Part 2 – Learn About CryptoCurrency or Digital Currency in Detail
How does mining cryptocurrency work?
How are new coins created?
We know that one of the main differences between regular currency and cryptocurrency is that (i.e. Bitcoin) has no overseeing body like the Federal Reserve to release new currency whenever the market demands or requires it. In the world of Bitcoin, new coins are released on as steady and predictable rate. This rate started with 50 new bitcoins every hour and is halved until the around the year 2140 when there will be no more bitcoins released. By then, all the 21 million bitcoins that ever will be created will be in circulation.
Understand Mining as verification
Mining cryptocurrency is a bit misleading because most of the work that is being done is to verify what transaction has taken place within the network and then add them to the ledger. Therefore, to understand mining better, it might be more simple to think of it as just verifications of transactions.
Who can mine?
From the beginning, when the competition for these crypto currencies was not very high, you could actually mine the coins with only your own hardware at home. You could take your home computer and just connect yourself to one of the mining pools where you would be able to get a share of the profit that was made from the collective of miners. While competition grew it became harder and harder to mine and the mathematical equations that were solved in these processes became too high for personal computers to solve. Then the development of specialized hardware started to come to the market that was specialized in mining crypto currencies. Nowadays there are mostly companies or big players in the game of mining crypto currency and even though if you still see smaller players in the field the big players or collectives are definitely in the majority.
Should I start to mine?
While everyone joining the network to mine it makes it a safer network there are not many financial reasons to start mining. This is now an extremely competitive market and if you are not a big player with a lot of financial capital to make a big investment in gear, you will probably not see even a return on your investment. So, there are good moral reasons to join or just as a hobby if you feel like you would like to be part of something.
What is a 51 Percent Attack?
If you have been dabbling in the world of cryptocurrency for any length of time, you may have heard about a 51 percent attack. If you are wondering what a 51 percent attack is, what powers the attacker would have, and what he would not be able to do, you will find the answers here.
To understand it you first have to understand a little bit about how mining and transactions within a crypto currency based on cryptography and the blockchain technology work. Let’s take Bitcoin as an example. Bitcoin relies on a data structure called a blockchain, this is a type of digital logbook of all of the transactions that have occurred in the Bitcoin system and mining is a process that builds the blockchain by controlling and verifying all the transactions that are happening around the world. Individuals solve difficult mathematical equations, and the first person to solve the equation gets to add a block to the blockchain and receive a reward in bitcoins. A new block is added to the block chain when a majority of the mining network accepts it and adds it to their own copy of the blockchain and the miners in the network is given the power to accept the transactions based on their computing power. The more power you are using to verify a block, the more is your vote counted. Therefore a 51 percent attack is a theoretical situation that would develop if a single individual or entity gains 51% or more of the mining power. This person or entity could, therefore, decide what transactions they would verify and what to deny, effectively making the value of Bitcoin being a consensus based currency, invalid.
Power of the Attacker
The immediate result of a 51 percent attack would be panic and mayhem. However, the power of the attacker is limited.
First, that attacker would be able to manipulate the blockchain at will by preventing transactions and reversing transactions. This could result in “double spend attacks” where the attacker would spend the currency and then reverse the transaction later. The attacker would also be able to prevent miners from finding blocks by not accepting them and adding them to the blockchain. This would allow the attacker to claim 100 percent of the mining rewards.
While it seems like an attacker might have a lot of power, in reality, their power is severely limited. It is important to note, that the attacker cannot reverse transactions from a long time ago. The transactions have to be recent. The attacker is not able to create coins, and they also cannot steal coins from someone else’s wallet.
In the event of a 51 percent attack, the attacker would be amiss to undermine the system too much because by doing so would decrease the value of the crypto currency dramatically. Therefore someone who had invested such a huge investment to actually get 51 percent of the mining power would, from a financial perspective, be much more well of just mining the currency and reap the rewards.
Does Cryptocurrency have an intrinsic value?
Since its conception and subsequent expanding market, there has been one big issue with cryptocurrencies. How can they be valued? Do they hold any intrinsic value whatsoever? Of course, that is not the only issue surrounding them but it is certainly one of the biggest questions asked and also one of the most important ones to create an opinion about if you are thinking about investing in these types of assets. A cryptocurrency only has value in its exchange – it has no inherent value – this is precisely the same as with a “conventional” currency. A dollar is only actually worth what someone is willing to give you in exchange for that dollar. If everywhere were to stop accepting the dollar it would become worthless. This is precisely how the financial market works.
