How Does Cryptocurrency Work?
Cryptocurrency is an encrypted, decentralized digital currency transferred between peers and confirmed in a public ledger via a process known as mining.
Below, we take a simplified look at how cryptocurrencies like bitcoin work. First, let’s review the basics and essentials of cryptocurrency, and then we will do an overview of the other properties that have made cryptocurrency what it is today.
TIP: If the page below feels overwhelming, please see: “how does cryptocurrency work (for beginners).” Meanwhile, if you are mainly interested in trading, investing in, or using cryptocurrency, see “how to trade cryptocurrency (for beginners).” This page provides an overview of the mechanics behind cryptocurrency.
The Cryptocurrency Basics
To understand how cryptocurrency works, you’ll need to learn a few basic concepts. Specifically:
Public Ledgers: All confirmed transactions from the start of a cryptocurrency’s creation are stored in a public ledger. The identities of the coin owners are encrypted, and the system uses other cryptographic techniques to ensure the legitimacy of record keeping. The ledger ensures that corresponding “digital wallets” can calculate an accurate spendable balance. Also, new transactions can be checked to ensure that each transaction uses only coins currently owned by the spender. Bitcoin calls this public ledger a “transaction block chain.”
Transactions: A transfer of funds between two digital wallets is called a transaction. That transaction gets submitted to a public ledger and awaits confirmation. Wallets use an encrypted electronic signature when a transaction is made. The signature is an encrypted piece of data called a cryptographic signature and it provides a mathematical proof that the transaction came from the owner of the wallet. The confirmation process takes a bit of time (ten minutes for bitcoin) while “miners” mine. Mining confirms the transactions and adds them to the public ledger.
Mining: Mining is the process of confirming transactions and adding them to a public ledger. To add a transaction to the ledger, the “miner” must solve an increasingly-complex computational problem (like a mathematical puzzle). Mining is open source so that anyone can confirm the transaction. The first “miner” to solve the puzzle adds a “block” of transactions to the ledger. The way in which transactions, blocks, and the public blockchain ledger work together ensure that no one individual can easily add or change a block at will. Once a block is added to the ledger, all correlating transactions are permanent, and they add a small transaction fee to the miner’s wallet (along with newly created coins). The mining process is what gives value to the coins and is known as a proof-of-work system.
The Anatomy of Cryptocurrency
Although there can be exceptions to the rule, there are some factors (beyond the basics above) that make cryptocurrency so different from the financial systems of the past:
Adaptive Scaling: Adaptive scaling means that cryptocurrencies are built with measures to ensure that they will work well on both large and small scales.
Adaptive Scaling Example: Bitcoin is programmed to allow for one transaction block to be mined approximately every ten minutes. The algorithm adjusts after every 2016 blocks (theoretically, that’s every two weeks) to get easier or harder based on how long it took for those 2016 blocks to be mined. So if it only took 13 days for the network to mine 2016 blocks, that means it’s too easy to mine, so the difficulty increases. However, if it takes 15 days for the network to mine 2016 blocks, that shows that it’s too hard to mind, so the difficulty decreases.
Other measures are included in digital coins to allow for adaptive scaling including limiting the supply over time (to create scarcity) and reducing the reward for mining as more total coins are mined.
Cryptographic: Cryptocurrency uses a system of cryptography (AKA encryption) to control the creation of coins and to verify transactions.
Decentralized: Most currencies in circulation are controlled by a centralized government so their creation can be regulated by a third party. Cryptocurrency’s creation and transactions are open source, controlled by code, and rely on “peer-to-peer” networks. There is no single entity that can affect the currency.
Digital: Traditional forms of currency are defined by a physical object (USD existing as paper money and in its early years being backed by gold for example), but cryptocurrency is all digital. Digital coins are stored in digital wallets and transferred digitally to other peoples’ digital wallets. No physical object ever exists.
Open Source: Cryptocurrencies are typically open source. That means that developers can create APIs without paying a fee and anyone can use or join the network.
Proof-of-work: Most cryptocurrencies use a proof-of-work system. A proof-of-work scheme uses a hard-to-compute but easy-to-verify computational puzzle to limit exploitation of cryptocurrency mining. Essentially, it’s similar to a difficult to solve “captcha” that requires lots of computing power. NOTE: Other systems like proof-of-work (such as proof-of-stake) are also used.
Pseudonymity: Owners of cryptocurrency keep their digital coins in an encrypted digital wallet. A coin holder’s identification is stored in an encrypted address that they have control over – it is not attached to a person’s identity. The connection between you and your coins is pseudonymous rather than anonymous as ledgers are open to the public (and thus, the ledgers could be used to glean information about groups of individuals in the network).
Value: For something to be an effective currency, it has to have value. The US dollar used to represent actual gold. The gold was scarce and required work to mine and refine, so the scarcity and work gave the gold value. This, in turn, gave the US dollar value.
Cryptocurrency works similarly regarding value. In cryptocurrency, “coins” (which are nothing more than publicly agreed on records of ownership) are generated or produced by “miners.” These miners are people who run programs on specialized hardware made specifically to solve proof-of-work puzzles. The work behind mining coins gives them value, while the scarcity of coins and demand for them causes their value to fluctuate. The idea of work giving value to currency is called a “proof-of-work” system. The other method for validating coins is called proof-of-stake. Value is also created when transactions are added to public ledgers as creating a verified “transaction block” takes work as well. Further, value comes from factors such as utility and supply and demand.
Learning More about How Cryptocurrency Works
If at this point, you feel a little bit confused, don’t worry and don’t give up. Understanding the concepts that are fundamental to cryptocurrency is a challenge. One explanation works for some people, and a different explanation works of others. We all learn in different ways.
The trick with cryptocurrency is not getting worried if you don’t understand it at first – each new video, explanation, or article that you learn from will make your understanding of cryptocurrency clearer until, eventually, it clicks.
To learn more, visit some of the other, more technical pages on our site to dive deeper into the inner-workings of cryptocurrency. You can also watch informational videos about the how cryptocurrency works such as the one below.
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Very good and simple explanation.
Great introduction to the cryptocurrency world!
I feel much more informed thought it was explained with honesty
Glad you found it helpful!
Can anybody please Help Me in investing in bitcoin
If you ask a question like that, then your best bet is to stop posting online and go directly to Coinbase. They are a beginner friendly platform. If you go around the internet saying “Help Me invest in bitcoin”… you are very likely to catch some bad advice 🙂
Our site is meant to help answer any questions, type them in the search bar, or do a Google search with our site name, or, like I said, go sign up for Coinbase.
https://cryptocurrencyfacts.com/exchanges/coinbase/
Thanks, for the good info.
But what is it used for? Can you buy and sell things with these currencies? Can it be used at Walmart? All these simple-minded questions are not explained in the article. We need a crypto currency for dummies approach.
Thanks for the insight. I will write up a page on that and link it above.
