Cryptocurrency for Dummies — A Beginner’s guide to Bitcoin, Blockchain, Mining, NFT & many more…
The general opinion of people on a sensitive topic like cryptocurrencies is highly debatable. Mostly crowded by those who do now know about this legit trend or those who have not invested themselves, are the loudest voices trying to influence people to agree with their way of thinking. However, the reality is that cryptocurrency has taken off globally.
What are the most common Cryptocurrencies?
Among the most common cryptocurrencies on the market, Bitcoin has a market capitalization of 599.6 billion U.S. dollars, followed by Ethereum at 224.3 billion U.S. dollars, and then Dogecoin at 23.6 billion U.S. dollars. From this perspective, this is a higher market value than Visa or Samsung. The explosive growth of cryptocurrency is not only reflected in its market value share. The demand for digital currency is high enough to be resolved in the Anti-Money Laundering Act (AMLA 2020) of 2020. Among other things, AMLA 2020 mandates the respective entities related to cryptocurrencies to comply with BSA registration and pre-established compliance standards.
The visualization of the market share of the top 5 Cryptocurrencies, from 2015–2020 clearly shows us that Bitcoin is certainly the most dominant cryptocurrency in the market. In a study by Market Research expert Raynor de Best, the market distribution has been discussed in detail. Here is the link to the article: https://www.statista.com/statistics/730782/cryptocurrencies-market-capitalization/
How do Cryptocurrencies work?
This how-to guide aims to lay the foundation for building your cryptocurrency knowledge. As its popularity grows and different entrepreneurs create new products, use changes. Simply put, it is a decentralized digital currency designed to be used to buy or sell goods and services. This can range from online stores (called tokens) with a unique form of currency used to purchase goods on the site to non-fungible tokens (NFTs) that are essentially virtual art. Payment is just like any other form of federal currency.
Bitcoin, Ethereum, and Dogecoin are the most common types of cryptocurrencies, and they are usually more like an asset in the “stock market” where investors can buy and sell currencies as their value changes. Another cryptocurrency that everyone pays attention to is Stablecoins such as USDCoin, Tether, and Paxos. This type of cryptocurrency is mainly linked to assets such as federal currency or other non-volatile federal assets (ie gold), so its volatility is lower than that of cryptocurrencies such as Bitcoin.
What is NFT?
Different from Stablecoins and other cryptocurrencies are unique virtual assets traded on the blockchain network, called non-fungible tokens or NFTs. NFT is more like a unique asset, not as easily interchangeable as a physical artwork like a coin, but a unique digital object. They are essentially virtual art, which appreciates and depreciates according to the demand for “artwork”.
NFTs are a new paradise for future art collectors, just as the decentralized financial system (Defi) of the blockchain is the future trading system.
What is Blockchain?
Blockchain (also known as distributed ledger technology) organizes data into ordered “blocks”, which are effectively traded with each other as assets and traded to the current owner of the asset, as well as their complete fingerprints. Set its first block with attribute data, a random number (a randomly generated 32-bit integer) connected to a cryptographic hash (256-bit number).
These data are transparent nodes, ensuring that the transfer of ownership is a smooth process. When the asset is transferred to the new owner, a new block is added and linked to the previous block using the new random number and hash. This effectively creates a true source of ownership of a particular token.
What is Cryptocurrency Mining?
Mining is the act of using computing power to calculate answers to complex mathematical problems to find “golden random numbers” or random numbers generated by accepted hashes. Once found, the miner’s block will be added to the chain, and the miner will receive economic rewards. In addition to mining, there is also re-mining.
Re-mining is the process of editing the blocks that need to be changed, which is very difficult because once a block is changed, all subsequent blocks also need to be changed (because the hashes are superimposed on each other). This fact makes blockchain technology so secure: the creation of a blockchain database allows us to track property chains and transactions over time, thus making the invention of cryptocurrency possible.
The decentralization of this technology is based on the fact that no company or organization has ownership of the blockchain system. The access chain is through nodes. This technology is not only important for cryptocurrency, but also for decentralizing the storage of many different digital assets, including documents, network security (identity management) transactions, and other items shared by multiple people. It can even make the decentralization of the federal currency possible (especially when a stable currency is introduced).
Are Cryptocurrencies regulated by the Government?
The future of transaction management lies in the further decentralization of financial systems on a global scale through distributed ledger technology. It is for this reason that the United States and other countries are considering new regulations on cryptocurrencies. For now, it is not strictly regulated, but as cryptocurrencies become commonplace, we may soon see different stories from lawmakers.
Cryptocurrency innovation As part of the cryptocurrency revolution, many different technology startups have exploded during this period of innovation. Some of the most famous companies are companies that have entered the cryptocurrency service industry. The first type of business is a cryptocurrency exchange. Like stock trading tools, cryptocurrency trading tools enter the market so that people can invest their federal dollars in different types of cryptocurrencies.
The interaction between the two currencies has triggered a debate among anti-money laundering law enforcement officials over the legality of these transactions, but due to the procedures adopted by these cryptocurrency exchanges, tensions have eased. And the newest entrant PayPal/Venmo has taken the task of identity verification into its own hands and relieved some of the pressure on regulated banks. In addition to exchanges, some companies are solving the problem of clearing owner tokens and creating solutions to facilitate access through cryptocurrency ATMs. These services, such as Coinsource, also take security and fraud seriously by conducting knowledge checks on the clients of each service client.
This industry is not only innovating, but also stimulating the economy in terms of creating new businesses. The cryptocurrency industry is so strong at this point that only the top is left. Thomson Reuters Joseph Raczynski predicts that “the value of Bitcoin will exceed US$150,000 in 2050.” As the financial market continues to move towards the digital landscape, and peer-to-peer technology is becoming the new normal, this prediction is very feasible. The combination of powerful technology and smart sports can make this prediction come true, even sooner rather than later.
How motivated are you to invest in Cryptocurrency?
~ Deepansh Pratap