I have been researching about cryptocurrency lately and will direct you to some interesting links at the end of this post, some surprisingly too good to be true! This post could serve as an FAQ for those who have just started getting fascinated by this new asset class.
I would first like to start off by explaining the meaning of a block chain. A block chain is a database stored over a peer to peer network as blocks with each block containing data about all the transactions that take place over the network. There is no central authority to maintain the records of the transactions! These records are called ledgers. It is completely decentralized because it is maintained by different computers in the peer to peer network.
An analogy would be you and 3 other friends are playing a game and all of you maintain a copy of each others’ score and not have a separate person such as a match referee (central authority) to maintain a score card for all of you. Assuming all of you record the score correctly it would be very hard for someone to change the score as the modified score would have to be verified with the others’ score and can easily be caught. This way it is really hard for anyone to cheat.
Bitcoin was one of the first cryptocurrencies introduced to the world by a person or a group of people (or a robot?) having a pseudonym Satoshi Nakamoto after the 2008 financial disaster. Many of the important reasons include the removal of middle men in order to directly connect the buyer to the seller, to keep currency almost inflation free (simply by keeping the number of Bitcoins fixed ), to have a decentralized network of all the transactions , and to give people access to their hard earned money at any point in time and not only when banks want to. Since, Bitcoins are exchanged all the time over the network someone has to maintain a ledger for the transactions. These are the guys referred to as Miners and just maintaining the transactions over the network is called mining! Since lots of people, over a geographically widespread network, participate to maintain a copy of all the transactions, a record of all the transactions is stored as blocks with everyone. A block is just a record of transactions. Every block has a fixed size and once a block is filled a new block of data is generated. This way all the data is stored as a chain of blocks, a block chain! Now, security is a concern as anyone can tamper with the data. So, miners run hashing algorithms using exceptionally high computing power on a block, every time one is created, in order to encrypt the data and in turn get paid by the system (per the bitcoin protocol) , in bitcoins, for doing so. There are a total of 21 million bitcoins and is estimated that the last bitcoin(s) will be mined in 2040.
Bitcoin has become legal in countries such as Korea, Japan,Germany etc. and lots of new bitcoin exchanges are being opened in many of these countries at an extraordinary pace.
Anyone can buy bitcoins here: https://www.bitcoin.com/buy-bitcoin and store them in a wallet available for you to choose: https://www.weusecoins.com/en/find-the-best-bitcoin-wallet/. The smallest unit of Bitcoin is called Satoshi and 1 Satoshi is 0.00000001 Bitcoins. You can check the price of a bitcoin here: http://www.coindesk.com/price/
As with any internet transaction, it is very important that you don’t forget your bitcoin wallet address and have it stored safely. You can mine bitcoins, ether(another cryptocurrency) using cloud mining services such as https://www.genesis-mining.com/ etc. Do use the the following referral code : sXkOlV if you are planning to open an account on genesis mining. You will get a 3% discount by using the above mentioned code!
The advantage of cloud mining is that there is no particular hardware and software setup required from your end because everything (from hardware to software) is taken care by the cloud service.
As promised at the beginning of this post, here are a few links for you to check out and win free bitcoins:
Here is a link for you to get a glimpse into what some famous personalities think about bitcoin:
Some other popular cryptocurrencies which are worth checking out are:
- Ether
- Litecoin
- Dash
- Monero
All of the cryptocurrencies are in their experimental phase. I don’t promote or support any particular cryptocurrency. However, I am pretty bullish about Bitcoin and Ether, particularly.
Pramod Prakash 