Cryptocurrency: A Beginners Guide
Most of us are comfortable with using money and credit and debit cards as well. But one thing many of us don’t understand is cryptocurrency. Cryptocurrency is becoming more and more mainstream and banks and even Facebook are trying to delve into it.
We received a very nice letter from Victor of Coinworld complimenting us on our articles about ransomware/malware. And he thought maybe our readers would be interested in learning more about Bitcoin and other forms of cryptocurrency. Victor provides an easy-to-understand, not-too-technical online guide to cryptocurrency, which we do want to share with you.
We’ve included just a bit of the information from Victor’s site below so you’ll get an idea how well-written and easy to understand the information is.
We think it’s pretty important that you have a basic understanding of what cryptocurrency is and why it’s growing in popularity. The following is from Victor’s site “Coinworld“.
“What is Cryptocurrency?
So you want to learn about Ethereum and Bitcoin? First you need to know what a cryptocurrency is.
A cryptocurrency is a currency that only exists on the internet. It is a digital currency.
‘But why is it called a cryptocurrency?’
Crypto comes from the word cryptography. Cryptography keeps your currency safe and stops other people from using it.
Cryptography encrypts your information, and you can only decrypt it with a personal key.
Think of it as a bank safe on the internet. There is only one key to open it, which you hold. Instead of a real key, you have a decryption code.
A cryptocurrency, such as Ethereum or Bitcoin, is very different from a traditional currency like the $USD, £GBP or €EUR, also known as FIAT.
But what are the key differences between a cryptocurrency and a FIAT currency?
a) There are no cryptocurrencies in physical form.
They only exist in code. You may see some coins with a printed B on it sold on various websites, but those are not bitcoins.
b) Central banks control FIAT currencies.
They do not control cryptocurrencies.
c) Regular currencies require a third party (a bank) to make online transfers.
Cryptocurrency transfers are peer-to-peer and do not require a third party.
d) Regular currencies are expensive and slow to transfer across nation borders.
Cryptocurrencies ignore national borders and are almost instant and free, no matter the size.
e) Only 1/6’th of the worlds population has access to modern banking which allows easy money transfers.
A lot of more people have access to the internet, which is the only requirement to use cryptocurrencies.
So more people can use cryptocurrency than regular banking services.
Many of you are probably thinking:
‘Okay, so encryption protects my money and data and the transfers seem great. But how does it really work?’
To explain this, I need to introduce you to the blockchain technology.
Instead of being all technical, I will use an analogy to first introduce the concept of a blockchain.
Imagine a magic notebook, and every person all over the world can easily get a copy of it for free.
Every time someone writes something in it, it appears in everyone else’s copy.
The more people who read what is written in their book, the harder it becomes to erase.
After a while, everyone with a notebook are in agreement, or consensus about what is written in it.
Your entry becomes the truth according to the network.
For example, Alice writes in her notebook that she transfers 5 bitcoin to Bob.
As 10 people holding the notebook have read it, it is now accepted as the truth and Alice can not take it back.
‘Cool, but how do I know who I am transferring my currency to?’
Instead of your name, the network assigns you a long string of letters and numbers, an address.
Your real identity has no connection to the address unless you enter your personal information on an exchange or if you use an unprotected IP-address.
With the notebook I can transfer money by writing the amount I wish to transfer and the address of my recipient in the notebook.
This notebook is the blockchain…”