What is Cryptocurrency?
By: Erin Moses
Tags: Cryptocurrency, Ethereum, Blockchain, Token Sale, Women In Tech

What is Cryptocurrency?

The Beginner’s Guide to the Galaxy of Crypto

In the last decade, cryptocurrency has taken the world by storm. Even those with little to no interest in online activities have heard it mentioned in the news. Here I have compiled a list of commonly asked questions and answers to get you started in the world of crypto. And I promise, it’s not as scary and complicated as it seems to be.

Litecoin, Ethereum, and Bitcoin, three of the most valuable cyrptos as of this posting.

What is Cryptocurrency?

The word crypto comes from the Greek kryptós, meaning secret or hidden. It is used in the English language today to form compound words like cryptography, which means the writing and solving of codes, and is used in programming to store and transmit data so that it is safe from prying eyes and hackers.

Simply put, cryptocurrency is digitally coded units of value. Since the language of computers is written in many forms of code (CSS, HTML, Java, etc.) cryptocurrency is a medium of exchange that uses these cryptographic processes to secure & track transfers of value and create new units. These units of value can be transferred and reimbursed for goods and services, just like government issued(fiat) currency. Every unit of cryptocurrency has a fluctuating market value, and is part of a fully self-contained network that tracks and records every unit or value on a public record called the Blockchain. Today there are many different forms of cryptocurrency, all trading at different valued rates.

Doge coins, Nautilus coins, and Syscoins, oh my! New cryptocurrencies are being created every day.

The first highly successful form of cryptocurrency, Bitcoin, was created in 2008 by Satoshi Nakamoto when they published The Bitcoin Paper. At the time of this writing, one Bitcoin’s estimated market worth is $7,679.20 USD. Part of the reason cryptocurrency has become so successful is the fact that it is not tied to a government, banking system, or material asset(eg: gold standard, silver standard, etc). Additionally, the creation of new units is determined by the software programing in the Blockchain, where new units are created in preset decreasing amounts over time as they are mined. There is a finite, preset amount of each cryptocurrency, releasing it from the fallout of a sudden “gold rush” of new units. With built-in protection from inflation, government debts, and bank collapses, cryptocurrency seems like the future of money to countless enthusiasts.

What is an ERC20 Token?

An ERC20 Token is a smart contract, and is a digital asset that can represent anything from loyalty points, vouchers and IOUs to actual objects in the physical world. These tokens can be sent, received, and traded like Bitcoin, Ethereum, or any other cryptocurrency. ERC20 Tokens implement the Ethereum Token Standard, a set of technical protocols that simplify, streamline, and secure the token exchange process. These tokens have exponentially less risk and more liquidity, making them trustworthy and easy to use.

How is CryptoCurrency Made/Mined?

In order to earn cryptocurrency, short of being paid for goods and services, you need to mine them. Cryptocurrency is “mined” by processing and verifying transactions made on the Blockchain on your computer using mining software, which can be downloaded in many places. The Blockchain is the continually growing list of records of every crypto transaction ever made. These transactions form coded problems, akin to a rubix cube or sudoku puzzle, that take computing power and time to complete, but very little time to verify. If you possess the massive amounts of processing power needed in order to solve these block problems(think custom-built desktop with an advanced GPU/ASIC chip), and you finish a block and post your correct answer along with your proof-of-work before anyone else, then you get the claim the newly generated cryptocurrency, along with any transaction fees. You receive your reward once other miners validate your block, adding another link to the Blockchain.

Example of a professional mining rig: each piece of hardware is dedicating to computing the solution to the block faster than the others, and claiming the reward. That’s a LOT of computer power!

The problems generated by each block of transactions have become exponentially harder as the Blockchain has grown, creating fierce competition and requiring more and more powerful computers to handle the data load. Mining is also central to the trust and security of the network itself, and lends itself the circle of this decentralized system: the more miners validate and affirm transactions, the more trusted and secure the blockchain and trading network itself becomes, the more transactions there are, and so on.

What does “decentralized” mean?

In a decentralized organization, powers have be spread out and distributed over a wide area instead of being concentrated in one central authority. In the crypto world, decentralized exchange is used to cut out the central authority of banks, the third party that normally holds the customer’s funds. Instead of bank accounts, ether wallets are used, and in lieu of slow wire transfers, currency conversions, and bank fees, peer-to-peer instant transactions occur via the Blockchain.

What is the Blockchain?

The digital ledger where all cryptocurrency transactions are recorded and verified in public view is called the Blockchain. Transactions are linked together to become blocks, which are processed and verified by miners, then added on as another block in the chain once they are approved. The Blockchain serves as a decentralized point of trust for the cryptocurrency community as it is shared openly and and verified daily by miners all over the world, and standard computation procedures keep participants honest.

How do Start Up Companies use ERC20 tokens for their platforms?

Many companies use tokens to create digital assets within the sphere of their own company. These assets can range from physical items up for purchase and services rendered to in-game bonuses and stock shares. The ERC20 token format allows it to be used within any blockchain platform. Token sales have become an extremely popular way for new companies to raise money for their endeavors, and participators can have the opportunity to exchange their tokens for well known cryptocurrency like Bitcoin or Ethereum. This allows companies to broaden their audience, geographically and economically.

Where do I begin?

Try signing up with Coinbase- it’s the the easiest on-ramp to the bitcoin, ethereum, & litecoin world.

Here’s how:

Go to Coinbase.com

Enter your email, set up a profile, and verify your account with your cell phone- they’ll send you a short code to verify your identity.

Add your bank account or credit card if you wish to start buying cryptocurrency.

They can import any of your crypto wallets if you have one already. If not, keep reading!

How do I participate in a Token Sale on an Exchange?

Before you can participate on any Exchange you need an Ether Wallet, like MEW (MeEtherWallet). Check it out here: MyEtherWallet.com

What is MetaMask?

MetaMask is a Google Chrome extension that allows you to browse Ethereum without having to run a full Ethereum node on your computer (which is way too cumbersome for most people). It allows you to create a cryptocurrency wallet, creates encrypted passwords for any and all accounts and wallets, and execute secure transactions from your browser. It’s a breakthrough in blockchain accessibility, letting any user access their Ethereum dApps from their computer.

The blockchain world is constantly growing, with new chains and cryptocurrencies popping up every day. It’s never too late to jump in and get started. If current events are any indication, anything is possible, and blockchain applications will only continue to grow in day-to-day use. You don’t have to be a master coder to get involved either — the wallets above are easy to set up and used worldwide. My advice? Watch this space, and take a dive into the galaxy of crypto.