Cryptocurrency can’t currently be used at Walmart, but we might get there some day (perhaps with Amazon first).
It works a lot like a mix between PayPal and Western Union, in that it is an electronic payment system and a way to transfer money around the globe. Mainly it is used to store wealth, transfer funds, and for peer-to-peer transactions (such as online services) at the moment. That said, I’ll create more complete answer in a ultra simple cryptocurrency for beginners guide soon.
Are these wallets transferable money to your bank account or is this something used strictly on buying merchandise?
How do you use a cold wallet? How would u get your coins to be cashed to your bank account?
You need a broker like Coinbase to trade between fiat and cryptocurrency (or you can use an exchange like GDAX). It can differ by country.
Both of those allow you to deposit money from your bank account, trade fiat like the US Dollar (USD) for Bitcoin, trade Bitcoin for other cryptos like Ether, and then trade back to USD, and then to deposit fiat back to your bank account.
Hello, I am an independent physicist living in Mexico. During my investigation into the cosmos and the subatomic world. I have discovered the universal constant it is a previously unknown measure. Within this constant, there’s a hidden system of math and code that runs every aspect of the universe including you and me. This system can calculate, process and perform infinite amounts of information in fractions of a second. It is completely Unbreakable and provides its own security. It is the only possible solution to the problem in cryptocurrencies. Only I have this code I discovered it and nobody else knows about it. I’m interested obviously in implementing this code into a working solution for the cryptocurrencies. Might you be interested with your contacts to helping me achieve this goal?
It is the only solution.
That is awesome. If even half of what you say is half true it would be a pleasure to hear your theory.
Overstock.com currently accepts Bitcoin for payment of their merchandise.
Really good point. So there are a few online retailers who accept crypto (Overstock.com probably being the best example).
See here: https://www.overstock.com/bitcoin
However, at the moment it is mostly used for peer-to-peer, value store, big ticket items, etc.
We’ll need to see more adoption by the general public before we see crypto being common in day-to-day transactions. Likely what will happen is companies like Square and PayPal will continue to integrate crypto payment options (Square is already flirting with this). Then we’ll see more retailers like Overstock (as I said Amazon has potential given their history in adopting innovative tech).
It helps to put aside the volatile of the market and focus on the usefulness of cryptocurrency transactions when trying to envision the future of its use as a supplementary payment system.
Does Bitcoin have an actual cash value
The cash value of Bitcoin, like any other asset, is relative to other values.
So I can give you the value in US dollars, it is roughly $8.5k right now. I can give you the value in Gold Bars, it is about 6.5. I can give you the value in Korean Won or Chinese Yuan or whatever. We can talk about the purchasing power of a Bitcoin, or what we can trade it for.
So in short, yes 🙂
It’s fine to feel confused at this point right? Would you mind to explain this to a person living in third World. Tip – with third worlders, giving incentives works fastest.
Here is the advice I’d give.
– Being confused is normal. It takes a good deal of time and effort to wrap your head around the digital ledger of transactions known as block chain (that digital ledger is the most important aspect to understand).
– What is Bitcoin? In simple terms, it is a public digital ledger of transactions secured by cryptography where you store passwords that relate back to Bitcoins accounted for on the ledger. When you want to send or receive bitcoin, you simply add that transaction to the digital ledger. The way the ledger is secured and distributed is a little complex, but in general the answer is “via cryptography” and “by the ledger being distributed to many users.” Thus consensus and cryptographic puzzles ensure the system.
– There is only one world, first, second, and third ones. 🙂 Cryptocurrency is meant to be a peer-to-peer global currency. It doesn’t rank people based on where they live, it is blind to that sort of thing.
– There is no such thing as easy money. Averaging into small positions in the top coins, especially when the market is down is the best way to grow your wealth. Don’t go chasing too-good-to-be-true pyramid schemes that promise quick returns if you lock your money up. Those scams tend to prey on people from countries where poverty rates are higher. Want to take a good bet, buy Bitcoin low, sell Bitcoin a little higher, on average, over time. In times when the value in your native fiat currency is low, consider holding. One day it could all go away, until then it has a history of recovering to new heights. Don’t get overly emotional about the day to day. Don’t invest more than you can afford to use.
– To become “not confused” it’ll take some work. Have fun researching crypto assets and block chain, charts, markets, and investing strategies. The more you know, the better you’ll be able to navigate the crypto space.
– Do your own investing. Never let someone else invest your money for you. Crypto is all about the user being in the drivers seat. Of course people want to hold your Bitcoin for you… would you not want to hold someone else’s? Don’t fall for that. You hold your Bitcoin, you hold your wallet, and never share your private keys!
I’m going to work on a super simple guide to crypto assets like Bitcoin next week. Any questions people have just list them below and I’ll make sure to cover them.
Is it like investing? Will the value of the Bitcoin grow or can the ‘market’ crash and you could lose everything?
Is there an app you can recommend for trading?
Tx!
It is like investing in stocks where the top coins are blue chips and alts are penny stocks. Also a little like Forex (foreign exchange currency trading) where it is a cut throat 24 hour global market.
A normal person would want to dollar cost average into a few top coins like Bitcoin, Ether, Litecoin, Ripple, Dash, Monero (do your own research). Ideally they would wait for retractions and then buy, but thus far there has really been no wrong to average into a long term position.
Someone who wants to take risks would learn to read charts and follow the news and look for good buying opportunities in alts, trading BTC, ETH, and Tether (USDT) for alts on a major exchange.
For trading I would always start with Coinbase/GDAX (if you live in a country where this is an option). If you can’t, I think Bittrex, Changelly, Shapeshift, and Binanace are all solid choices for obtaining coins before moving them to a wallet (although there are risks to any exchange that should be researched and considered and there are risks associated with different wallet types). Coinbase/GDAX keeps everything simple, so its a great starting point if you can use it (if not, look for a similar product in your region).
TIP: If you Google “cryptocurrency exchange / wallet in X” where “X” is your nation, you’ll likely get pointed in the right direction reading through the first few listings.
The thing to consider here is that there is a lot of risk and a lack of regulation with trading crypto. So you want to keep most of your coins in cold storage in a wallet (check out Trezor or a paper wallet for example) or, an insured wallet like Coinbase (perhaps even in their vault).
A conservative trader will invest about 1% of their investable income in crypto over time (not all it once) if they want to start their journey (but of course many end up going deeper than that).
Because things are volatile, it makes a lot of sense to average in slowly and cautiously, doing research, and making very small trades at first. Going all-in at the wrong moment can be psychologically difficult. Imagine jumping in right at $5k before Bitcoin fell to $3k, or jumping in at $7.9k before it fell to $5.5k. It isn’t like it didn’t come back, it is only that a big play for a newcomer can leave them spooked. You don’t need to learn lessons the hard way. Average in over a year (or at least a few months) with 1% of your investable funds, learn about stops and trading pairs, and then when you are ready, at that point take the next step.
