What is Cryptocurrency?

Bitcoin’s “peer-to-peer electronic cash system,” launched in 2009 by an anonymous programmer (or group) Satoshi Nakamoto, was a watershed moment for the freedom of money. For the first time in history, people could securely exchange value, without requiring a third party or trusted intermediary. Paying in Bitcoin meant that people like Steve and Cindy could pay each other directly, bypassing institutional fees, obstructions, and intrusions. Bitcoin was truly a currency without boundaries, powering and connecting a new global economy.

What is cryptocurrency?

A cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, often called tokens, and these can be traded specifically for the good or service that the company provides. Think of them as you would arcade tokens or casino chips. You’ll need to exchange real currency for the cryptocurrency to access the good or service.

Cryptocurrencies work using a technology called a blockchain. Blockchain is a decentralized technology spread across many computers that manage and record transactions. Part of the appeal of this technology is its security.

How is it different from the normal currency?

Currently, our everyday financial transactions rely upon a trusted third party to maintain a record of transactions. For example, when you do a bank transaction, the banking system keeps a record & guarantees that the transaction is safe & reliable. Likewise, when Cindy transfers $5 to Steve using PayPal, PayPal maintains a central record of $5 dollars debited from Cindy’s account and $5 credited to Steve’s. Intermediaries like banks, PayPal, and other members of the current economic system play an important role in regulating the world’s financial transactions.

However, the role of these trusted intermediaries also has limitations:

1. Unfair value capture: These intermediaries amass billions of dollars in wealth creation (PayPal market cap is ~$130B) but pass virtually nothing onto their customers — the everyday people on the ground, whose money drives a meaningful proportion of the global economy. More and more people are falling behind.
2. Fees: Banks and companies charge large fees for facilitating transactions. These fees often disproportionately impact lower-income populations who have the fewest alternatives.
3. Censorship: If a particularly trusted intermediary decides that you should not be able to move your money, it can place restrictions on the movement of your money.
4. Permissioned: The trusted intermediary serves as a gatekeeper who can arbitrarily prevent anybody from being part of the network.
5. Pseudonymous: At a time when the issue of privacy is gaining greater urgency, these powerful gatekeepers can accidentally disclose — or force you to disclose — more financial information about yourself than you may want.

Why are cryptocurrencies so popular?

Cryptocurrencies appeal to their supporters for a variety of reasons. Here are some of the most popular:

1. Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable.
2. Some supporters like the fact that cryptocurrency removes central banks from managing the money supply since over time these banks tend to reduce the value of money via inflation.
3. Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems.
4. Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.

Are cryptocurrencies a good investment?

Cryptocurrencies may go up in value, but many investors see them as mere speculations, not real investments. The reason? Just like real currencies, cryptocurrencies generate no cash flow, so for you to profit, someone has to pay more for the currency than you did. That’s what’s called “the greater fool” theory of investment. Contrast that to a well-managed business, which increases its value over time by growing the profitability and cash flow of the operation.

Buying Cryptocurrency

How do I buy cryptocurrency?

While some cryptocurrencies, including Bitcoin, are available for purchase with U.S. dollars, others require that you pay with bitcoins or another cryptocurrency.

To buy cryptocurrencies, you’ll need a “wallet,” an online app that can hold your currency. Generally, you create an account on an exchange, and then you can transfer real money to buy cryptocurrencies such as Bitcoin or Ethereum.

Are cryptocurrencies legal?

There’s no question that they’re legal in the United States, though China has essentially banned their use, and ultimately whether they’re legal depends on each individual country. Also, be sure to consider how to protect yourself from fraudsters who see cryptocurrencies as an opportunity to bilk investors.

Bored Elon,Satoshi Nakamoto, Vinny Lingham, Lou Kerner, Vinay Gupta, Mark Zuckerberg, Vitalik Buterin.