tl;dr: crypto is going to run the world one day by giving the power back to the people.
Everyone likes money, right? Just ask Naval Ravikant, a billionaire investor and the co-founder of AngelList. He published 36 tweets on cryptocurrency that absolutely will blow your mind.
In a nutshell, they describe how in the past, currency used to be controlled by a small group of powerful people. These powerful people could force others to do their will through monopolizing the method of payment which was received. Flash forward to 2020 and now we have crypto. Instead of being controlled by this small group of people, it is decentralized, meaning that the zero sum game of monetary influence is completely eliminated. Instead, what happens is that everyone receives responsibility for their own currency. Everyone is responsible for collectively working towards making the community a better place. In crypto, because of the record keeping system of virtual coins, each individual is able to be held accountable for their own actions. In other words, cryptocurrency opens up the door for pure monetary meritocracy.
This is really exciting! Not only does it ensure that there is more fairness in distributing money, it also keeps the crooks and thieves at bay. We all want a more efficient, more just system of trading assets, and crypto is the perfect solution to do this.
😯 What is cryptocurrency?
Cryptocurrency is a virtual currency designed to work as a medium of exchange. Each piece of currency is an entry in a database that cannot be changed unless specific conditions are met. It didn’t get big until 2009, when an anonymous person or group going by the alias of “Satoshi Nakamoto” introduced Bitcoin. Wary of banks after the financial crash that rocked the world, individuals started flocking in droves to Bitcoin with its promise of no central authority overseeing the exchange of assets. The cryptocurrency’s success elevated digital money to a level it had never achieved before.
🤔 How does it work?
Payment methods commonly struggle with double-spending, a phenomenon that occurs when users spend the same amount twice. In the real world, double-spending is equivalent to counterfeiting cash. This traditionally used to be regulated by a central authority keeping records on paper of all transactions. The Blockchain abolishes the need for a central authority. It is a public collection of all transactions available for any user to see. Each transaction is a file consisting of the sender’s and recipient’s wallet addresses (also called public keys), as well as the amount of currency sent. In order to confirm the transaction, all the sender needs to do is sign off with their private key. Blockchain requires both parties to consent to the exchange, thus creating an easy but secure way to transfer assets without the need for a bank.
🤷 How do you create new Bitcoins?
By mining of course. Well, how do you mine? Good question. Essentially, you are solving a complex computational puzzle and if you’re successful, you get rewarded with new bitcoins. Mining is important to keep up the ledger of transactions upon which bitcoin is based. It makes transactions secure. Gradually, algorithms developed to become more and more complex as the puzzles became more difficult. The “block reward” is the amount of bitcoin that is rewarded with each new mined block. Every 4 years, it is halved with 210,000 blocks. On May 11, 2020, Bitcoin changed its block reward from 12.5 to 6.25. At this pace, halving will be obsolete by the year 2140, when all 21 million bitcoins that were originally released by Satoshi Nakamoto will have been mined. Only then will miners be rewarded with fees for processing user transactions. These fees are projected to rise as more users jump on the cryptocurrency train and exchange assets across the blockchain. Since there will still be an incentive to mine, the network will keep growing.
🔥 What stuff can you buy?
Today, cryptocurrency can be used to buy almost anything. Many stores, ranging from the well known Overstock to small restaurants, accept Bitcoin as a form of payment. You can even buy a college degree using Bitcoin. Although cryptocurrency’s reach is limited as of now, it will surely grow to become the primary mode of exchanging assets in the future!
👉 Top 2 most common types
While Bitcoin is the most common type of cryptocurrency, Ethereum comes in at a close second. It’s a decentralized software platform used to build applications without the interference of third parties. As of January 2020, Ethereum’s value was 1/10 the size of Bitcoin’s.
💰 Where can you trade?
Ready to make some profit? Great! There are two types of places where you can trade cryptocurrency: centralized and decentralized exchange. Centralized exchange is when a private company offers a platform to trade cryptocurrency. They require the user to register their personal information. While they have high volumes and liquidity, if a server were to be hacked, user information could easily be compromised. Not only that, the currency is stored in their pockets, not yours. For this reason, it is quite ironic that centralized exchange has become the most popular option out of the two for crypto traders. Examples of platforms which use centralized exchange include Coinbase, Binance, Kraken, and Gemini.
The second option is decentralized exchange. Here, there is a server controlled by multiple computers spread out across different locations. As a result, if one computer is down, the server won’t be affected since the rest of the computers will keep it up and running. Another key feature that distinguishes decentralized exchange is that there is virtually no form of identification. Since no centralized body of people is consistently maintaining the system, it is close to impossible for governments to track who uses the platform. Examples of platforms which use decentralized exchange include AirSwap, Bisq, and DDEX.
What Can You Buy With Bitcoin? [5 Places You can Spend Today]
In this guide, we will explore all the things you can buy with Bitcoin you've been hodling for so long! With the…
Meet the Author
Hello! My name is Amanda and I’m a 16 year old junior in high school who’s currently exploring cryptocurrency. In my free time, I’m learning paper trading with the end goal of learning how to invest in the stock market. Fintech, advanced travel, and space technology all interest me, which I’m exploring at a program for future innovators called The Knowledge Society.
If you would like to reach out to me, you can message me right here on LinkedIn. Cheers!