In the last couple of months, terms such as blockchain, Bitcoin, Bitcoin Cash, Cryptocurrency, and Ethereum have become focal points in finance. What exactly are they? Why is Cryptocurrency suddenly so hot? As the society increasingly becomes digital, financial services providers are exploring different ways of providing services to customers in a more efficient, highly secure, and inexpensive way. With the outlined goals in mind, enters the blockchain technology!
A closer look at blockchain technology
Blockchain technology is the bottom line of cryptocurrencies. Though blockchain origin remains nebulous, it was first brought to fore by Satoshi Nakamoto in 2008. He presented a White Paper and released a blockchain tech as a method of digitally and anonymously sending cash between 2 parties without using a third party such as a bank for verification. In the beginning, the goal was facilitating, authorizing, and logging transfer of money from one party to another.
Blockchain technology is a shared database that is populated with multiple entries that MUST be CONFIRMED and ENCRYPTED. The technology provides a way to create a tamper-proof log of every sensitive activity efficiently. The conceptual framework, as well as the underlying code, is very helpful in financial processes to provide companies and individuals a secure and highly effective digital alternative to the common paper-heavy, time-consuming, bureaucratic and costly banking model.
What exactly is Cryptocurrency?
Cryptocurrency is digital money. Consider it a digital tool of exchange that utilizes cryptography and blockchain technology for facilitating completely anonymous and secure transactions. As opposed to relying on the common financial institutions that verify and confirm transactions, a Cryptocurrency network utilizes its users spread in the system to check and confirm transactions.
The computers that verify these transactions are referred as nodes. They receive a small reward/ token, for being part of the block and confirming the transactions. This is called mining. Mining is the main process that Cryptocurrencies generate their coins. Note that various cryptocurrencies have different methods of mining for users in their network.
Today, there are thousands of cryptocurrencies in the market. However, Bitcoin remains the most popular Cryptocurrency with roots buttressing well into others that use its platform.
Cryptocurrencies can be used in ways that fiat currency cannot
Since cryptocurrencies are digital, they can be applied in a way that conventional currencies cannot. They are digital equivalents of conventional cash. Note that unlike debit or credit cards that are issued by banks, people do not need accounts yet they can comfortably buy goods and services with cryptocurrencies. Though more stores are starting to embrace cryptocurrencies, only a handful accepts them at the moment. To carry a transaction, a small fee (smaller than credit card charges) is charged to support the network.
Cryptocurrencies have also become a common method for tipping people on blogs, social media, and IRC chat. Many independent bloggers have created tipbots for social media especially Twitter and Reddit to allow users send some cash to those who make tip-worthy comments.
Cryptocurrencies are easily converted to represent things that are conventionally not currencies. Depending on the platform under consideration, transactions can be anonymized to turn the respective Cryptocurrency into discreet cash. In addition, Cryptocurrency coins can be sent to any part of the globe within seconds. This allows cash senders and recipients to deal with each other directly without involving financial institutions that charge for currency conversion and take some time to release funds.
Cryptocurrency security and technologies
Even as Cryptocurrencies take the world by a storm, more people have been asking about their security. While they are not immune from fraud and theft, they utilize technologies that make hacking difficult. To begin with, the wallet you select for respective Cryptocurrency should have a well-encrypted password and regular backups. It is a great idea also to have a written copy of the password.
Remember that unlike the common web applications such as Gmail that allow users to recover lost passwords, it is different with Cryptocurrencies. Just like cash, if you lose the password, there is no recovery for the wallet and all the cash therein. It is also crucial to store most of the cash offline, preferably in a wallet that can be disconnected from the internet when not in use.
To guarantee safety to their network, users, and resources that cryptocurrencies hold, they apply various technologies including these;
- DPoS (Delegated Proof of Stake): This is a unique algorithm mode based on consensus. It targets ensuring that every node only makes one vote when confirming transactions.
- Egalitarian PoW algorithm: This algorithm is applied to help with fair distribution of and prevent users who might target bulk-coin holding.
- Ring signature: This is one of the most advanced technologies in blockchain systems. It requires trusted public keys to verify transactions in specific blocks. Remember that even with Ring Signatures, it is still impossible to know the identity of the signer.
Picking a great Cryptocurrency
The fast rising numbers of Cryptocurrencies provide a unique way of trading. Besides, each one of them features unique challenges that subsequent ones target to address. Therefore, if you want to join one of the cryptos, here is how to identify the right one;
- Check on market capitalization: The market capitalization of a Cryptocurrency is its total worth. If the Cryptocurrency has a very high capitalization, it means the value per coin is equally high.
- The method of verification: One of the things that have made new cryptos to enter the market is the effort to introduce new verification methods to help maintain total user anonymity. The common technology applied is the Proof-of-Work that involves solving specific mathematical problems by a node. Using proof-of-Work proved very complicated especially to users without computing background. Another method adopted to help with verification is the Proof-of-Stake that allows users with bigger currency share to verify block transactions.
- Acceptance by retailers: As Cryptocurrencies become the norm in every corner of the globe; they are not worth much if you cannot use them to buy an item in a retailer. Here, you should look for cryptos that have a partnership with major retailers or are part of the blockchain’s networks.
Where to Buy and Sell Cryptocurrency in Australia?
Crypto Currency for Fun recommends buying all Cryptocurrency at CoinSpot. CoinSpot is a multi cryptocurrency wallet with built-in trading features. Users can store many coins, including Bitcoin, Ethereum and they offer Instant Delivery or your coins right into your account.
Cryptocurrencies are the latest digital developments in the globe. While there is no doubt that the currencies are the ultimate way to go, one cannot be sure where they will ultimately lead to. However, the truth is that they have provided possibilities that fiat currencies could not envisage.