Crypto 101: What is Cryptocurrency & the Blockchain?
Thanks for taking the time to read today's blog post where we have a new guest blogger from Nigeria, Emmanuel Familoye, with a Masters in Computer Science who is going to break down what Cryptocurrency is and how you can get started!
A couple of years ago Tom, a good friend of mine, always talked about cryptocurrency trying to understand what it was. Finally, I explained it to him in a way that made sense and I think it's about time you should know about it too!
What is Cryptocurrency?
Cryptocurrency is a digital currency that does not have a physical representation like the paper currency (the US dollar, British pound and so on). It’s a currency used to carry out transactions in the online space without a central bank or government controlling it. It uses cryptographic techniques to ensure buying and selling are secure.
Cryptocurrency is built on the blockchain technology, a public financial transaction database that uses a distributed ledger on a distributed network of computers.
The first decentralized cryptocurrency is Bitcoin and was released in 2009. Its price is based on supply and the market’s demand. Bitcoin is a digital currency used to carry out transactions electronically on the blockchain network like conventional paper money transactions but without limit. Bitcoin has a finite supply of 21 million designed by its creator, Satoshi Nakamato. There are other cryptocurrencies created after Bitcoin like Dogecoin, Litecoin, Avalanche, etc.
Why are cryptocurrencies so popular recently?
Cryptocurrencies have very low fees associated with their usage, unlike conventional currency usage that incurs large transaction fees. Its low fee usage makes many people want to use it as means of transaction online, and it is also safe to use.
Any financial institution or government does not control cryptocurrency. Irrespective of country differences in currency exchanges, cryptocurrency is not affected, and it’s safer.
People get involved in cryptocurrency because of its profit potential. Early investors made huge profits because of the surge in countries’ and individuals’ mass adoption of cryptocurrencies. Investors are still making profits because the market is still hot.
Even though cryptocurrency is a digital currency, one would be concerned about the security of one’s money or transactions due to the increase in cybercrime in our modern times. Cryptocurrency is built on a secured technology, making its usage more secure than traditional payment options. These key features have also helped to make it popular.
Cryptocurrency is seen as the future of money by many people, which has brought about the adoption of numerous technological innovations built on the blockchain. This technology will change the world and make trading more manageable and transparent.
How can I get into cryptocurrency?
In a conventional financial institution (bank), a person must have an account with the financial institution to save money. Likewise, to buy, sell, store and track your cryptocurrency, there is the need to have a financial application called a ‘wallet’.
If you want to buy and store cryptocurrency, it’s best and easier to do it with an exchange. There are several exchanges available for your devices. You create an account on the exchange app and transfer real money to buy cryptocurrencies. You can buy any amount of coin, i.e., cryptocurrency like Bitcoin, dogecoin and others, but experts suggest that it’s best to invest $100 on different coins. There are several exchanges in existence, and we have Coinbase (Coinbase.com), it's one of the largest and most user-friendly apps used for cryptocurrency transactions. There's also Robinhood (Robinhood.com). You can trade stock and cryptocurrencies on these platforms.
Tom, my friend, was already interested in buying and investing in crypto after reading and having limited knowledge of cryptocurrency. He was concerned about the safety of his money on the internet as cryptocurrency is not controlled by a bank or government agency. Oh, I can wake up in the middle of the night, and my money is gone Tom thought??!! He had a second thought, I'm afraid Crypto's not right, and I'm not going with crypto again.
Emma, a cryptocurrency expert, had patiently listened to his friends concerns.
(Emma) Oh, my friend, give me a minute of your time, let me show you something.
Do you know that cryptocurrency is hosted on a secured network called blockchain?
Worried and excited, Tom asked, did I hear "Chain"?
Emma laughed and smoothly stated: 'It's called a blockchain.'
Ok, what is that? Said Tom.
Listen carefully, said Emma...
What is the Blockchain?
The blockchain is a distributed ledger that records any digital assets (like Bitcoin) in a transparent and secured (unaltered) way using decentralization and cryptographic hashing. The blockchain enables a secure and decentralized record of digital currency transactions like Bitcoin without the intervention of a third party. Blockchain allows a transaction record that cannot be altered, deleted, or destroyed—the blockchain works in blocks connected in chains.
Every transaction carried out is done throughout the block called nodes. All other nodes would be notified if a node is altered, bringing about transparency. Now, imagine what a hacker will go through before hacking or altering a blockchain. The hacker would successfully change 51% or more of the blockchain's nodes and create a majority of correct nodes that other nodes would accept. This process will take time and resources because it will involve redoing the blocks with different time stamps and hash codes. The point of hacking more than 50% of the nodes, definitely other nodes would be aware and move to a new chain that has not been affected.
(Emma) Do you now see that your crypto is secure?
(Tom) My money is secure, and I am purchasing a coin when @essextrading tweets!
Emma and Tom sipped the last drop of their DogeBeans coffee. Both became happy
and crypto investors!
In a short while, the paper money would cease to be in existence. (End scene)
Get on, for scale up,
Essex's Trading Quote of the Day (#QotD)
"Gold and silver is God’s money.
Crypto is the people’s money."