There is a lot to learn, a lot that can go right, and a lot that can go wrong.
Don’t be scared off from crypto and not join the party, but do enter cautiously and conservativly to avoid the pitfalls.
Happy to answer any questions or offer insight.
PS. Yes the market could crash and you could lose a lot. I really don’t think the value will ever go to zero on Bitcoin or the other top coins… but it could over time on some random alts down the list (by coin market cap… make sure to use coin market cap https://cryptocurrencyfacts.com/exchanges/coinmarketcap-com/ ).
PPS. Stay away from coins that ask you to lend them money and get referrals in return for increased payouts (the structure that some refer to as a Ponzi scheme; these prey on new users by offering them the moon in exchange for their coins or fiat). I only suggest investing directly in top cryptos like Bitcoin, Ether, Litecoin, etc as a new user, and I always suggest using the top broker / wallet / exchange (so in the, Coinbase/GDAX). Also, while Bitcoin Cash and Bitcoin Gold are valid coins, don’t mistake them for being Bitcoin, they are hard forks (they are their own coins). Likewise, although Tether and Bitconnect are top coins, they aren’t “just cryptos” so don’t treat them as equal types of investments. A little research can pay off a lot, don’t impluse buy something you haven’t researched fully!
There are over 50k ewallet holders in Uganda. Bitcoin is routinely traded via platforms like BitPesa that converts crypto to fiat like Ugx and Kes. Conclusion: someone in the Third World is way ahead in this game already!
Hi! Am from Nigeria…let’s talk about the E-wallet thing…don’t think we have any here yet… thanks
Cryptocurrency wallets are universal. Anyone with an internet connection can download Bitcoin Core or buy a TREZOR wallet for example. Meanwhile, if you want a custodial wallet service, then you have to find one that services your region.
Im still confused,i need to watch it a couple of times before ill grasp it?Maybe?
To say the least. It takes a good deal of thinking and research to fully wrap your head around cryptocurrency. I’m going to work on a simpler guide and will post it above.
What if have Bitcoin and want to buy or sell to someone who uses a different crypto currency. is Bitcoin transferable ?
No. You cannot and should not send Bitcoin to any address other than a Bitcoin address (this includes Bitcoin Gold, Bitcoin Cash, i.e. any hard forks). You would have to use Changelly (or ShapeShift) or an exchange to convert it into the other crypto, or they would have to have a Bitcoin address and accept your Bitcoin.
Bitqyck.me has a mining oppurtunity that….When mining, you get returns weather the coin value goes up or down….correct?…You join up free to get started
I don’t like anything that offers anything that isn’t honest pay for a hard days work. So I generally avoid any incentive-based structure without tons of research first. I don’t want to comment on a service I haven’t used. My first sniff test is to see if the domain is blocked by Google. The second is to do tons of research. They pass the first test, I haven’t done enough research to comment further on this one. 😉
You are a scam.
How does cryptocurrency differ from credit cards?
One is bank credit accounted for by the bank, the other is cryptocurrency accounted for on a decentralized, encrypted, public digital ledger.
Fundamentally not so different. Very different in terms of specifics.
Bank credit is ultimately backed by the state, cryptocurrency is backed by an algorithm.
Your credit card charges you interest, but you can spend money you don’t have. Your crypto generally goes up in value over time like a volatile stock, but you have to obtain it using your own capital (or trade it for goods and services).
If someone steals your credit card, you call the fraud department and the bank fixes it. If someone steals your crypto, you lose it. This is why I like Coinbase, they are essentially the closest thing you can get to a bank with crypto at the moment.
still does not explain the critical things of how do you buy in and how do you convert currency like dollars out of it when required
We cover that elsewhere on the site, for example here: https://cryptocurrencyfacts.com/how-to-trade-cryptocurrency-for-beginners/
Thanks for saying something though, I added that link toward the top of the page for people to check out.
The digital signature accoded to the individual, how is it developed? Is it a system based address like MAC address?
It is sort of like a MAC address. When you generate a wallet you get a public address that coins can be sent to and from and a private key that allows you to access the wallet (which stores your public address and allows you to send/receive a given crypto). You share the public address and transactions that uses it are recorded on the public ledger, but you don’t share your private keys.
I still don’t understand why a computer generated number is valued so highly.
Its a store of value with a system of encryption and accounting behind it. Its a digital payment system that allows people to transfer large or small amounts of money across the globe using a peer-to-peer payment system. It gives people in any country on the planet a way to obtain and maintain real world value (if they have an internet connection). Someone with no other options can mine or sign up for a faucet site (where you get very small amounts of coins for free). There is work behind it.
The list goes on. That is why it has high value….
… Well that and people bid it up on exchanges.
In other words, it has fundamental and intrinsic value, and then it also has the value people are willing to pay for it in the current market based on bidding wars on the exchanges (not just supply and demand, but tactful bidding).
The fundamental value is very exciting in the long term regardless of what happens in the short term, meanwhile the increasing value in the short term is exciting in a different way (but has some inherent risk).
Check out the white paper of this cryptocurrency. I think they may have stolen some of your work. bitqy.org
Yeah I do see that this is the case. I mean as long as they aren’t using it to rank their website I’m not overly upset. Feel like they could have at least offered us some tokens though 😉
Good catch, thanks.
I will vet them. As long as they are legit I don’t think its a big deal. If they are using it to pull one over on people, then I’ll be saying something.
Way over my head but watching this vid 20 times I will get saturation.
What an amazing system
That is exactly how I learned about cryptocurrency. Watching videos over and over, reading the same documents over and over, trying to mine, using exchanges, etc. Saturation works. 😉
What do you think about industry specific currencies. I work in healthcare and the idea of a Blockchain based electronic medical record is intriguing to me.
I know we are towing the line between Blockchain and crypto here. But, it does not look like many alt coins are going into the healthcare sector. Thoughts?
Ps thanks for the great explanation and your willingness to interact with so many in the comments. Easily one of the most comprhendable explanations I’ve rwad
Thanks for the compliment.
I think industry specific tech based on crypto tech (like blockchain) is a clear winner. I think related tokens can be hit or miss. If there is a reason to have a token, that is one thing. If a token is just sort of created as an aside but doesn’t have any necessary function related to the system, then it is less attractive.
Generally I think there is a ton of potential though.
Great intro to crypto currency.
io francamente ho capito ben poco…
If it weren’t for Google translate that would make two of us.
To your point, understanding crypto isn’t something that happens over night. It is something you earn over time by putting in some hard work. It’s a great hobby, but it takes work to understand how cryptocurrency works 😀
I think it is just a matter of time to its total failure, sorry. I am a computer IT guy, write 4 computer codes and have been involved since 1992, wow. YEAH, well someone will pull the floor out from under us all in time with receivers of all varieties which are particularly sensitive to EMP, as the highly sensitive miniature high frequency transistors and diodes in such equipment are easily destroyed by exposure to high voltage electrical transients. See this article, which pretty much says it all; http://www.ausairpower.net/ASPC-E-Bomb-Mirror.html – I wish it wasn’t so.
