The cryptocurrency market is on a boom, which is beneficial not only for leading currencies like bitcoin and ETH but also for almost every other crypto coin.
A cryptocurrency itself doesn’t have any standard rate or price since it is not regulated by any authority. The value of such a coin depends on the market. This is how the price of cryptocurrencies are determined.
Let’s find how does cryptocurrency gain value?
The main use of a crypto coin is to buy goods and services. So, a coin will be valuable as a unit of exchange. For example, you can purchase 1 gm of gold for 1 coin, and so on.
Cryptocurrencies hold value on behalf of other physical material/things and can be used to store such assets without needing any central bank or authority.
This is the main benefit of the use of cryptocurrencies. They do not require any central bank or person to govern the transactions or accounts of users. This is why they are more secure and easier to manage.
Let’s discuss the things that affect the price of cryptocurrencies or how is the price of a cryptocurrency determined:
Here are some factors that define the price of a cryptocurrency:
Supply and Demand
The number of total tokens released against the demand in the market will significantly affect the price of the coin. For example, if a company decides to release only 100 coins in the market, the coin will naturally have a high price because of the lower supply as compared to the demand.
The more features and secure blockchain a token has, the more complex it will be to mine it and the price will be higher.
The value of cryptocurrencies is largely affected by what people think about it. For instance, when people started taking Bitcoin positively, its price increased and is still increasing. It all depends on whether your coin has the potential to provide any significant value to the public.
Media and Marketing
The promotion of a crypto coin starts way before its actual launch. How much your coin is being talked about in the media, online news sites, press releases, etc, will highly impact its user demand and price.
Apart from the top few cryptocurrencies, almost all others are facing severe market competition leading to dilution of currencies that have no practical utilities. Your coin can survive and gain value only if it has something unique to offer.
Value against Bitcoin
When people first hear about a new cryptocurrency, the first thing they do is compare it to the price of Bitcoin. Bitcoin has become the reference currency for all other cryptocurrencies in the market. The growth (or fall) of bitcoin may therefore also affect the price of your own coin.
Ever since the launch of the very first cryptocurrency, this industry is facing legal battles from everywhere. Most of the governments are unwilling to allow digital currency since they are unregulated. If the government is not on your side, your coin may not gain the value it should have gained otherwise.
Most of the cryptocurrencies in the market are based on the blockchain technology, and it takes a lot of energy to secure and run a blockchain. This energy also adds to the cost of the project and thus determines the value of the coin.
The real value of a crypto coin depends on how much it is usable and for what purposes. A coin that has no real-world applications will not attract many investors. This is why most of the digital currencies today are backed by a range of applications, such as payments, exchange, and investment.
Investors, especially the big ones, have the power to manipulate the price/demand of the new cryptocurrencies. By purchasing a lot of cryptocurrencies and/or promoting good things about them, they can positively affect the prices.
If you are planning to develop a clone to bitcoin or any other popular cryptocurrency, do not expect people to show interest in it. Only if your coin/concept is appealing and innovative enough, it will gain value in the market. See the example of KCH coin. They have developed a token backed by a unique and powerful social media mobile payment app that will actually have real-world applications.
The price and value of a digital token depend largely on the factors mentioned above. Even though the initial price is defined by the launching company, the growth in the rate will depend on the uniqueness and cost-effectiveness of the coin.
During the past several years, the traditional Investment Management (IM) industry has seen rapid changes with the appearance of well-funded fintech companies, the digital tsunami and the shifting of demographics. DCI is one such upcoming finance preferred ecosystem that leverages the digital capabilities in order to provide excellent investment opportunity for the private, retail, and institutional investors. DCI uses advanced technologies like AI, machine learning, and Robo-advisory to offer a complete 360-degree view of the private and institutional portfolio to the users of the ecosystem.
Coming back to traditional investment methods in the IM industry, it is observed that the traditional investment methods like mutual funds and hedge funds do not guarantee an excellent return to investors due to limited investment opportunities and larger capital requirements. In the recent past, investing in mutual funds has also been considered as expensive by IM industry experts that is largely considered as an anachronistic ETF.
