What is Cryptocurrency?
As of 2019, cryptocurrency has been used as a decentralized alternative to traditional fiat currencies (which are usually backed by some central government) such as the US dollar (USD).
For the average person using cryptocurrency is as easy as:
- Get a digital wallet to store the currency.
- Use the wallet to create unique “public addresses” to receive currency.
- Transfer funds in or out of your wallet using public addresses.
How do I get cryptocurrency? If you want to get cryptocurrency you can mine it or trade goods and services for it. However, cryptocurrencies can be traded on exchanges and bought via brokers using dollars and other cryptocurrencies. Check out Coinbase for a broker/exchange/wallet solution.
What is a cryptocurrency address? A public address is a unique string of characters used to receive cryptocurrency. Each public address has a matching private address that can be used to prove ownership of the public address. With Bitcoin the address is called a Bitcoin address. Think of it like a unique email address that people can send currency to as opposed to emails.
The History of Cryptocurrency
Although bit gold is considered the first precursor to bitcoin, cryptocurrency pioneer David Chaum’s company DigiCash (a company founded in 1989 which attempted to innovate digital currency), Wei Dai’s b-money (a conceptual system published in 1998 which Satoshi cites it in the Bitcoin white paper), and “e-gold” (a centralized digital currency that started in 1996) are all notable early mentions.
Bitcoin became the first decentralized digital coin when it was created in 2008. It then went public in 2009.
As of 2019, Bitcoin is the most commonly known and used cryptocurrency. Meanwhile, other coins including Ethereum (ETH), Ripple (XRP), Litecoin (LTC), and more are notable mentions.
Given the popularity of Bitcoin as well as its history, the term “altcoin” is sometimes used to describe alternative cryptocurrencies to bitcoin (especially coins with small market caps).
As of January 2015, there were over 500 different types of cryptocurrencies – or altcoins – for trade in online markets. However, only 10 of them had market capitalizations over $10 million.
As of September 2017, there were over 1,100 cryptocurrencies and the total market capitalization of all cryptocurrencies reached an all-time high surpassing $60 billion! Then, by December 2017, the total market cap reached $600 billion (a multiple of 10 in only two months).
In other words, although the future is uncertain, cryptocurrency seems to be more than just a fad. Today cryptocurrency is shaping up to be a growing market that (despite the pros and cons) is likely here for the long haul.
Introduction to Bitcoin
Bitcoin is a new type of money that works very differently to traditional money. Here’s a quick introduction covering the key facts you need to know.
Bitcoin is for everyone
No person, company, or organization is in control of Bitcoin: it’s a decentralized digital currency that’s powered by a huge, distributed network of computers.
As such, when you own Bitcoin, only you have access to your funds. You’ll typically send, receive, and store it using a secure digital wallet app which you can download for free.
It’s really important to remember that, since no bank or other financial intermediary ever has access to your wallet app, you’re in charge of keeping it secure.
Bitcoin can be used to move and store money
You can use your Bitcoin just like regular money. Transactions are sent and received directly between one person and another—be it for personal or business purposes.
Currently, there are two main types of Bitcoin: Bitcoin Cash (BCH) and Bitcoin Core (BTC). When you use Bitcoin Cash, these transactions cost only micro fees (less than a cent!). As such, they’re a lot cheaper and also much faster than international bank transfers.
You can also choose to store your money as Bitcoin. If you’re storing larger amounts, consider purchasing a hardware wallet to add an extra layer of security to your storage.
Bitcoin can be accepted by businesses
If you’re a business owner, you can accept payment from your customers in Bitcoin. Doing so has various benefits, such as the fact that fraudulent chargebacks are not possible.
You can accept both Bitcoin Cash and Bitcoin Core payments; we recommend Bitcoin Cash since transactions are cheaper, faster, and more reliable!
Either way, to be able to accept Bitcoin as a business, you need two tools. The first is a secure digital wallet app, which is where you’ll receive the Bitcoin payments.
The second is either a Bitcoin payment gateway (online businesses) or a point-of-sale app (in-store businesses). Our own free point-of-sale app, which is available for both Android and iOS devices, lets your customers pay with Bitcoin Cash.
Bitcoin can be exchanged for other currencies
Whether you’ve bought, received, or earned Bitcoin, you can choose to exchange it for both traditional (fiat) currencies and also for other digital currencies.
One of the easiest ways to do this is through a cryptocurrency exchange. Create an account with an established exchange such as Coinbase and, after verifying your identity, you’ll be able to sell your Bitcoin.
Alternatively, to get better margins on the Bitcoin you exchange, you can use a trading platform like Local.Bitcoin.com. This lets you sell Bitcoin Cash (BCH) anonymously for significantly lower fees than cryptocurrency exchanges.
Bitcoin transactions are repeatedly ‘confirmed’
The computers powering the Bitcoin network continually process and verify the latest transactions as people send and receive Bitcoin.
These transactions are publicly recorded on a global digital ledger called ‘the blockchain.’ Each time a new list of transactions (called a ‘block’) is added to the blockchain, every previous Bitcoin transaction is repeatedly acknowledged by the network.
This is known as ‘confirmations’ and, the greater the number of confirmations a transaction has, the more secure it becomes. You can check how many times a transaction has been made by searching for the transaction ID (called a TXID) in any block explorer.
Bitcoin transactions are not fully anonymous
Since you don’t need to share your identity to download a digital wallet, it’s more private than a bank account. However, Bitcoin is not a privacy coin: the blockchain is public to everyone, meaning that all transactions can be viewed (though they’re not tied to your identity).
To keep your Bitcoin transactions more private, use a different address for every payment. To do this in our wallet app, tap Generate new address in the Send tab if you’re the one sending the Bitcoin, or in the Receive tab if you’re the one receiving the Bitcoin.
Alternatively, when sending and receiving Bitcoin Cash, you can use an automated tool like CashShuffle to help enhance your privacy. This is currently available in the Electron Cash desktop wallet and is being added to other Bitcoin Cash wallets over time.
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