Sure, if that worst of all possible worlds occurs then all digital finance is in a real pickle. But that takes down all the dollars of central banks, the systems that track commodities like gold, etc. Nothing is safe, we are all in deep trouble. So I don’t see the problem being unique to crypto.
We can live in fear of the worst cases, or we can not. I say not, but awareness is good. Interesting article either way.
Very well done but I miss the days of the handshake to secure a transaction. My only thought is money laundering and illegal activity, terrorists, cartels, etc, etc. Why give those criminals this solution to do further harm. Who else uses this and for what purpose? Just curious.
The software that handles transactions is better than any handshake. It is a trustless contract that allows any two people to create and execute a transaction with a virtual handshake ensured by the principles of cryptography. Nothing is stopping one from pairing it with a good old physical handshake though.
As for criminals. We can’t stop them from forming businesses (unless they have a record), we can’t stop them from using dollars, we can’t stop them from doing whatever they do (unless the powers that be can use the forces that be to catch them), etc.
Many, but not all, of us would love it if we could create a magical line of code that excluded the worst of criminals from a given digital system. However, this is probably not realistic in any system. It is sort of just a sad aside of any system that there is no perfect solution to. The idea that cryptocurrency should be equated with crime is largely a talking point, criminals can use the internet for crime, they can use a secure phone for crime, they get further in a car than a horse and buggy, they can hurt more people with modern weapons than sabers and muskets… still, the rest of us have to evolve, and therefore the worst of us will also have access to the tech. What can one say?
So in 2140 I might be able to buy a GPU for its actual MSRP since mining won’t generate profit anymore?
Don’t get your hopes up 😀
Too confusing and complicated to understand…I’ll stick to the tried and true: greenbacks! and they are accepted all over the world.
I’ve spent a lot of time trying to explain cryptocurrency in simple terms and so have other members of our team. It is a little difficult to offer a complete view and a simple view at once.
Here is two ultra simple ones:
Cryptocurrency is a bit like email. You send/receive email using addresses and use passwords to access your email. You don’t know how it works under the hood, but you don’t need to to use email.
Likewise, its like online banking. You send to accounts and use a password to access your account. The bank keeps an electronic digital ledger of your bank credit. You don’t know how it all works, but you don’t need to to use it.
Want to invest in crypto or use crypto? You don’t need to study how it works. Just sign up for coinbase. Want to use it to buy something? Hit the send button. Want to convert it to greenbacks, hit the sell button.
We don’t all understand how our trading platform works, but we could figure out how to self manage our 401k in a pinch.
Not everyone knows how PayPal works or Square works, but using the product only takes a little bit of a learning curve.
Cryptocurrency is a new technology, its a bit complex under the hood, but from a user perspective there isn’t much more than “download the app and hit the buy/sell/send buttons” to transfer funds in and out of your account. There was a time when mass adoption of things like the internet, text messages, email, and social media seemed like a pipe dream, but we all caught on over time.
You get the gist.
All that said, here is another take on the bitcoin basics and beyond: https://cryptocurrencyfacts.com/bitcoin-basics-and-beyond/…. I wanted to make that page simple, but complete. As a trade-off I ended up I think getting neither accomplished. 😀
Blah blah sound’s extremely risky to me-
The government could shut down the internet at any time, so now how will your cryptocurrency be, huh?
Oh and I forgot;
People could smugle huge amounts of money around the world.
People can smuggle huge amounts of money via cryptocurrency technically. They can also use fiat currency to do that. Nothing much to do to stop criminals from being criminals. I’m more concerned with how the 99.9% of the rest of us are helped by having a global peer-to-peer digital payment system. For example, how non-criminals can send money across the world without long wait times and high fees.
If the government shuts down the internet then cryptocurrency is the least of our problems. Online banking, paypal, email, search engines, etc. All going to be in trouble. I would put this concern very far down the list.
The first introduction I’ve seen that I actually understand. Thanks 🙂
Could I have a few bullet points on what a ‘cryptocurrency unification platform’ does and what are the BENEFITS of such a platform to retailers and consumers? Thanks.
A simple explanation that actually does not impart information of any value. In the “coin” world, currency has value that can be traded for goods. For one dollar, you can exchange for what is valued at one dollars worth of goods.
With cryptocurrency, if a bitcoin is valued at $15,000 how does one use a portion of a coin to pay for goods? Can one only use this currency for high ticket items that cost at least the base amount of the bitcoin? Is a bitcoin like a virtual debit card? How does one track its value, and if part of the value is used, is it no longer a bitcoin as it is not worth what a “bitcoin” is valued at?
If I want to buy a loaf of bread from someone who accepts all mediums of exchange, and that loaf of bread costs $5. Then I can use $5 worth of value of any medium of exchange to buy the loaf. To do this we’d probably agree to use the market price of Bitcoin in USD, the market price of Gold in USD, etc.
If I want to use Bitcoin, I’ll use a fraction of a coin and pay a transaction fee.
Now, if the loaf dealer values his loaf is satoshis (fractions of a Bitcoin) then it works the other way around. He will only sell the loaf for .0001 BTC. Thus I can offer .0001 BTC worth of dollars or .0001 BTC worth of gold.
Thinking of BTC in dollar value is one way to do it, but I could just as easily compare loaves of bread and BTC, or BTC and weights of gold. We are just picking a standard and comparing other sources of value to it and valuing things based on current exchange rates.
Since we live in the world we live, generally we will use the US dollar as our standard (it is nice and stable and we can pay our taxes in it; it is a good choice). Thus, we will compares loaves of bread, Bitcoins, and Gold to that in terms of value in USD and we will say a bread is $5, a Bitcoin $8k, and a ounce of gold $1.3k.
A Bitcoin is always a Bitcoin, bread always bread, gold always gold, but its value in USD changes.
Bitcoin is a flexible medium of exchange, one could think of it like a virtual debit card (although its a bit more complex than that, PayPal or online banking are decent comparisons).
Otherwise your questions are probably best answered with a short discussion on the nature of money in terms of the philosophy of economics.
So can we say.. once there is a technology breakthrough which explodes computing power, say, quantum computing, it will totally change the scarcity of the coins, similar to human being exploring another planet full of gold and can ship them back to earth in tons…right? Is that a real risk?
As to the utility part, I can start to see the point as its transaction value will increase as it becomes more liquid, and more ATMs open. But I still can’t see how it beats fiat money, except for in cases where users want to remain anonymous – an anti-money laundering nightmare.
As the mainstream fiat money is pretty much digital now, it has to offer a stronger value proposition to convince me. And it can’t be anonymity, as there is a reason why financial regulation exists.