In the cryptocurrency space too, the investors are looking to invest in digital crypto funds that offer high returns with minimum market risk. In order to help investors, modern fintech players, such as DCI (Digital Crypto Invest), are planning to provide active portfolio management capabilities in a ready turn-key ecosystem featured by modern technologies such as Artificial Intelligence (A.I)/Robotics.
Despite rapid changes in the IM industry, it is important for the investors (i.e. private, retail and institutional) to obtain proper knowledge regarding the difference between types of funds in terms of risk, return, tax treatment, and investment opportunity.
Here are the category-wise differences between three major funds, which include equity funds, hybrid fund, and debt funds.
When it comes to investment risk, the equity funds come on top with a high-risk rating in comparison to debt and hybrid funds. Equity funds are the ones that primarily invest in stocks. In equity funds also, the risk varies in sub-categories. For instance, mid-cap and small-cap are riskier than the diversified large-cap funds.
The lowest risk credit in the equity category goes to index funds, which passively tracks the index. On the other hand, in the debt category, the risk rating is mainly determined by maturity and credit quality. Debt funds primarily invest in different securities like Treasury bills. High maturity generally incurs high risk in debt funds. Lastly, in the hybrid category (debt and equity both), the riskiest category is the balanced funds as it has a greater than 50% exposure to equity.
In obvious terms, it can be simply stated that the returns expected on each type of fund are generally proportional to the risk taken by the investor. One thing that affects this relationship between risk and return is Total Expense Ratio (TER). TER, in simple terms, can be defined as the total cost that incurs to the investor for managing and operating any fund like a mutual fund.
The level of TER varies with active management of funds by the investor. Talking about three different funds, the closely ended and liquid funds have a low TER in debt category, whereas in the equity category, diversified and sectoral funds have high TER and high expense ratio. In the hybrid category, arbitrage funds are largely passive in nature, hence have low TER, whereas the balanced funds have high TER close of 2.5 percent.
Apart from TER, the choice between regular and direct plan also affects the NAV to investors, and as a result, overall return also gets affected.
Keeping this in mind low TER would be the best choice for investors to have a high return in the alpha markets.
Talking about taxation, there are broadly two categories, dividends and capital gains, on which taxation scheme of things gets imposed. In the case of dividends, the capital earned is tax-free and is directly handed to investors in case of debt, equity, and balanced funds. However, the Dividend Distribution Tax (DDT) generally varies in each category. For equity, DDT is 10%, whereas the debt category has a much higher DDT of 25%.
In a period of less than 5 years, the global financial market experienced a sudden rise and fall of a an unique trend. ICO, Initial Coin Offering emerged as a trend raising considerable amount of funds in public sphere. Although backed by a technology not popular among masses, ICOs were successful to gain good consideration as an investment opportunity. Ethereum was the first successful ICO raising bitcoins equal to US dollar 2.3 million back in 2014. Starting with Ethereum’s success, ICO became a bandwagon for businesses and enterprises reaching incredible peaks in terms of fundraising. Until January 2018, Filecoin was the ICO with highest grossing funds backed with token sales worth US dollars 257 million.
However, within a year of this bullish trend, by 2019, now ICO reduced itself to a failed buzzword. Although the trend of failing ICOs was quite rampant in the beginning of 2018 as well, the recent market fell to a state that it does hesitate to align ICOs with words such as ‘RIP’ and ‘90% ICOs are failing’. Citing ICOs as a bubble, there were strong criticisms indicating it as a mechanism of scams. This happened because either most of mushrooming ICOs were not backed with adequate technology to support their claims, or they prioritised the objective of rising public fund rather than adding value as a problem solving mechanism. A major reason to this is also the approach of ICO enterprises to align themselves with IPOs.
ICOs are based on crypto tokens and currencies. They are not merely shares with a purpose of rendering profit to shareholders. Most ICOs fail ignoring this fact. While, tokens and ICOs with a purpose of utility are still with much relevance in the market. For instance, tokens like Ripple, IOTA, Steller are serving strong purposes in several industries.
