THE CRYPTOCURRENCY ECOSYSTEM
Cryptocurrency is basically software. It’s a string of codes that contain instructions about financial transactions: how much, what time, the sender, the recipient, etc.
The Blockchain Is Everything
The data about these financial transactions are stored on something called the blockchain, which is like a public ledger of all transactions. What’s special about the blockchain – and the reason you keep hearing how amazing it is (to the point of annoyance, probably) – is that it’s a distributed ledger. This means that blockchain transactions are an open book; everyone can verify whether the accounting is honest or not.
It was Bitcoin inventor Satoshi Nakamoto who first described the blockchain in the same 2008 paper in which he first laid out the blueprint for Bitcoin.
Any given blockchain consists of a single chain of discrete blocks of information, arranged chronologically.
Mining: How Cryptocurrency Gets Made
When you send someone cryptocurrency, the transaction has to be verified to make sure that you are not double-spending (i.e. that you have the money that you say that you have). The verification process is conducted by miners. Once miners have verified a certain data size of transactions (for Bitcoin, it’s 1 MB), they compete with each other to complete that block. For Bitcoin, the prize for doing all this account-keeping is 12.5 BTC. The reward is halved approximately every four years; in 2020 the reward will be halved to 6.25 BTC.
Mining is how new crypto gets released to the public.
Buying Your First Cryptocurrency
It’s pretty hard to understand how cryptocurrencies work if you don’t own any. Fortunately, you don’t have to buy a whole Bitcoin, a whole Ether, or a whole Litecoin. You can buy tiny fractions thereof. For example, you can buy 1/100,000,000 of a Bitcoin, called a Satoshi.
Here’s how to get started buying bitcoin on some of the more popular exchanges. Coinbase is the easiest to use and currently offers Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
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