The one benefit cryptocurrencies have is they are software. So if we can upgrade other hardware / software to do quantum computing, logically we will be at a place where we can update cryptocurrency software to avoid being nullified by the quantum computers. I think there is risk in there, if someone develops a super computer before the world upgrades their computer security and software, but its the same sort of risk any software / hardware faces from a very general frame.
On the other point, I don’t think crypto will replace fiat currency, I think it is supplemental. Very roughly I mean it in the same way that PayPal, Square, Apple Pay, Credit Cards, and Gold haven’t replaced fiat. It isn’t just because most of those are ultimately fiat backed, it is because they don’t have all the same exact features despite their useful qualities.
Crypto is sort of a hybrid between being money and an asset, a store of value and a medium of exchange. This is different than fiat money which is meant to hold a stable value and be a medium of exchange… it is currently more like if we could spend stocks as money.
The real utility of crypto is probably in its use within online environments. Like if Twitch had a crypto, Facebook had a crypto, or Google had a crypto, etc, or if they used cryptos, it would allow for a more fluid exchange of value within those systems.
If I’m watching someone on Twitch and I want to tip them, exchanging a token rather than fiat money starts making a lot of sense. Further, if I want to send money across the globe, it might be faster, easier, and cheaper to send tokens rather than to get our banks to accommodate the transfer (especially if we are transfering to a country where their state issued currency is in disarray, we might conclude that there is more value in sending them the token.
Just two of many examples of where it doesn’t replace fiat money, but exists along side it. I doubt they are the best examples, but they are perhaps examples of fuctions we don’t need fiat to preform, but crypto can easily (do we need a bank handling countless micropayments for tips on a platform like Twitch?).
Meanwhile, while criminals might benefit from any technological advent, to me this is partly an aside. All good tax paying peoples of the world are going to claim their crypto, report correctly, and pay taxes, thus they won’t be any more anonymous then they would be if they handed someone a chunk of cash. We don’t know what the individual did with their cash, but we have a tally of cash in and cash out reported to the IRS each year (and actually with blockchain, we can see the transaction even if we don’t know who conducted it… so its even more transparent).
So I don’t think that anonymity is the selling point or that a replacement for states and money is the future, instead I think that its a complimentary system that solves some of the problems with current monies. When Apple comes out with Apple pay, when a bank a credit card, or PayPal with their digital payment system I don’t think “this is the end of money” I think “this is another compliment to the way value is transferred and stored. When a new stock comes out, I don’t think “this has no value” I think of what that stock represents and then try to buy low and sell high (at some point); cryptocurrency also has this feature.
Very good. Where can I find a book that goes deeper into the subject? I need to get more detail before I will feel comfortable.
Thank you.
I’m not sure if there is a book that explains modern crypto, but I’m tempted to post this: https://bitcoin.org/bitcoin.pdf
I’m a little confused about how transactions work. So the transaction gets completed once someone successfully mines, right? but how many transactions can one successful mine complete? BTW great job on the explanation.
When a person creates a transaction in a wallet, they sign the transaction using a cryptographic signature created using their private key (when you send from a third party platform they might handle this part for you).
The transaction shows the addresses sending and receiving. Then the transaction gets broadcasted to the network. Then miners confirm transactions like this in transaction blocks.
Once the transaction block containing the transaction has been added to the blockchain, the transaction is considered done.
With that said, it is common to wait for more than one “confirmations” before considering the transaction complete. This helps ensure against blue moon events like fraud.
This means that it is common to wait for not only the transaction block to be added, but for another couple of transaction blocks to be added after that block has been added.
This thread explains Bitcoin confirmations and why waiting for confirmations is important: https://bitcoin.stackexchange.com/questions/146/what-are-bitcoin-confirmations
One of my concerns are that there is no regulation on who can become a “miner”, so people with a lot of cash/capital (and obviously criminals like drug lords) can become miners. Please share some reassurance about that.
Secondly, if I wanted to become a miner, have you compiled a source for how to get started?
Thirdly, if I was representing a government from a small country that wanted to start cryptocurrency do you have a resource for me as well.
Lastly, as for now, your doing a fabulous job. Keep up the good work, it has much value.
Thank you for the kind words.
1. Criminals can become miners… but they will be running a giant noisy facility, in a location with cheap power, and will be buying a ton of hardware. Really hard to hide a large mining operation. So being a criminal and mining directly isn’t probably the best move in most countries.
2. Here is a how-to for mining Litecoin on a mac. If you can walk through this you’ll have the basics of mining down. https://cryptocurrencyfacts.com/beginners-guide-to-mining-litecoin-mac/
3. I’m not sure about what would be needed in terms of mining as a state. That is not something I’ve ever researched, but love the idea of it. Please share if you find anything and I’ll do the same.
I like he concept better than cash already.
Greed, dishonesty, takers and money sharks are rampant in our present money world.
Change needs to be a happening.
Lets get towards real living.
Give, gain and remain honourable.
From that perspective, one should note that the same people are present in any system. The main difference with truly decentralized cryptocurrencies is that on could argue that there is no way for corrupt people to distort the system aside from participating in the market with everyone else (for example they can be developers, or miners, or collect and trade a bunch of Bitcoin, but they can’t directly control the system).
Cryptocurrency has unique pros and cons, but it does have some real pros to consider in my opinion.
Thanks for the comment.
I have only done a little bit of research on this and keep coming to the same conclusion. It is “something” from “nothing”. Someone had to define the “first” currency. What gives it value? There is no “thing”. Only a digitally defined attribute. The emperor has no clothes!
There is inherent value in Bitcoin, as the system is a decentralized and distributed trustless digital payment system, so it has at least the value of that. So I would look to things like PayPal, Square, major banks, etc and think what is the value you in that, lending and other such things uncommon aside (as most, but not all, cryptos don’t have a lending mechanism).
Then i’d consider and compare speeds and accessibly and fees.
Then you have factors like supply and demand. Then you have the use values of other cryptos like Ether (its whole own ball of wax which has comparisons beyond states and banks).
When I think through it, I do not come away with this idea that the emperor has no clothes. I come away with the idea that the emperor has considerable value, but is young and for the moment still in a very volatile environment.
For today, I would say the value of Bitcoin is properly the cost of mining a Bitcoin. As we don’t have a better metric. However, with the markets being what they are, the price can and has fluctuated wildly. I suspect those who are focused on accumulating it and embracing it though have a sense of its true value. Sort of like a young emperor full of potential, but still not fit to be a proper king.
hello, just like so many other people i think, i have read and not yet so acquainted with how cryptocurrency works. i will further read more technical sites to understand.
otherwise i am so much interested in working in the digital world and trading in cryptocurrency.
It takes a while to wrap your head around, but the basics are pretty straight forward. It is like online banking without a middleman. A digital ledger with balances and account numbers and passwords (keys) that let you move balances around on the ledger as a form of value transfer / payment. The result being trustless financial contracts. Or, in the case of systems like Ethereum, all that plus a platform for building decentralized applications and creating non-financial contracts. Everything is driven by algorithms rather than handshakes and middle-men. The exception being that people need to host the blockchain (ledger) and add transactions to it, so the system requires “miners” (those who do that). All that noted, people who want middle-men can use a service like Coinbase or Square to get a more traditional banking experience while still participating in the system.
