Welcome to my Blog
Hi and welcome to my blog, Crypto Compass. When I set out to learn about cryptocurrency, I found it immensely overwhelming and hard to follow, as many of the articles out there contain complex terminology that make it hard to build an initial understanding. If you are like me and want to know more about cryptocurrency but find the research overwhelming, don’t have time for it, or don’t know where to start – good news; I did your homework for you.
In this blog, I’ll release semimonthly articles starting with the basics of cryptocurrencies and gradually building upon them. My goal is to break it down simply enough to get a good understanding and then slowly throw some more complex aspects in as we go. In today’s post, I’m starting with the basic question of “what is cryptocurrency?” and making the not so simple answer a bit simpler.
So… What Is “Crypto”?
The definition of a cryptocurrency is a medium of exchange that is digital, encrypted and decentralized. Digital meaning there’s no physical form; encrypted meaning it’s converted into a code; and decentralized meaning there is no one country or entity that is regulating and controlling it. That’s it. That’s what a cryptocurrency is.
Why Do People Keep Talking About Blockchain?
The fact that cryptocurrencies are not controlled or regulated by any one country or entity is a scary one, but blockchain is the not-so-scary explanation behind this. The goal of cryptocurrency was to form an electronic medium of exchange without needing a third party for security and regulation. Blockchain technology was the solution.
A blockchain is just an electronic database that is distributed amongst many computers and networks. It stores all the transactions for its cryptocurrency in one central, electronic place. Each cryptocurrency has its own blockchain. However, instead of a database that’s organized in columns or tables, it’s organized in… yep, you guessed it – blocks. The database collects information on different transactions in groups, or blocks, and they have certain storage capacities. When a block is filled, it’s closed and linked to the previous block. This forms a chain. Once a block is added, it’s set in stone and cannot be altered, deleted, or destroyed. The blockchain is maintained by users on the database, which anyone is allowed to be a part of. Before a block can be added to the blockchain, it needs to be authenticated and authorized by the majority (51%) of all users on the network. This protects the data from hackers.
So, let’s say a hacker joins the network and wants to alter a block on the chain to steal the cryptocurrency within it. They would attempt to alter their own single copy of that transaction. When everyone else on the network cross-references their copies against each other, they would see this one copy stand out. The hacker’s version of the chain would be cast away as illegitimate and thus the hacker failed to infiltrate the system. The actual process of authenticating transactions is “mining.” We’ll go into more detail on blockchain and mining in a later post, but the gist of blockchain is that it’s maintained and checked by a majority of the network which prevents any one user from having the ability to tamper with the system and replaces the role of a third party or regulator.
What does one even do with cryptocurrency?
You can use cryptocurrency to make purchases, although it’s not a form of payment with mainstream acceptance quite yet. Some notable companies that accept some form of cryptocurrency as payment include Microsoft, Overstock and Home Depot. There are also smartphone apps that have launched, such as “Spedn,” that make it possible to spend cryptocurrencies at participating stores without needing to cash out to US dollars. Their partner stores include popular retailers like Whole Foods, Jamba Juice, and Baskin Robbins (yes, you can buy ice cream with crypto – what a time to be alive). Some cryptocurrencies, like Bitcoin, even have actual ATMs where you can use cash to buy Bitcoin or sell Bitcoin and receive cash. That said, it’s more widely used as an investment strategy at this time.
Why should I care?
First, the main goal of crypto: it’s owned by everyone, not a single country or government body. As a result, its value is not subject to a country’s political whims or a central bank’s monetary policy. Second, it’s almost impossible to forge (blockchain, remember??). Currencies that use a single entity to manage transaction records are exposed to human manipulation and corruption. Finally, and probably most popular right now, it can be an investment. Just like any other asset, the value of any individual form of cryptocurrency changes, so there is the potential to buy the asset at one price and sell it at a higher price if the value goes up after your purchase. The opposite is also true – you can buy high and sell low.
I promise I’m done…
If you made it this far into the article, congrats! You made it. These topics are the foundation of cryptocurrency. Once you understand these fundamentals, we can dive a bit deeper together into the various subcategories of cryptocurrency like Bitcoin, Ethereum, Stablecoins, and whatever the internet invents as this blog continues! Thanks for taking the time to read this and please don’t hesitate to reach out to me if you ever want to talk crypto. And if you found it useful, please share it with friends and family – more eyeballs will encourage me to write more.
This blog is intended strictly for educational purposes only and is not a recommendation for or against cryptocurrency.