This is where the concept of ICOs is gradually beginning to transform to STOs, the security tokens. A Security token may not be similar to Utility tokens like Stellar or IOTA, they are based on credible securities, bonds, revenue or even tangible assets belonging to the ICO. More importantly, it hits the bullseye solving the most important lacuna related to ICOs, Regulatory Compliances. Since, STOs are based on securities, it is under direct purview of licensing and security compliance authorities.
STOs are gaining a good traction in the financial market for its credibility. There are two primary reasons for this. First, the underlying mechanism behind a security tokens is simply the smart contract which ensures the proportional relation of its value to the value of the asset or securities it is connected to. Thus, they are transparent and simple compared to ICOs, which often require massive information to convince investors with wordy whitepapers and technology jargons. STOs are comparable to cryptographically secured digital representation of share or revenue of the promoter enterprise.
Second, STOs are under the ambit and scrutiny of state laws and regulatory bodies. The technology mechanism behind Security Tokens must align with the security laws and regulations of the state or the country of its origin. Thus, it naturally increases its credibility as an investment avenue.
STO is the connection between SEC and Cryptocurrencies. It provides a legally authorised identity to crypto tokens. From investment perspective, STO is comparable to digital representation of stocks and shares. There is a strong probability of their official adoption across the globe, as digital currency became an irreplaceable development in finance.
As an ICO adviser, I often come across several queries associated with Initial Coin Offering. More ICO projects come into light every day, and many people with no knowledge about ICO are entering into this field. The people are taking interests in it, as media have reported that funding in Initial Coin Offering is high.
As I have mentioned that people with no idea on ICO are attracted to it, so I want to brush up your basic knowledge about it before going ahead on the topic.
What is ICO?
ICO or Initial Coin Offering is a platform for raising funds. In this mechanism, new projects vend their original crypto tokens in a transfer of Ether or Bitcoin. It is very similar to IPO (Initial Public Offering) in which people buy shares of an organization.
In spite of being a relatively new phenomenon, it has fastly become a prevalent topic of discussion in the community of Blockchain. Many of the people take ICO projects as unfettered securities, as these projects permit project owners to raise a low amount of money. On the other hand, several others take it as an innovative way to fund a venture.
What is Blockchain?
Blockchain is a distributed and decentralized ledger. By using this technology, every transaction is recorded. Without approval from stakeholders/creator, no one can alter data. Being transparent, secure, and safe, this technology has gained enormous popularity in the finance sector. Businesses of several different industries are working on this technology to make it better for their business operations.
What is White Paper?
As a document, WP or White Paper supports your probable customers take a favorable decision in favor of a particular product/service or your organization. If it fails to help clients in making a favorable decision, it might not be a WP. In layman words, it is something amid a marketing brochure and an article. Apart from containing useful information, a White Paper leads to a list of facts to encourage customers to buy a product/service.
Now, I come back to the topic – ICO Myths. I am going to mention the five most common myths:
1. Starting an ICO is effortless – False
No, it’s completely false. You need to do your homework first before going out for raising funds. Having a well-brought-up white paper is just beginning. Most of the ICOs underestimate legal aspects that are significant. And the legal issues are pricey. Be ready for a considerable war chest, as the cash flow is going to be outlandish for you. Have the patience you can, as starting an ICO would be a long journey for you. It might take even more than one year.
2. Setting up money for an ICO is easy – Totally False
Rising funds/money for ICO is not like a Cakewalk. Investors in today’s world think a lot before making any investment. It is, as several investors have lost their money or many ICOs are Yet to Perform. The investors have become more conscious in selecting projects, and you need to follow them a lot to draw a little form of attention. You need to have an in-depth idea about the crypto community and find out the right people who can be your cash resource. It is very different from a park walk.
3. Every whitepaper is factually correct – Not True
In a white paper, it is easy to find out fraudulent or incorrect assertions. However, it would be harder to notice factually wrong data. TRON sets a unique instance in this sense. It had plagiarism. However, it showed it was licit, leading to a diminishing to the industry credibility.