I think it’s the most brilliant scam that every existed. Buying nothing and creating a mysterious web of uncertainty that literally offers nothing but the hope of someone coming in under you so you can sell them your share in nothing. Brilliant.
Sure, on one level you have a point. On another level you can’t dismiss the very real aspects of crypto. If every application was just hot air, because it was a culmination of users, code, and developers… then many things that we consider to have value would have no value.
Well run and useful cryptos have fundamental value, any problems with current market behavior exist on top of that. Lots of room to criticize the pump and dumps, the mania, and the speculation… but we can’t confuse that with the underling fundamental value and use-values of the top cryptos.
When in doubt, I’d consider a fair value to be [very roughly] what it costs to mine a coin.
I can and do go into long winded rants about the disconnect between the speculative value of cryptos and the fundamental values, and the pros and cons of this… but never would I buy into the idea that cryptos have no fundamental value. People who propose that idea tend not to have first hand experience with crypto and aren’t appreciating its finer points. It to me goes some way to discrediting arguments that otherwise have some merit.
The basic question remains unanswered (or I didnt understand the article):
How cryptocurrency is CREATED? How do new bitcoins come into existence?
Fiat money is printed by central banks. But how cryptocurrency is created?
New coins come into existence a rewards for miners who crack cryptographic puzzles which allow them to submit blocks of transactions to be added to the blockchain. Or at least, this is the case with Bitcoin and with all Proof of Work coins that use an algorithm like Bitcoin’s.
“New coins come into existence as rewards for miners who crack cryptographic puzzles”
Probably you think your answer is evident, but I humbly admit, I dont understand it.
The purpose of money is facilitating the interchange of goods.
Thus, dumb people like me used to think that money must be based in something real, not artificially increasable – gold, for the simple minded, total economic production of a country for the more sophisticated.
Question:
Is “cryptographic puzzling” in your opinion a value on which something hyper-important as money can be based?
Sorry, didn’t mean to make that answer overly confusing.
This video offers a simple explainer: https://www.youtube.com/watch?v=GmOzih6I1zs
Essentially new coins are created through a process known as “mining.” The money supply is controlled by an algorithm and “miners” are rewarded with newly minted coins for adding coins to the ledger AKA “the blockchain” (the process of which involves using software to solve difficult math problems / cryptographic puzzles).
To your other point: I’m not sure that “proof of work,” a type of mining that essentially uses the “labor theory of value” (where the computing power needed is the work that gives the money value on one level), is really the best way to imbue value into a medium of exchange.
However, it seems to be enough to get people speculating on the exchanges and it does provide a bit of a fundamental to fall back on (plus it ensures the system, without miners there is no Bitcoin).
Today it can cost between $5k – $8.5k (very roughly) to mine a Bitcoin. So I look at the current $9k-ish price tag and think, ok that makes sense given transactions data, usage, and mining costs.
How do we value fiat dollars? We trade them on Forex markets and consider supply, velocity, and the integrity of the issuer (how much faith do we have in the debt represented by the dollars). We also consider the GDP of the state (roughly the output of labor and capital). We consider what people charge for goods and services. Etc. That model has some logic to it, but a few aspects have elements of theory and speculation as opposed to being based on strict fundamental value, it isn’t too different from Bitcoin.
That is a rough sketch, but hopefully it illustrates my logic.
This line of thinking, that is what gives money value, is actually fairly complex… as money has exchange value, but not use-value. Lots of economics books on the concept, only so deep i probably should be going in this comment (as I feel like I’ll get side tracked from the point) 🙂
I had a very fundamental question. Why would people attach “value” to the “mining effort”?
And given that the value is attached to a “single” effort (mining in case of BITCOIN) – doesn’t that make this currency risky – tomorrow if the “mining effort” losses value, then the value of BITCOIN will crash (even go to zero).
Whereas, if the “value” of any currency is attached to multiple efforts – such as economy -which is the case in most of the currencies operational at a global level – those are more sustainable in value over longer periods.
The only argument is that BITCOINS “value” can’t be manipulated like the other global currencies are (such as liquidity injection) – but no one know if that’s true. Tomorrow someone can have a methodology to do so.
Ah, I see. You make good points, let me offer some insight.
People attach value to the mining effort because mining is what makes the system work. Miners literally maintain the ledger, and Bitcoin is in many ways nothing more than its ledger.
That said, mining is only one of the places to look for the value of Bitcoin. The reality is no one has a perfect model for valuing Bitcoin. It is more like Bitcoin is bid up on exchanges, therefore mining competition ramps up, and therefore it is harder to mine coins, and therefore adequate mining equipment becomes more expensive.
So while I would look to mining to justify prices at times, mining costs follow the price on the exchange more than prices on the exchanges follow mining costs (there is a bit of a circular relationship at best, but I’d say mining comes second).
Another way to determine value would be something like transactions data (how frequently and how much is being spent on goods and services).
Still, the reality is that a trading bot with a large bankroll affecting supply and demand on the exchanges is going to effect the price of a cryptocurrency far more than mining costs, transactions, total fixed supply, etc.
To another point you made, if mining stops then Bitcoin doesn’t work. However, the incentive to mine a coin would essentially be there at any price. It is like with Gold. If the price drops, miners shut down operations, and if the price goes up, competition increases as more people try to mine. Human are incentivized by money, someone will always come along and mine Bitcoin under any normal conditions.
The actual danger in mining is that it becomes so expensive to set up operations (or so unprofitable that only certain players can afford to take the losses) that mining becomes centralized and then the decentralized blockchain would then be in the hands of the a central power.
A central power controlling the majority of Bitcoin mining could result in their ability to manipulate the ledger. So that is on example of a method in which Bitcoin could be manipulated in theory.
Otherwise, the algorithm would need to be updated to affect the supply or the way in which new coins are created.
Bitcoin in its current form has a fixed total supply, it is hardcoded in. Someone either needs to tamper with it or it needs to be democratically updated by its users.
So, it is hard to manipulate the value of Bitcoin, but like… people don’t value it based on its value, they value based on speculation on the exchanges, so in theory it is a rock solid fortress (assuming it avoids centralization), but in practice it is an easy to manipulate highly speculative asset that no one has fully decided on a price or a methodology for valuing. We are at best in an early stage of an exciting future, and at worst in the late stage of a speculative bubble built up around a good idea.
There is clearly a whole conversation in here with many interesting points, I’m not the most qualified to have it, but it is fun to ponder, research, write about, and experience.