Cryptocurrency, just like the dollar, is only worth what someone will exchange for it. There is no Federal Reserve to issue new digital currency, theoretically making it more stable. Bitcoin, for example, releases more of its cryptocurrency each year but the exact amount decreases proportionally year on year; the Federal reserve reissues in a reactionary fashion whenever it so chooses. Thus, the more businesses and people that accept a form of a crypto currency – the more stable it will become.
In conclusion, you could say that this question has two answers. One view is that because cryptocurrencies, in general, are not pinned to any physical commodity or other institution giving it a value it can not have any intrinsic value. At the same time, the opposite can be argued that actually because it is not pinned to any person, organization, country or regulation that can control it, therefore, has an intrinsic value in its ability to not being able to be controlled.
How does the cryptocurrency QR code work?
Firstly, it is important to understand what a QR or Quick Response code is: it is a two-dimensional barcode, originally developed to track vehicles during manufacture. The rise of the smartphone cemented their presence in our everyday lives. It is now possible to create a QR code which contains all the unique information of an amount of currency.
We can create a QR code to represent an amount of cryptocurrency which you own. This can then be printed and stored safely offline. This makes sure that no one can hack or access your online money until you chose to trade or spend it. This way you must keep the paper representation safe as you would actual currency – in your safe, in a safety deposit box at the bank. This paper containing the code can then be handed over in a transaction (just as you would with a $20 bill or a personal cheque).
It is possible for investors to make a custom code containing their public key. In order to purchase or trade an account holder would need this code in any future transaction, be that for further currency trade or an online purchase. A trader could publish these codes on a profile or personal online presence, in a place where they may be able to exchange currency.
From the other side a merchant can use these QR codes by embedding other information into the mess of black and white squares, information about a sale or special offer. This makes it incredibly easy for customers to access or take advantage of these offers. It could even be a way to encourage customers to make purchases using cryptocurrency rather than more conventional methods, an incentive even. This could encourage repeat business through easy of use but also encourage new custom making the use of QR codes win/win in conjunction with cryptocurrency.
How do I protect my cryptocurrency?
As we can see cryptocurrency is kind of new in the market, and it is developing time after time, for that reason have more than three millions of users right now. But you must be very careful because this currency is not link to any bank or any government organization, so your money can be stolen and just disappear forever. And because it is an anonymous owner, you won’t ever know the identification of the people you are receiving or sending money to.
Tips to protect your cryptocurrency
There are so many ways to protect your digital money, but the most important ones are the following:
• 2 Step Verification is one very common way to protect your account from being accessed from other people. This is commonly used by most big corporations such as Google, Facebook and Twitter and those who want to keep the account secure use it.
• Try to have your money mostly offline, if you do so the hackers won’t have any chance to enter to your platform and take your money, connect this one just when you are doing transactions and as soon as you can just turn it off.
• You can have the law to protect you with layers of security. There are many platforms that offer even six layers of coding security, make sure you chose the best option for you and your currency.
• Look for the latest news about the development of the cryptocurrency. Don’t wait until the last day to know something because it can be so late, read blogs and articles about the news of this currency.
How will cryptocurrency affect the economy?
Compared to the existing financial markets and real world currencies, crypto currencies are mere fledglings. At this early stage in their existence, it is not a surprise that their effect on the global economy is limited.
It is possible that this could change, as is the nature of the market. It would not be unthinkable for a particular cryptocurrency could eventually play a part in the destabilization of a global currency.
What would need to happen for a cryptocurrency to have such power? Well, this is quite simple – people need to use it. Take Bitcoin, for example, the more people who buy, sell and trade in Bitcoins the better for its fate.
Cryptocurrency is only worth what someone will exchange for it. There is no Federal Reserve to issue new digital currency, theoretically making it more stable. New cryptocurrency is released, Bitcoin, for example, releases more each year but the exact amount decreases proportionally year on year; the Federal reserve reissues in a reactionary fashion whenever it so chooses. Thus, the more business and people that accept a form of a cryptocurrency – the more stable it will become.
So perhaps cryptocurrency will not affect the economy directly at this moment in time but it has definite potential. So we will wait and see what the future holds.
Will CryptoCurrency become stable?
Cryptocurrency is referred as the virtual currency that uses cryptography for safety. Due to the security features of Cryptocurrency, it is very difficult to forge. A unique and important feature of a Cryptocurrency is that it is protected by government interference or operation, hence not issued by any central power.
The unspecified character of Cryptocurrency transactions makes them compatible for a host of despicable activities such as tax evasion and money laundering. The first Cryptocurrency introduce was Bitcoin, that was launched in 2009. Cryptocurrencies make funds transfer easier between two individuals in transactions; these transfers are secured by using public and private keys. The fund transfers are done with negligible processing fees, enabling users to keep away from the unreasonable fees charged by the financial institutions and for bank wire transfers. A chief drawback of Cryptocurrencies is that they do not have a central storage area, a user’s Cryptocurrency balance can be removed by a computer break down if a backup copy of the holdings is not restored.