4. The success of ICO is guaranteed – Success ratio is half.
There is no guarantee of success. While investing in an ICO, you need to be very careful. According to Sodium Capital, approximately half of ICOs have got failed. However, around 1400 ICOs got published in the first three months of 2018. It means it is clear here that one in two people can trust you and they can invest in your project. You need to be very careful whether you are launching an ICO project or going to invest in it.
5. Every listing site is the same – Not True
On the Internet, you can come across a large number of ICO websites. Keep in mind all of them are not the same and useful. Some of those sites only list the projects while some go beyond listing and offer all associated information to investors. Ensure to go through reviews if you are checking an ICO site. Going through those reviews can support you comprehend how such a website analyze a project before listing it.
Besides the common myths mentioned above, I want to state some other myths to help you be aware of the project you will launch or invest. Here are some other myths:
Advisors Support You – It is also a myth. No one advises you at free of cost. You can google to avail the most of advisors’ knowledge. For ensuring your success, you need to find the right advisor who can give you real insight and support you. 90% of advisors claiming to be a super advisor join for a selfish reason. Before going ahead, talk to a lot of people and ask them for their commitments to your ICO project.
You can hand over the ICO leadership – It would be a big mistake if you trust your experienced friend to run your ICO project. I am saying this, as your friend can find a way for his benefit. You must avoid putting your plan in the hands of strangers.
Pitching ICO support you raise money – It may / may not help you. Here one thing is sure that it is highly expensive. Throwing your ICO for 5-10 minutes at a conference can cost you 5000- 1000 US dollars. Other guys would be waiting to present their pitches just after you and can kick you out. I know many organizers might promise you about the presence of hundreds of investors. You need to be very careful and do not get trapped in their promises. Schedule personal meetings with some of the interested investors. It can help you a lot in raising money.
Customers are ready to buy your ICO – It is very tricky. In general, the crypto community, professional investors and businesses bring ICO tokens. Around 90% of these are not the customers of your super platform. They just trade with your tokens and consider how fast you would be placed on exchanges. You need to get your customers, and you should have a solid plan for it.
Tokens and coins are same – Several people consider both tokens and coins as same. They use these both terms interchangeably. In fact, these two terms are different. You need to comprehend the fundamental differences between them if you are going to invest in it or launch an ICO. A token has more than one function and saves an array of value levels. On the other hand, a coin is one utility and saves only one level of value.
In brief, you have to be very careful whether you are going to launch your own ICO or to invest in one. For launching your ICO, you need to create a product, build a token, take legal advice, draft your white paper, create a community and place your token out for exchanges. Take these all steps very carefully.
Nowadays cryptocurrency has created a buzz all over the world. For those who dont know about cryptocurrency, cryptocurrency is nothing but a digital or virtual currency developed to work as a medium of exchange.
What can you do with cryptocurrency
Few years ago it is difficult to find merchants who accepts cryptocurrencies as there were only very few merchants. But nowadays the situation is completely totally different as there are number of merchants accepts cryptocurrency as a mode of payment both online and offline. Though bitcoin is the foremost cryptocurrency used as a mode of payment and for other transactions, other digital currencies like Litecoin, Ripple and Ethereum too widely accepted by many.
With the drastic growth of cryptocurrencies, it becomes one of the most trending investment opportunity. As many have already invested in the cryptocurrency business, still many people wants to step in to the cryptocurrency industry.
Though many already make big money through cryptocurrencies, one must be aware that risk associated with cryptocurrencies are high as their market value fluctuates. Moreover, it is not legal in many countries so there is also a risk of them getting outlawed.
So you should have the deep knowledge about various cryptocurrencies and cryptocurrency industry to avoid any loss of money. If you decide to invest in cryptocurrencies, Bitcoin must be your first choice as it is the dominant one. Just like any other businesses, you need to pay close attention to the cryptocurrency market value and to the news related to cryptocurrency industry. You should keep tracking the details like price, volume, market cap and many more of most existing cryptocurrencies.
