In this article, we shall study the very basics of cryptocurrency and what it is all about for beginners. There are so many pages on the net explaining how this trading method and its affiliated industries came to life. That is not our aim, as we focus on informative and essential aspects of this trading method, hoping that it can be used as a head start for beginners. We try to realize this aim through a short read and pointing out the topic’s main essential concepts.
As its name suggests, cryptocurrency is a form of digital currency that secures its associated with transactions based on cryptography principles. The basic idea of bitcoin or cryptocurrency was a trading methodology independent of a central bank or government in charge of transactions. The power is thus distributed among community members. This creates a distributed ledger that controls the monetary policies in the community, called a blockchain. Blockchains contain a chain of blocks consisting of the transactions’ information. All transactions made should obey a set of rules, and shall be verified by the relevant blockchain stakeholders. A small part of the fee paid for each requested transaction shall be spent on maintaining the security of the block. Then all the transactions are put into a block, verified by a miner, on the bitcoin blockchain which completes the transaction. This way, users can transfer cryptocurrency with low fees to anyone, anywhere. This is actually one of the most attractive aspects of working with cryptocurrency for companies and traders. Without any local rules applying to users’ wealth, they can transfer or spend their money. Investment in high-tech/tech industries and startups, purchasing specific goods such as house furniture, and travel services are among the business working with cryptocurrencies. This is how transactions become valuable: whatever agreed on for transactions to be performed upon is valuable. This is the main reason why banknotes or stock market shares are valuable too.
As mentioned above, the transactions are verified by a miner. Miners encrypt the transactions block by block into blockchains by solving complex mathematical problems. This will verify the transaction in the blockchain, and the first person who can solve the problem shall be awarded for performing this process called mining. The verification carried out is taken into account as a mining service. Securing the blockchain this way is called proof of work. Large industries implementing cutting-edge technologies aim large numbers of mining every day in order to earn profit from this relatively new IT market.
Cryptocurrency is thriving as the currency of some countries are experiencing fluctuations. Earning money and making transactions in a secure and fast way for low fees envision a bright future for cryptocurrency, and introduces one of the safest candidates for taking over the future markets. Another huge benefit of working in cryptocurrency instead of cash and known currencies is its easy transportation – as it is in form of the information – while the encoded information is extremely difficult to crack or modify. The volatility of businesses and stock markets these days can be very annoying for investors, while volatility is considered an opportunity for investors since tracking the information is way faster than shares and markets.