geforce GTX 1080 Ti can do 700 h/s (hashes per second) when mining zCash on Windows 10. This is about $8 a day in profit when with a pool. If I was to mine by myself, I may get a block of coins, instantly giving me $400 per coin x 10 coins (average reward) but it may take over a year, so at this point, everyone joins a pool unless they have a very insane setup.
Are there other ways to get CryptoCurrency?
Yes. But it is becoming increasingly hard as banks try to block the purchases. However sites like coinbase.com sell some crypto directly via bank account, and debit card (after ID verification). Any Google search of Bitcoin exchange will net over 100 results of places to purchase Bitcoin at it’s current value. 99% require identification and bank verification, as well as a few lower amounts to establish trust, as Bitcoin and other crypto have been used for abusive activity due to their hidden nature.
Sites like Local Bitcoins allow you to get them deposited via payment like Western Union, Moneygram, bank deposit, etc. You do not have to buy a whole Bitcoin, or 1.0 of anything. Currently I have .0053 of Bitcoin. 🙂
So what’s the big fuss?
It’s exciting to most because of the recent explosion of Bitcoin’s price. What once was 10 cents is now $10,000 (and has been as high as $18,000) and has made many people into millionaires, and a few people billonaires.
Can I get into mining? Or should I buy it outright?
Depending on what you plan on mining, it can always be profitable. As long as you supply enough compute power and don’t use more electricity than you’re earning, you’re OK, but if the currency fails, or falls too far down, you could end up with worthless coins, unless you are selling them immediately.
As for purchasing them, this is usually done as a hope that they will rise up and provide a quick extra buck. Currently Bitcoin is $10,000 so it may not be wise to invest, but Kala Token (probably worthless) is only 10 cents, and if it every went to $10,000 you’d make a ton of money. This is purely speculation.
So if you are looking to get immediate cash, or want to hold onto coins, you can do either. If you just want to mine to get your hands on as many as possible without paying full price, then mine. And if you have a hunch about a sudden rise in a crypto about to happen, maybe buying on the exchange is your thing.
Thanks for reading, if there is anything I didn’t answer, please feel free to let me know.