Most common cryptocurrencies
Cryptocurrency mining is the process used to verify transactions and to add to the block chain. Additionaly, new cryptocurrencies are produced using a mining system mining process. Nowadays there are many bitcoin development companies which helps you in bitcoin development and mining process.
With the sheaf of disparate startups coming up to light, it’s getting tougher to detect the genuine ones. Jason Cohen had once quoted, “It’s more effective to do something valuable than to hope a logo or name will say it for you.” Hence, we cannot judge or comment upon a company’s progress solely depending upon its hype or revenue generation.
To know where a company stands, it’s necessary to take into account a bunch of other offbeat factors furthermore. The funding, business model, ideas, team, and timing are the factors which hold a potential to make the startup revolutionize a marketplace thereby leaving a lasting impact. The investors need to make sure they are investing in experience. They need to find people smarter than themselves.
A startup that is comfortable with any kind of change and has all its hands on the deck to execute its vision is more or less unfeigned. There are many Initial Coin Offerings going on in the market today. Only a quarter of the ongoing year is left, so let’s quickly have a look at the funds already raised by the ICOs of 2019.
Image credits: Crowd Fund Insider
Research credits: ICO Data
It’s quite hapless to note the wretched state of the ICOs this year. As we can see from the monthly-recorded chart above, the funds raised by the ICOs have declined from about $1.423 billion in January 2018 to approximately $533 million in April 2018.
The Assumed Why
Talking of the most successful ICOs, there are startups to have raised over billions in a minute! That is how crazy the world of ICOs is. There is no doubt that ICOs have changed the financial landscape over the past 2 years.
However, these farcical success booms have just made us look over the facts through a rose-tinted glass. Factually understating, about 99% of the ICOs taking place, tend to fail. Last December, the value of bitcoins soared to 20,000 USD, following which the price was dropped by 70% in the initial months of 2018.
The Greater Fool Theory economically states that the price of an object increases not because of the value that it brings in but because of the irrational beliefs attached to it. Applying the same to ICOs, you have a bunch of decentralized applications and currencies coming up which are bringing in nothing new to the ecosystem.
However, because they have been hyped up so much and there are so many ignorant investors around, their value increases anyway, and furthermore, the tokens face inflation. The reason why most ICOs fail is that most developers/entrepreneurs do not pay any attention to the three pillars that make an ICO:
ICO Data also says, “In most cases, the tokens or coins being sold are for platforms and businesses that are yet to be fully built, or even worse, exist only as an idea.”
The entry of Altcoins
Back in December 2017, the value of bitcoins soaring to a 20,000 USD, led to a steep drop in its price by 70% which affected the initial months of 2018. As a result, a lot of altcoins started being issued through the ICOs.
Although altcoins or alternative coins resemble Bitcoin in the way they’re designed, most of them serve a different purpose than just being a financial tool. The vast majority of altcoins doesn’t do anything special at all as they just try to mimic a Bitcoin with little tweaks. Some, on the other hand, has been designed with a purpose of becoming a worldwide computer and can be used as a platform for building decentralized applications.
Many critics have contended that these altcoins can be easily manipulated on exchanges as they are created in a small supply at the beginning of the ICOs. This manipulation is generally done by the founders who entrusted to the pre-ICO period or by the early eminent buyers.
Ultimately when the coins hit the exchanges, the founders and other early investors are known to have blatantly washed the traded the tokens back and forth between themselves under minimal regulations, thereby kicking off a pump to create an illusion of demand for the coins. Some founders can easily disburse the funds raised in ICOs on some hype-creating campaigns instead of on the actual product development.
Coin founders build the social media hype before releasing the coins onto exchanges. Many ICOs state that the startup holds zero obligations to its investors. VitalikButerin, the inventor of the most used altcoinEthereum, proposed an improved model of ICOs in January called the DAICOs. DAICO models enshrine greater investor involvement, a gradual release of investor funds to companies and powerful voting rights.
