What is Cryptocurrency and Bitcoin?

What is Blockchain

Before we can discuss cryptocurrency and Bitcoin, we must first understand the underlying technology upon which they're built upon, blockchain. Blockchain is simply a normal accounting ledger that is stored digitally across multiple machines. Each machine holds the exact same copy of the ledger and compares it with each other every time there's an addition to the ledger. Each copy of the ledger must remain the same during this process and those who do not are considered outliers. Through this way, the ledgers pick the copies with the majority rule; meaning, if 51% of the machines have one result while 49% have the other, the 51% is considered to be right and all the machines are updated to suit. Another key factor of the technology is that once a record has been added to the ledger, it can never be deleted again and that each machine that is a part of the blockchain are individuals who use their machines computational power to secure these records in cryptographic hashes and are paid for it with tokens or coins.

What is Cryptocurrency and Bitcoin

Now with that understanding of blockchain, what exactly is cryptocurrency and bitcoin? Well as mentioned before, a blockchain generates coins and as such, all blockchains can be considered a cryptocurrency because of this. There are some blockchains which go a step further by implementing technology atop of this which functions like traditional fiat currency, such as making the cryptocurrency have a point of sale system for people to use for payments of services and goods. Others use it instead to build features such as selling cloud storage space to others. Bitcoin, being the very first cryptocurrency and blockchain, had no such technology overlaid atop of it but because of this, it made it quite popular regardless.

The Current Buzz Around Crypto

The nature of cryptocurrency is one that is similar to stocks and shares of companies and money. The simplest scenario one can imagine is buying 100 Bitcoin at $1 each as that may be the price at the time of purchase. However, in the future, if the price goes up to $5 per 1 Bitcoin, you could sell all of your Bitcoin and make a profit of $400 (you regain the $100 you spent and an additional $400). Because of this nature, at the height of the industry in 2017, Bitcoin reached heights of being worth more than $20,000 for 1 Bitcoin which greatly influenced the current space's growth.

The crazy heights Bitcoin made within recent years is not the only reason for the current buzz around the space either. Since the advent of Ethereum, a blockchain which introduced a new technology called smart contracts, space has been growing at a fast rate. Smart contracts are a means for developers to use the blockchain to create interesting interactions with the blockchain involving transactions onto the network. Because of this, tokens came about and Ethereum effectively allowed for blockchains to exist atop of itself making the space run rampant with activity at the time. Conversely, as you could imagine, Ethereum's coin (called ETH) also saw an increase matching the interest in their technology.

But, it does not stop there either. Blockchain and Bitcoin came about from the idea of creating a monetary system which is not ultimately run by banks as current FIAT currency is all predominantly controlled by the banks of the world. Because of this, banks can take out a fee for transactions using their services involving FIAT which left many people quite miserable. However, blockchain and Bitcoin sought to have a trustless system with lower fees that anyone can earn from while using it; a system to cut out the middle-man known as "the bank". Many saw this philosophy and shared in its promise and added more fuel to the flame that is now the cryptocurrency space.

Things to Consider

With the surge of the industry and its similarity to stocks and trades, it should be no surprise that trading in crypto is a very common thing in today's world. Many people see the space as a great industry for investments despite the recent fall of the market (in comparison to 2017's high) but there are a few things you should consider if you're seriously considering to get into this space.

The market of cryptocurrency and blockchain is an extremely volatile one with prices changing drastically over a matter of minutes. As such, you should do your due diligence whenever investing into any one token or coin and should only consider investing an amount you're fine with losing if it comes to that.

Because of how new space is and the reason it came to be, there is some friction between blockchain and banks. Banks are considered some of the most (if not, the most) powerful entities in the world and to have something challenge their position of power means they're not going to go down without a fight. As such, there is a lot of different regulations and rules in place from nation to nation concerning the entire space so for your own safety, you should consult with your bank and update yourself on the laws in your country on blockchain before getting involved and finding yourself in trouble with the law or banks.