Hello, this is an introduction to cryptocurrency for people who are new to the subject. It may also be helpful for people who already are familiar with the concept but are curious on a new perspective. We’ll go through some of the fundamentals and also touch on the unique features of SmartCash in comparison to other coins.
What is cryptocurrency?
Cryptocurrency is a kind of virtual currency that is created by solving cryptographic algorithms. The coins created are an international decentralised currency that is not controlled or backed by any particular government or state. In short, it is decentralized ledger of transactions created by and supported by a network of decentralized participants. Coins are created within the network at a regular interval (usually a couple minutes) and given to miners.
Why is it called cryptocurrency?
Crypto refers to cryptography which is a kind of mathematics that is essential for creating and securing everyone’s assets. This cryptography makes everything possible and lets others verify what is going on. The currency part refers to the idea that there are coins that can be sent between participants.
How is cryptocurrency different from regular money?
Regular money is created by a central bank and then distributed to banks to lend to people. Regular money (referred to as “fiat” in crypto discussions) also are controlled and supported by governments. Crypto-currency is decentralised and created by participants in the network. While in fiat you can control the supply of money and change it over time, in crypto-currency the supply is embedded in the algorithm so it can’t be changed or influenced like that. It also can be a lot quicker than regular money for sending and receiving.
What does blockchain mean?
Blockchain is the data structure of cryptocurrency containing a list of all accounts that made transactions and any new coins created through mining. It is connected together which is literally a chain of blocks. The blocks are lists of transactions happening every couple of minutes. The chain is connected together using cryptographic hashes (kind of like locks that prove the data is correct) that bundles all together and makes sure it can’t be altered. Blocks later in the chain rely on earlier blocks to be valid.
What is Bitcoin and why is it important?
Bitcoin is the very first crypto-currency. It got started in 2009 as free, open source software. It took a lot of time to catch on but it is important because it was the first solution for the general problem of how to create internet money without a central authority.
What are some other cryptocurrencies?
There are hundreds of them. A few other different cryptocurrencies include Ethereum, Dogecoin, Smartcash, Waves, Komodo, Electroneum, and CreativeCoin.
Why do we need more than one cryptocurrency? Isn’t Bitcoin enough?
We need different cryptocurrencies because the different coins have different features that set them apart from each other, in much the same way that we have different cars even though they all serve the same essential purpose. Some currencies offer features like building in smart contracts useful for automating or executing agreements while others offer speedier transaction times than Bitcoin.
People can make their own and that encourages communities and developers to try new ideas. Some are focused on creating new platforms for other applications, some want to compete directly with bitcoin, others focus around a particular industry like music. There are varieties in how many coins are available, how they are created, and how they are traded. There are even cryptocurrencies that work as an additional layer to Bitcoin to add new functions!
If anyone can make cryptocurrency, how does it have a value in USD (or other currencies)?
There are a couple of answers to that. Cryptocurrencies are valuable because there is a shared acceptance of its value between communities, and it can be used for trade and buy things out in the real world. The most famous example is when a developer, Laszlo Hanyecz, bought pizza using 10,000 bitcoin. There is value because people are willing to trade USD for it (at an exchange, on craigslist, or in the Wall Street financial system). In this example he sent bitcoin to someone on a forum who had called the local pizza shop and paid for a pizza to be sent to him.
Can I buy, store and invest crypto just like I do with regular money?
Yes, one can buy sell and invest cryptocurrency but you should take extra care to keep it safe. There are various platforms where you can choose to trade with the purchased cryptocurrencies (similar to traditional stock exchanges) or can simply store it for a long term investment in a crypto vault called a hardware wallet, paper wallet, or cold storage.
As with all assets and investments, take care to keep your cryptocurrency safe and secure.
You need to be careful because security is dependent entirely on you. The safest way to keep your cryptocurrency is to have a “private key” to the coins you own – the cryptographic key that unlocks the coins. There are methods to save and secure your private key. Just like cash, you need to keep it safe. Whatever you do, don’t leave your currency on a private exchange where it can be stolen.
Why are cryptocurrencies so volatile?
One big reason is that it is such a small market that even a small amount of money moving from buy to sell and vice versa can change the current price quickly. Unlike established markets like foreign currency exchange there is much, much less money on crypto exchanges. People also are more emotional about cryptocurrency and that encourages more price movements. There aren’t a lot of regular investments coming into crypto like you see in other markets to help even out the market. Also, as it’s a new asset class it is hard for people to put a value on it which encourages price movement.
I’ve heard the term “smart contracts” used before. What does it mean?
Smart contracts are a bit like programmable money. They are a special kind of address on cryptocurrencies like Ethereum that can respond automatically to other accounts. This can do things automatically (like pay you when your airline flight is late) or eventually be used for important transactions like sale and transfer of real-estate. And since it is programmable, it can also be used to create fun games like Crypto Kitties. Smart contracts are also used to create something called Initial Coin Offerings. It’s a way to invest in a company or idea: you send Ethereum to a smart contract they create and they send you tokens. It’s a bit like Kickstarter except you get a token which works better for services. An example ICO is Grid+ which focused on the energy market. An interesting note is that Ethereum was actually an ICO which received Bitcoin for Ethereum.
Glossary of a few terms generally used in cryptocurrency discussions:
Cryptocurrency users also have informal language like “going to the moon”, which refers to huge price increases. It is part of the belief that long-term cryptocurrency provides value in a way that is unique and will reward all participants in ways that other money systems cannot or have failed to do so.
In what areas is SmartCash unique compared to other cryptocurrencies?
SmartCash has a focus on three areas that set it apart from others. First, it has a unique block rewards system that allocates newly minted coins to governance groups. These includes teams focused on development, outreach, support / web, and also a treasury. The treasury supports a price stabilization feature, masternodes, and community projects. Second, there is a voting system that allows anyone to submit proposals and receive funding in SmartCash from the treasury. Anyone can vote on proposals, not just those with a certain amount of SmartCash. The third main feature is a focus on privacy and instant transactions (as well as retail transactions using point of sale terminals). The privacy is implemented using the zerocoin feature and instant transactions is supported by a dedicated node network. Taken together, there is a clear funding model for innovation and clear use cases for daily retail transactions. Many cryptocurrencies have one of these features but SmartCash is the only cryptocurrency that implements all three concurrently.
Hopefully this was helpful! If you have any questions feel free to leave comments and I will address them. If you’d like to see in-depth articles like this on other topics please let me know for future writing.
Original Source: https://smartcash.blockchainlibrary.org/2017/12/introduction-to-cryptocurrencies-for-the-smartcash-community/
