Let's start from the beginning.
Instead of getting to technical, here i am going to furnish in a simple language.
A crypto currency is basically money on software platforms.
It's important to keep in mind that the teams/companies that are behind these crypto currencies are not only creating a new form of currency, but a new software platform.
To demonstrate how this works, let's take a look at other software platforms that you are probably already familiar with.
Examining how these platforms work will help you understand crypto currencies.
Here are a few software platforms that many people use:
Windows: A software platform for personal computers
Drop box: A software platform for storing and sharing documents
Fed wire: A software platform that sends money between financial institutions
On each of these platforms, a type of money is used, in exchange for using the platform:
Windows: You pay US Dollars (or your local fiat currency) to buy a license for Windows to use on your computer. If you buy a computer that already has Windows on it, the license fee is included in the purchase price.
Drop box: You pay US Dollars (or your local fiat currency) to buy a subscription to use the software for a month or a year, depending on which plan you buy.
Fed wire: You pay a transaction fee to use the system and you send fiat currency itself.
Each of these systems also has a database connected to it:
Windows: Database is stored on your local computer
Drop box: Database is stored on the Drop box servers
Fed wire: Database is stored on the Fed wire servers
Crypto currencies essentially replace the US Dollars (or your local fiat currency) that you use to purchase these software services. The “database” that crypto currencies give you access to be based on block chain technology.
(Let us learn more about block chain in our next posting.)
But wait, what are the software services that you are getting? Isn't a crypto currency like Bitcoin just a currency, like US Dollars?
Not quite.
The goal of crypto currencies is usually to improve on some type of existing software system or network. When you send money via PayPal, Fedwire or Western Union, you are basically sending fiat money electronically, similar to Bitcoin.
However, that's where the similarity ends.
Platforms like PayPal have severe limitations on what you can and cannot do. For example, you cannot send/receive money from certain countries (like Nigeria).
Crypto currencies like Bitcoin want to make financial transactions more open and accessible to everyone around the world.
Other crypto currencies solve other problems, which we will explore later in future postings.
I hope i am succeed in explaining little bit in this posting to some of our new and interested members.