Cryptocurrency 101: History and Facts You Need to Know
Every cryptocurrency on the market is reaching soaring heights this year, with one Bitcoin skyrocketing from under $1,000 to over $15,000. Yet to most people, cryptocurrency is still a complete mystery. With all of this wealth at stake, it’s important to know your basic cryptocurrency 101.
Cryptocurrency isn’t tied to typical financial markets. There’s no “closing bell” like you find on Wall Street, so value can jump wildly at any hour of the day. It’s also not tied to anything like the value of gold, so it can be hard for some people to conceptualize.
If you’re thinking about getting involved in the cryptocurrency market, now is the time. With value climbing at a rapid pace, it’s better to get in now before it’s out of your budget.
Check out these 10 facts so that you have a fundamental understanding of cryptocurrency 101.
1. Limited Supply
Aside from Ethereum, most cryptocurrencies are based on a limited supply model. Bitcoin is limited to 21 million whole units.
Over 15 million bitcoins have been released into the system so far. As each is released and trading commences, it becomes more difficult for the computers that “mine” for bitcoins to create them.
Litecoin, another cryptocurrency created by MIT engineers, is limited to 84 million. While its value hasn’t climbed as high as Bitcoin or other cryptocurrencies, it’s set to keep pace at a steady percentage of the value of Bitcoin.
2. Energy Usage
The computers that are used to mine cryptocurrency need a serious amount of power to run.
Each transaction, from full coins to 0.0002 of a Bitcoin, is connected to the history of every transaction its ever been through. This bit of accounting is how a computer owner could mine for coins.
It becomes increasingly complex as more people use coins for transactions. Most mining operations are located where energy is cheap and the internet connections are fast.
Supposedly the amount of energy used for one Bitcoin transaction is equal to the amount of energy used by a typical home in a week.
3. Buying in Fractions
You don’t need to shell out a big sack of money to get your first coins. You’re allowed to buy as little as you’d like. Most of the cryptocurrency marketplaces will charge you a small fee for your transaction.
The smallest recognized unit of Bitcoin is the Satoshi, which is named after the creator of the currency. At one hundred-millionth of one bitcoin, it’s worth less than a tenth of a cent.
The key to cryptocurrency 101 is knowing that when you’re talking about cryptocurrency, you’re not necessarily talking about whole units.
4. Biggest Winners
Bitcoin alone has done better than anyone predicted. It did better than every currency in the world, every single year since 2011, with the exception of 2014. That year it took a huge tumble and did worse than any other currency.
If you had bought $1,000 in cryptocurrency in 2013 and had never sold any, it would be worth over $100 million dollars.
Some people think it’s more of a speculative tool than actual currency. As we’re seeing more retailers like Starbucks accepting it for transactions, it will continue to grow.
5. Stolen coins
Nearly 1 million coins have been stolen from various exchanges. This has been done through hacking or insiders who know the systems well.
The value of those coins would now account for $15 billion given the current exchange rates.
It helps to make your transactions through reputable marketplaces to protect against loss of your cryptocurrency.
6. Strange Creator
Many people have tried to find out information about the person who created the cryptocurrency. In 2016, an Australian computer scientist named Craig Wright tried to convince people that he was Satoshi Nakamoto, the creator.
He refused to provide the kind of evidence that could have proved his identity. No one knows whether Nakamoto is real or a pseudonym. We’re not even sure if the creator is still alive.
7. Different Types
After Bitcoin, pretty much every other cryptocurrency is considered an “altcoin”. There are over 1,000 different altcoins. A few of the most well known are Ethereum, Litecoin, and Dogecoin.
Ethereum was created by people involved with the Bitcoin Magazine, who were there at the beginning of the current cryptocurrency wave. It was largely crowdfunded at the beginning and has risen steadily along with bitcoin, albeit at a lower price.
Litecoin uses technology very similar to bitcoin. It was created by engineers at MIT and aims to be able to complete transactions in 1/4 the time that it takes bitcoin to complete one. Litecoin’s algorithm is more complicated than bitcoin and takes more powerful computer power than bitcoin in order to mine.
Dogecoin was created for fun in reference to doge memes. The aim was to make a cryptocurrency that was more accessible and fun for the uninitiated to get involved with. It’s generally the same as other coins, but without the fixed supply that litecoin and bitcoin rely on.
8. Market Cap
The market cap for cryptocurrencies keeps getting redefined. The market cap of bitcoin recently got close to $300 billion, which accounts for the total value of all the bitcoins in existence.
This means that the amount of value held in bitcoin has surpassed the biggest financial firms on the planet. Visa has a market cap close to $250 billion, for some perspective.
9. Missing Coins
Out of the nearly 17 million bitcoins that have been mined, only a few are in circulation. Forgotten passwords, losses, hoarding practices or their owners forgetting about owning coins means that those coins just sit out there.
It’s been estimated that 6% of all of the bitcoins in existence have never been spent. Supposedly, the creator holds a million bitcoins on their own.
10. Bitcoin Cash
People who bought into bitcoin previous to August 1, 2017, are now owners of Bitcoin Cash.
Bitcoin cash is a “fork” under which the code for bitcoin was split from the original. People with bitcoin cash now hold over $3,500 as of the end of 2017. This adds to the original investment in bitcoin held by owners who bought in earlier this year.
Build Wealth With Cryptocurrency 101
By understanding the basic underpinnings of cryptocurrency, you’ll begin to understand how you can be building wealth by investing. The value keeps climbing and as its based on an increased complexity and scarcity model, it will keep climbing ever upward.
If you’re still wondering what other concepts are essential to cryptocurrency 101, follow us for more information on how to invest and build wealth today.