Unfortunately, scarcely some companies have opted to do DAICOs in place of ICOs. Numerous experienced cryptocurrency influencers are trying to make more companies adopt this new model. This might help overcome the already discussed wretched state of the ICOs.
Kevin Roose has quoted the following in New York Times to reveal his opinion about the operation of ICOs:
“If you’re having trouble picturing it: Imagine that a friend is building a casino and asks you to invest. In exchange, you get chips that can be used at the casino’s tables once it’s finished. Now imagine that the value of the chips isn’t fixed, and will instead fluctuate depending on the popularity of the casino, the number of other gamblers and the regulatory environment for casinos.
Oh, and instead of a friend, imagine it’s a stranger on the internet who might be using a fake name, who might not actually know how to build a casino, and whom you probably can’t sue for fraud if he steals your money and uses it to buy a Porsche instead. That’s an ICO.”
Cost goes before the profit. A wise man once said, “The rich invest in time, the poor invest in money”. Take time if required. But never fail to choose the right ICO to invest on.
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Even though cryptocurrencies are still catching on slowly, they have been around for quite a long time. For more than a decade, these digital currencies have been used for various kinds of financial transactions and are still being used.
There are different types of cryptocurrencies in the market, all with different values, made by very different firms and run on different frameworks. Typically, they all run on blockchain technology but the two largest assets in the market which are Bitcoin and Ether, run on their own different chains.
However, it’s important to note that just like cryptocurrency is just one use of blockchain technology, Ethereum is more than just a cryptocurrency.
Ethereum is a major distributed and public blockchain network. The Ethereum blockchain allows decentralized applications (dApps) to be built on it and primarily focuses on running code for these apps. The token used within the Ethereum network is known as Ether and its creation process is a bit different from that of Bitcoin.
The Ethereum blockchain is also different because it gives developers the freewill to do pretty much anything they want because even though most blockchains are considerably limited, the Ethereum chain isn’t. This means that developers can go above and beyond, building a gazillion and one apps as they see fit.
Publicly, the Ethereum journey began in November of 2013 when Russian–Canadian writer and programmer, Vitalik Buterin, first published the Ethereum whitepaper. About two months after that, the official development of the network was announced and the initial team included Vitalik Buterin, Charles Hoskinson, Anthony Di Iorio and Mihai Alisie. This began a process of development and also an ICO which ended in August 2014 and successfully raised $18.4 million.
Before Ethereum was developed, there were significant limitations to the usage of blockchain applications. A good example is the Bitcoin blockchain that was initially developed for Bitcoin to strictly be a peer-to-peer cryptocurrency. This was a huge problem for most developers at the time because there was a lot more that they wanted to do. The two options available, starting with the most tedious and less time-effective one was to find a way to develop and expand the Bitcoin network so it could accommodate a lot more. The other option was to create a whole new blockchain that will be a lot less limited than its predecessors. This option was quickly picked up by Vitalik Buterin and the development for Ethereum began.
“I thought [they] weren’t approaching the problem in the right way. I thought they were going after individual applications; they were trying to kind of explicitly support each [use case] in a sort of Swiss Army knife protocol.”
This is a software built on the Ethereum network and which solved a lot of problems. Basically, EVM allows any developer to easily create any run any program they want, without having to worry about the programming language used. The EVM also simplified the process of creating applications and made it even more effective and efficient. So, there was no longer any need for a new blockchain to be built as this solution allowed as many development projects as possible, be built on the same network.
The process of producing Ether is a bit different from how Bitcoin is mined on the Bitcoin blockchain. On the Ethereum blockchain, miners do work to earn Ether instead of exactly mining for it. Ether, serves on its own, as a kind of fuel for the Ethereum network. Ether is also generally what is used by developers who create applications on the network a payment for charges and services.
Apart from Ether, there is another type of token that is used on the Ethereum network. This token is called Gas and it is used as payment for miners. When an Ether transaction is initiated, a gas fee is set along with it which is basically a fee paid to the miners so that they can include that particular transaction on that block, for the blockchain. The higher the gas set for an Ether transaction the faster the transaction is executed and then completed.
