Cryptocurrency — quick fire Q&A
What are they?
A cryptocurrency (or crypto currency) is a digital asset designed to work as a medium of exchange. Just like money but online.
Currencies like Bitcoin use cryptography (code) to:
- secure its transactions
- control the creation of additional units; and
- verify the transfer of assets
Critically cryptocurrencies use decentralized control as opposed to centralized electronic money and central banking systems. The decentralized control of each cryptocurrency works through a blockchain, which is a public transaction database, functioning as a distributed ledger.
When did these digital currencies come about?
Bitcoin, created in 2009, was the first decentralised cryptocurrency. Since then, numerous other cryptocurrencies have been created. These are frequently called altcoins, as a blend of alternative coin.
Aren’t they the preserve of drug dealers on the Dark Net?
They have been exploited by different groups partly because decentralised cryptocurrency is produced by the entire cryptocurrency system collectively, at a rate which is defined when the system is created and which is publicly known.
Where as in centralized banking and economic systems such as the Federal Reserve System, corporate boards or governments control the supply of currency by printing units of fiat money or demanding additions to digital banking ledgers.
Who invented them?
The first currency Bitcoin was created by the group or individual known as Satoshi Nakamoto. Still to this day — no one knows who they/he is although a few people have tried to claim responsibility (e.g. Elon Musk)
There are loads of currencies aren’t there?
As of September 2017, over a thousand cryptocurrency specifications exist; most are similar to and derive from the first fully implemented decentralised cryptocurrency, bitcoin.
I don’t understand what people mean by ‘mining’ — it’s not buried in the ground?
Given its a digital currency — this is obviously a metaphorical expression. Within cryptocurrency systems the safety, integrity and balance of ledgers is maintained by a community of mutually ‘distrustful’ parties referred to as miners: members of the general public using their computers to help validate and timestamp transactions, adding them to the ledger in accordance with a particular timestamping scheme. Miners have a financial incentive to maintain the security of a cryptocurrency ledger.
Most cryptocurrencies are designed to gradually decrease production of currency, placing an ultimate cap on the total amount of currency that will ever be in circulation, mimicking precious metals. Compared with ordinary currencies held by financial institutions or kept as cash on hand, cryptocurrencies can be more difficult for seizure by law enforcement. This difficulty is derived from leveraging cryptographic technologies. Again helping those drug & arms dealers.
What does this other term Blockchain mean — and what part does it play?
The validity of each cryptocurrency coins is provided by a blockchain. A blockchain is a continuously growing list of records, called blocks, which are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp and transaction data. By design, blockchains are inherently resistant to modification of the data. It is “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way”.
How many Bitcoin are in circulation?
The statistic presents the total number of Bitcoins in circulation from first quarter of 2011 to fourth quarter of 2017. The number of Bitcoins has been growing since the creation of this virtual currency in 2009 and reached approximately 16.78 million in December 2017.
How many are left?
In fact, there are only 21 million Bitcoins that can be mined in total.
There are also stockpiles of inactive coins that are held around the world, the largest supply of which belongs to the person or group who founded Bitcoin, Satoshi Nakamoto. Perhaps this supply, consisting of roughly one million Bitcoins, is intentionally being saved for a time when the global supply is facing increased levels of demand.
Whose made a killing out of the Bitcoin bubble?
The Winklevoss twins, famously known for suing Mark Zuckerberg after claiming he stole their idea for Facebook, are now Bitcoin billionaires.
Cameron and Tyler Winklevoss won $65 million from the Facebook lawsuit, and invested $11 million of their payout into Bitcoin in 2013, amassing one of the largest portfolios of Bitcoin in the world — 1 percent of the entire currency’s dollar value equivalent.
Their slice of the Bitcoin pie is now worth over $1 billion after Bitcoin surged past $10,000.
The cryptocurrency has surged over 10,000 percent since the Winklevoss’ investment, when one coin traded at around $120.
“If Bitcoin is a better gold or seen as a type of gold-like asset, then it could be in the trillions on a market cap,”
Tyler Winklevoss stated.
“We do feel those are very real possibilities.”
The twins have never sold a single Bitcoin, noting that only a handful of Bitcoin wallets hold more than $1 billion worth of the cryptocurrency.
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