Ever since prices are dependent on supply and demand, the Cryptocurrency rates are fluctuating extensively. They have also created a place for illegal transactions, such as drug trafficking. Cryptocurrencies are lawful in all countries except Iceland, and there are some restrictions in the other countries. The greatest danger to Cryptocurrencies lies in the capacity of hackers to break the system of cryptography and get into the security systems, basically rolling down the value of the currency.
There are various Cryptocurrencies such as Bitcoin, Ripple, Litecoin, Peercoin, Namecoin, Primecoin, Stablecoin, and Mazacoin. The Bitcoin procedure has enabled opposition between digital Cryptocurrencies and traditional fiat currencies. Despite remarkable Cryptocurrency approval rate, impressive deflationary price insecurity has dissatisfied declaration about the Cryptocurrency management. Price constancy can be reached by strongly evaluating the outstanding sum of money: the currency units in every wallet are adjusted instead of changing the value of a single unit. This proves that its only real uniqueness is about equality and effectiveness.
The future financial base changes have an impartial blow on the overall wealth, as it does not introduce any random alteration in the basic value of the wallet. Cryptocurrencies have been used so far by just a few thousands of people for a very restricted part of their assets. If billions of people start using it, Cryptocurrency value will surely reach beyond imagination. Price insecurity is going to be as remarkable in the future as it has been in the past years. But the view of making a better and more stable Cryptocurrencies is good news for anyone who adopts Cryptocurrencies, as well as the future and stability of our financial systems.
What is the Future for CryptoCurrency?
No one knows the future of cryptocurrencies. But the fundamental premise for the existence of cryptocurrencies is aptly eroded by one factor; the more popular they become, the more regulation and government scrutiny they are likely to attract, that bedevils the cryptocurrency, and it will be harder to surmount. And the fact that one’s digital fortune can be ransacked by a hacker or erased by a computer crash tells a lot about cryptocurrencies future.
Why the Future of Cryptocurrency Looks Very Unpromising
Except for the technologically adept, the relative complexity of crypto currencies alone compared to conventional currencies deters most people from using them. For the cryptocurrency to become more widely used, it has to generally gain widespread acceptance among consumers. Unless this happens, the future looks bleak. The number of merchants who have accepted cryptocurrencies is still very much in the minority albeit having increased.
Cryptocurrency should also preserve user anonymity from disreputable activities without being a conduit for money laundering and tax evasion. It would also need to be decentralized but with adequate consumer protection; be easy for consumers to understand, and be mathematically complex to avoid hacker attacks and fraud. A cryptocurrency, which tends to become part of the conventional financial system, must satisfy widely divergent criteria.
These are formidable criteria to satisfy, and even though the future fortunes of other small cryptocurrencies might not be determined by major and popular cryptocurrencies in dealing with the aforesaid challenges it currently faces; the possibility looks remote for the most popular cryptocurrency in few years as it could have traits that fall in between today’s cryptocurrencies and fiat currencies, which are heavily-regulated.
Is It, Therefore, Worth Investing In Cryptocurrency?
As a cryptocurrency merchant, you should recognize that you run the risk of losing most of your “investment” if not all of it, when investing in cryptocurrencies. It is best, therefore, that you treat your investment, in the same way, that you would treat any other highly speculative venture. Cryptocurrencies increase the risk of loss to an investor as they are susceptible to huge price swings. That is because a crypto currency has no intrinsic value.
It is upon a conservative investor to determine whether a crypto currencies just a speculative bubble, or just another investment with a limited supply and a dwindling usage. While opinion continues to be deeply divided about the merits of cryptocurrencies, it is imperative that you realize that their value can plunge at an all-time low with shattering speeds, in a snap. If you cannot stomach that kind of volatility, look elsewhere for investment that is best suited for you. In a nutshell, the future for cryptocurrency does not look promising or scream success either.
Should I store cryptocurrency offline?
So many people are asking this question, Can I store cryptocurrency offline? And even though this seems difficult to do, it is possible and the safest way to store your currency. As technology advances, the number of cyber criminals are increasing as well. And for this reason is very important to take action and make the best to protect your digital money.One of the reasonable ways to keep your currency safe is to have it in a location that is not accessible by the internet. The reason that this is such as safe way to store your money is that the advancement in ways in which criminals will try to steal your money online will most definitely increase faster, then you are able to update your own measures to protect them. Further, you will almost never be able to retrieve your lost money because of the sheer nature of the anonymity that exists around cryptocurrency.