One major use of Ethereum is its ability to easily build decentralized applications. Shortened as dApps, these apps all serve different purposes but their decentralized nature means that they are not exactly controlled by any one individual, institution or entity. The decentralised nature of these apps help increase the amount of trust it garners because people know that because they are on the network and are public, they are not easily manipulated.
Another use is the creation of a Decentralized Autonomous Organization (DAO). These organizations are basically run by a programming code and built on the Ethereum network. Also their decentralized nature means there isn’t any one leader and so no one is in control. DAOs have tokens and these organisations are jointly owned by anyone who purchases these tokens.
Tolu is a cryptocurrency and blockchain enthusiast. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover. Contact: Tolu.Ajiboye [at] zycrypto.com
Over the years, many people have noticed that the idea of money, as we know it today, has quite a few inherent flaws. There are too many limitations to it and too many different governmental bodies all over the world controlling its creation, value and also regulating its usage and movement.
The average person has to jump through hoops of a million different shapes and sizes to successfully send funds across international borders. This is because of all the regulations that govern financial transactions either individually in a country, or internationally as a region. There has always been a great need to solve this problem to ease cross-border payments, whether they are for the business of personal. One major solution to this is cryptocurrency.
Bitcoin is the first decentralized cryptocurrency ever developed. It is a form of electronic cash or digital money that is completely deregulated without any sole administrator or central bank. Bitcoin can be sent directly from one user to another completely without any interference or required middlemen.
It was created sometime in 2009 by a person or a group of persons known as Satoshi Nakamoto. Even though the asset is about a decade old, the identity or identities of Satoshi is still unknown. A few people have come out with claims that they are the real Satoshi but most of their claims have been debunked.
Bitcoin (and all other cryptocurrencies) currently require a public, distributed ledger to function. This ledger is called a blockchain and records of all confirmed transactions can be found on a blockchain. Basically, every kind of Bitcoin transaction ever carried out is powered by the Bitcoin blockchain and is recorded, unalterable and irreversible. This presents a level of security that was hitherto unavailable with traditional transactions. The blockchain is a tightly run technology created with very strong cryptography.
A Bitcoin wallet is simply a digital, virtual wallet that holds your bitcoin. All other cryptocurrencies also have wallets and these wallets are created specifically to hold the crypto. A Bitcoin wallet always has an address and this address is what is used to send or receive Bitcoin. A Bitcoin address is usually a long set of characters including numbers and letters and just as no two people can have the same traditional account number with a bank, no two Bitcoin wallets can have the exact same address.
One of the most fantastic reasons for the use of Bitcoin or any other crypto is the level of autonomy it offers. The biggest problem with regular and traditional legal tender is how much trust is required for the system to run properly. This leaves it open, expensive and most of all, very prone to exploitation. Bitcoin easily solves this problem because not only can all transactions be verified, it’s impossible to make counterfeits on the blockchain due to its decentralization.
As stated earlier, every Bitcoin transaction gets recorded in the blockchain. Because of the security requirements for the blockchain, every Bitcoin wallet must have a secret signature called a private key. This private key is used to sign each transaction as a way of showing precise proof that the transaction was actually originated from the wallet’s real owner.
Mining is a complex decentralized computational process that basically fulfils two needs.
The process of mining, unlike before, can now only be done with very specific and powerful computers and there are millions of miners all over the world who are constantly doing this at any given point in time.
It’s very important to note here that only 21 million Bitcoins will ever be mined. The only solution for this is to change the protocol of the Bitcoin blockchain. This protocol was done to control how much Bitcoin is produced to keep it valuable but it is now thought that when that peak is reached, a lot of problems, especially with scaling, may now rear its head.
Until something about the Bitcoin protocol is hanged, mining of new coins will stop after 21 million Bitcoins have been mined.
Tolu is a cryptocurrency and blockchain enthusiast. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover. Contact: Tolu.Ajiboye [at] zycrypto.com