Here on Steemit there’s a lot of talk about Bitcoin (BTC), Ethereum (ETC), and Steem (SBD) itself. Virtual currency has its own language and you don’t want insiders and traders to wall themselves off with jargon. You don’t have to — the lingo is straightforward.
Cryptocurrency
The “crypt” in cryptocurrency is etymologically linked to encryption, the process of encoding and decoding meaning. With a typical currency, like Bitcoin, its value is linked to a blockchain, a public ledger of validated transactions visible to the entire linked community. Standard currency — dollars — is recorded and validated by banks. The exciting thing about cryptocurrency is that the recording and validation is peer-to-peer (your computer, mine, and everyone else’s), cutting out the banking middlemen.
To encode and solve a “block” of transactions is a difficult computational task, requiring a powerful processing engine, plus time and energy. This is what nominally gives a digital currency its value. The computer I’m using right now is fairly robust, designed for gaming, but was only able to mine about 10 Dogecoins over several weeks. The value of that currency was approximate to the electricity needed to generate it. That’s not an exact metric, but it explains why cryptocurrency isn’t created out of thin air.
Then, the solved block of transactions is re-encoded and attached to the public chain, which is thus the “blockchain.” It contains a ledger that describes who sent what to whom. One key difference between cryptocurrency and normal dollars is that it is highly volatile and subject to rapid changes in value, similar to stocks.
Here’s BTC in action over the past week. Although the red line shows a general upward trajectory, you can see how the actual value is testing upper and lower limits of the range. This behavior is the same whether the movement is in aggregate upward or downward, akin to the movement of a stock.
Making (or losing) a bundle
BTC and ETH are both experiencing strong upswings at the moment, and you can take advantage of that by setting up a wallet at Coinbase (which I use) or another trading platform. You can move money from a credit card or PayPal into your wallet and buy the equivalent amount in BTC, ETH, or Litecoin (LTC). Other platforms support various currencies beyond these three, but I like Coinbase because it’s fairly secure and stable.
The value of a US dollar over the past few months has fluctuated, but not remotely to the extent that these three cryptocurrencies have. By converting some cash into BTC, I’ve doubled my money over about 12 weeks. BTC could crash by the same amount and my holdings could be likewise halved, so doing this is a speculative activity. There’s a risk-versus-reward proposition that, as with stocks, means that the greater the risk, the greater the potential gain or loss. Never commit money you are not willing to lose.
But the blockchain
It’s more than cryptocurrency. This technology looks to be useful for the transmission of medical records, government documents, any exchange of sensitive information. As with all disruptive innovations, the key benefit is the elimination of unnecessary middlemen who raise costs by being intermediaries.
And here on Steemit, you have the opportunity to gain cybercurrency without the need to pass gatekeepers like editors, people like me, who are trained to evaluate the worth of the written word. It’s a kind of democratization of information and, on the whole, this is a good thing.
Great post. We need more genuine, original and helpful content here. I'm trying my best to do the same. Followed and upvoted!
Thank you so much.
Thank you for explaining why cryptocurrency isn’t created out of thin air! This is a common question I am asked when explaining Bitcoin to others.
Congratulations @mededitor! You have received a personal award!
Click on the badge to view your Board of Honor.
Do not miss the last post from @steemitboard!
Participate in the SteemitBoard World Cup Contest!
Collect World Cup badges and win free SBD
Support the Gold Sponsors of the contest: @good-karma and @lukestokes
Congratulations @mededitor! You received a personal award!
You can view your badges on your Steem Board and compare to others on the Steem Ranking
Vote for @Steemitboard as a witness to get one more award and increased upvotes!