Bitcoin and You - How it Works and Why You Need to Know about It

14:45

via Coindesk
Hello! My name is Steve from stevesincomestreams and Kai has been kind enough to invite me to talk with you all about Cryptocurrencies. I'd like to explain how they work and how they can be part of your financial strategy. 

You may have heard about these mysterious things called "Cryptocurrencies" in the news - anonymous money that seems like it can quadruple in price over night! Luckily, it's not as complicated as sensationalist media may have you believe. A cryptocurrency is any form of currency whose transactions are cryptographically validated by a decentralised network. More simply put, it is a type of money that derives its “authority” as real money from a mathematically proven history of transactions rather than the arbitrary say-so of a centralised authority. This kind of money gives power to everyday citizens to control our currency.

The first technology to use this concept on a large scale was the famous Bitcoin. Since its transactions were validated by math and not bankers, there was no way for the government or anyone else to track who owned which Bitcoin when. This anonymity revolutionised online economics and naturally lead to a black market, while also having legitimate uses. After the government’s crack down on the largest Bitcoin vendor, the Silk Road, Bitcoin went largely clean and is used for legal purposes in the vast majority of transactions.

The mechanics of Bitcoin involves two groups: the miners and the users. Miners are the people who connect their computer to the Bitcoin network to validate transactions. Since these transactions must be mathematically unable to forge, validating transactions requires an enormous amount of computing power. When the network was small and there were few miners competing among each other to validate a “block” of transactions before other miners did, many people just mined with laptops. But as more transactions flowed in and more miners entered the game, people switched from graphics cards to specially built mining cards and eventually were forced into pooling their resources among miner allies. Miners get rewarded 25 Bitcoin for validating a transaction, a vast sum that now ends up getting split among 1000 or so pool mates.

This serves the dual purpose of introducing new Bitcoin to the system as well as validating transactions. Miners tend to sell their rewards off for fiat currency or other cryptocurrency and the newly mined Bitcoin enter the system of users, being traded and used for purchase.

As an open source project, Bitcoin opened a world of opportunity for developers ead to a whole world of altcoins all claiming to make improvements off of Bitcoin’s model. These improvements include new validation algorithms, new ways to distribute coins and coins revolving around drawing support to special causes. I hope to take you through all these altcoins over time, but for now I hope you have a solid understanding of cryptocurrencies and Bitcoin.

For more tech insights, financial advice, and general tomfoolery check out stevesincomestreams.com and @StevesStreams on Twitter!

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