Thank you for the explanation – Question
If the value of the currency depends on the work/”mining”being done which is shown in Bitcoin to be 10 minutes per transaction does it mean that all cryptocurrency mining times will get longer as their value increase – eg. Ripple currently has a 4 second confirmation time which they claim to be the value they add ie. transactions being fast? Or otherwise can its value rise by limiting the number of coins to maintain the fast response time but still do the required mining?
A block will be mined roughly every 10 minutes, as the difficulty will constantly adjust to ensure it. That can’t change without a software update that a substantial majority of users agree on or a hard fork that makes a copy of the software to go in another direction.
What happens is that blocks get harder to mine and more expensive to mine as more people try to mine them, but the time it takes to mine a block does not change.
When I connect the value of a coin with the mining cost, I’m considering “what is the current cost to mine a coin, given the current competition, at this difficulty?” If you think on this, you can see there is a bit of a feedback loop (more miners try to mine as the price goes up, so mining costs more, but yet we want to justify the price by the cost of mining).
That is a consideration, but I think mining is none-the-less a good place to look for a current fair value.
That covered, the above is true for PoW (Proof-of-Work) systems like Bitcoin’s, but I don’t think it is the case for XRP (the token on the Ripple network). I believe (but would need to double check) that XRP isn’t mined by private miners and instead transactions are confirmed by Ripple’s software / hardware (meaning the company itself would know the cost of mining, but it is different than with BTC / Bitcoin).
XRP is a centrally managed coin, Bitcoin is a decentralized and distributed network controlled more democratically. With that in mind, to another point you made, Ripple is a very quick network though, and honestly if the price was stable would be one of the most useful cryptos to use a bank credit replacement.
When valuing XRP, one might have to look more to transaction data and the utility of their system to find a valuation (and like I said, the company’s cost of maintaining the system). A problem here is that the Ripple protocol, which is clearly valuable, doesn’t have a direct relation to the XRP token. For example, I don’t own shares of Ripple’s company by owning an XRP, I simply own the native token on the network.
This makes valuing XRP even more tricky than Bitcoin. As to why it sometimes is worth a quarter and sometimes $3.50… pure speculation is probably the most honest answer. It is almost a shame, because there are so many positives in play with Ripple and the company and its software / company clearly deserve a respectable valuation and I do think the XRP token is justified in reflecting this… but, there is honestly no direct relation in many ways between the token and the network in terms of value.
There are a ton of complex and interesting problems with crypto pricing to think of. I’ll probably end up on a tangent if I go on. Hope I answered some of your questions in my rant there 🙂
Good introduction.
Hi, I would like to use your information on our websites. Is this possible?
If it is a reasonable citation, I would just need a little more information to make the choice. If it is a copy and paste job where you grab large chunks of text or whole articles, then it is a hard no (although I assume you would not ask if that was the case). 🙂
It is a good article for beginners but yet to get the trick.
The trick to getting crypto is sticking with it. Trade it, use it, research it, learn about different coins, etc. Then over time you’ll start to wrap your head around the different aspects of it.
A good way of breaking it down. It seems the base to all currencies is value. I just didn’t understand the value aspect to something that could not be represented in real life e.g ( dollar and gold). In this case the mining is like an anrtificial way to add value to the currency. Thanks
Making the case for the value of Bitcoin and other cryptos isn’t simple, and is partly a matter of speculation. If you are interested in a long answer I discuss it here: https://cryptocurrencyfacts.com/how-to-value-bitcoin-and-other-cryptocurrencies/
I just cant yet get the idea how bitcoin works. What are the chances of me losing money if ever i decide to invest in bitcoin?
The chances of losing some money on paper in the short and medium term are really high. The chart will tell you that story. Most places one could buy in the short and medium term of 2018 have resulted in losses. Only buys in the high $5ks have resulted in almost no on paper losses and only gains thus far.
However, the chances of making money over time (despite on-paper losses) are greatly increased if you average in buys at what you think is the bottom and hold out (AKA HODL). That means knowing how to read the chart to detect possible bottoms, skipping out on buying what could be good prices that are not likely the bottom, and being willing to HODL through ups and downs until you get a price you want to sell at.
If you bought between $8k and $5.75k in 2018, you average price would be lower than the current price $7.5k despite some of your buys being higher. That is an example of how averaging in for a longer term trade or investment can work.
That is just Bitcoin though, the least risky of all cryptos with a fluctuating value essentially.
If you are ready for Bitcoin to go to zero, then you have the mindset needed to brave the crypto space as an investment. If you believe in the technology and know you want to be a part of whatever comes next, then you have the right mindset.
Hope that frames it well. Bitcoin is a solid investment if you know what you are getting yourself into, but it can really sting if you just throw money at it at any price and aren’t ready for the big ups and downs.
Can I cash out the Cryptocurrency in my wallet? If so, how?
You have to move it to an exchange that deals in fiat. Or move it to an exchange that deals in your coin, covert it to a common coin like Bitcoin, and then move it to an exchange that trades bitcoin for fiat.
For example: you would send your Bitcoin from your Bitcoin wallet to Coinbase and then sell it via Coinbase or Coinbase pro and then move your fiat to your bank account via Coinbase.
unless I’m really missing something, I still don’t understand what one does with cryptocurrencies – are bitcoins, for example, used to purchase goods and services? Do they accumulate value if invested? How is the value of digital currencies redeemed?
Let’s put aside official definitions and specific details and give a rough picture. It works like this:
Bitcoin is like a digital dollar that holds a value like a very volatile penny stock. You can use it to buy goods and services by sending Bitcoin’s between digital Bitcoin wallets or you can hold it as an investment and trade it for dollars or other cryptocurrencies on a cryptocurrency exchange (like a stock exchange).
So you can use Bitcoin like a money (trade it for goods and services), or you can use Bitcoin like a stock (trade it for dollars on an exchange).
The market (mostly traders on exchanges) decides its value, you could value it against a basket or goods or ounce of gold, but for us the most common sense way to value it is against a dollar.
Right now a Bitcoin is worth $8.1k. So I could trade it for $8.1k in dollars on an exchange, or $8.1k in goods and services (assuming those providing the goods and services accepted the current fair market value).
As an investment, Bitcoin is risky and could always go down. As a money, Bitcoin works just fine. I could spend Bitcoin, Litecoin, Ether, or Bitcoin Cash very easily and quickly right now.
very good explanation…. one should know cryptocurrency before talking nonsense about the CRYPTOCURRENCY TECHNOLOGY
Fully agree there. If you are interested in speculating on something you don’t understand, that is valid. One can look at the charts and the popularity of crypto and decide they want to take a gamble.
However, the reason it is a thing in the first place is because of all the interesting technologies behind all the different cryptos. Smart contracts, distributed computing, blockchains, DApps, etc are why there is an underlying market. Very interesting to learn about and can help you understand which projects you might be interested being a part of by mining, investing, using, etc.
How do you put crypto funds in you wallet to purchase items
https://cryptocurrencyfacts.com/how-to-send-and-receive-cryptocurrency/
Sounds great in theory. But still skeptical.
In simple terms, there are pros and cons https://cryptocurrencyfacts.com/cryptocurrency-pros-and-cons/ + https://cryptocurrencyfacts.com/wp-content/uploads/2018/04/02/some-pros-and-cons-of-cryptocurrency-from-the-perspective-of-march-2018/
Some aspects of cryptocurrency are, in my opinion, amazing. Some aspects are rather, for lack of a better term, “brutal.”
I would encourage anyone to learn about crypto, and I would encourage most people to at least dabble in ownership, use of the related system, and/or development, etc… but I would also encourage anyone who owns cryptocurrencies to use extreme caution due to the volatility, tax implications, and lack of protections against fraud.
It is very far from being a simple conversation to have, but there are enough benefits in there to make it worth learning more about at least.
Information that is given is pretty cool ,may it help me understand more about this
confused
The best way to get unconfused is to keep learning and asking questions.
am new here and want to know more about crypto trading and it makes money
Start here: https://cryptocurrencyfacts.com/how-to-trade-cryptocurrency-for-beginners/
Take it slow, and learn risk management: https://cryptocurrencyfacts.com/the-basics-of-risk-management-and-position-sizing-in-cryptocurrency/
…And then take the time to learn the many other things there are to learn about crypto trading and trading in general over the coming years 🙂
https://cryptocurrencyfacts.com/cryptocurrency-investing-tips/
I’ve been researching BC and CC for an internal discussion in the asset management firm I work for and have made a wide survey of online sources/discussions of BC and CC and in addition to the surprise at the unfortunate choice of terminology the field has employed which is vague, overlapping and prone to misinform, I am really amazed at the poor writing, the failure of writers to anticipate reader’s confusion, the failure to actually clearly explain what cryptocurrency is, what blockchain is, how CC is created, the ease/difficulty of creation, the bizarre notion of (for example Bitcoin’s) supply as it is affected by the scheduled reduction of its availability/existence… What a mess. I have an academic background in philosophy so I’m used to reading some very dense and also poorly written material but BC/CC followers and promoters win the prize for being unable to communicate. And those who claim to get it are most definitely going to fail to be able to answer carefully put questions – as all of you writers here demonstrate. Shame on you all.
Skipping right over the part where I say “no sir, shame on you for waltzing into this space like you own the place while belittling everyone who came before you and put the hard work in that even has you interested in the first place”…
… It honestly just sounds like you are projecting some general experience with crypto authors onto our site.
You are venting, I get it, but if you feel so strongly at least add some specifics and constructive criticism that applies to the page you are on instead of just a general rant.
Maybe you didn’t really spend time looking at the site for answers, maybe you are looking for something more like this: https://cryptocurrencyfacts.com/how-does-cryptocurrency-work-for-beginners/
It is really hard to say since your comment was so general and salty.
Anyway, in the interest of making you eat your words, go ahead ask me a carefully put question to test your theory.
Did I communicate my thoughts well enough? 😀
Bravo. Well said.
Very interesting and intriguing
The only reason that people are comfortable if not all-in on using credit cards is because plenty of people accept them. Same thing goes for American currency. How large is the market right now for accepting cryptocurrency as payment and is it growing, shrinking or flat?
I would say it is for sure growing, especially thanks to companies like Square and Coinbase.
There are some complications in terms of wait times for confirmations and learning curves, but there are advantages like the fact that you can use one currency world-wide (Bitcoin for example). Right now cryptos are great for online payments, but are workable for in-person payments. Further, it isn’t that difficult for a business to get set-up taking crypto, so you do see it in practice.
Hi I’m first time in this crypto thing n m very interested I want to join .pls guide me step by step
1. Find the top exchange in your region, 2. invest carefully in the top coins by market cap, 3. secure all your accounts, and 4. learn, learn, and keep learning.
Here are some resources to help you learn.
https://cryptocurrencyfacts.com/cryptocurrency-for-beginners/
https://cryptocurrencyfacts.com/how-to-trade-cryptocurrency-for-beginners/
https://cryptocurrencyfacts.com/cryptocurrency-investing-starter-kit/
I’m totally new to cryptocurrency and very much want to learn. The other day I tried signing up at Coinbase. It was simple enough, but to authenticate it, they sent a text message to my phone. Problem is, I don’t have a cell phone… just an ordinary home phone, which doesn’t take text messages. I couldn’t find any email to ask about this on Coinbase, nor any forum. Any thoughts on how I can resolve this, without buying a cell phone? I really really don’t want one. I work from my computer.
You may be able to create another account, you could also try contacting Coinbase support. https://support.coinbase.com/customer/portal/emails/new
Honestly I don’t know that you can use Coinbase without a phone. You should be able to use another authentication process, but you may still need a phone.
https://cryptocurrencyfacts.com/using-two-factor-authentication-in-cryptocurrency/
I do not understand all this stuff. If I want to buy something I pay cash or send a check. Why do I need to use some electronic money (which is not money to me) to buy something? At some point electronic money has to be converted into actual spending money for the grocery store and other goods and services that I might need. I don’t think that if I send my name or some electronic configuration to buy a book on line that I will get it. They will want cash not electronic mumbo jumbo.
my two cents
Dick
If you want to buy something online from another country, if you want to send money over seas, if you want to make a peer-to-peer transaction in the online space, etc. it can actually be much easier, cheaper, and quicker to use cryptocurrency than traditional fiat currency. Both fiat and crypto pair together, they don’t replace each other (not unless the banking and credit card system gets a major overhaul).
Great information, thanks for sharing. Well written!
Talk about a fiat currency! This is a complete joke! The whole concept is based on a theory that because a miner spends time working out a mathematical problem, the gold star received for solving the math problem first (crypto coin) has some sort of value. This is preposterously stupid! But, given the stupidity of most people, its understandable how this scam can perpetuate.
The ONLY real money is Gold. For thousands of years this has been true. While other minerals and stones have economic value, gold is the “gold standard” by which all other things of value are measured.
I think in due course, either the crypto market will collapse, or central banks will put pressure on industrialized nations’ legislatures to outlaw the use of it, deeming it a form of internet/electronic fraud, and causing disruption in commodity pricing. It also is a very deceptive method to contribute to a nation’s loss of sovereignty, just as a trans-national currency does; example: the Euro.
I think all you have is a video game of how to try to make money, similar to monopoly!
Are these post sponsored or some how linked to coinbase, as I notice there’s alot of promoting coinbase?
Coinbase is our top choice for crypto exchanges in general. Next up are Robinhood, Binance, and FTX. Coinbase is a public company, works good for onboarding and offboarding, and is probably our top pick for newcomers to crypto. While we make a bit more with some referral programs of other brands, we think Coinbase is the best choice for ad. We do get paid for conversions, anyone can apply for that sort of program with all these brands, but that isn’t why we promote the brands we promote. Cheers! 🙂