Cryptocurrencies are basically the money on software platforms
It’s important to keep in mind that the teams/companies that are behind these cryptocurrencies 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.
The goal of cryptocurrencies 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).
Cryptocurrencies like Bitcoin want to make financial transactions more open and accessible to everyone around the world.
Less than 12 months after the 2008 market crash, The world was introduced to a new revolutionary Digital currency known as BITCOIN.
The developers of Bitcoin remain anonymous to this day and go under the alias of Satoshi Nakamoto. Since the release of Bitcoin, we have seen an influx of other alternative Digital currencies such as Ethereum, DASH and many more, All of which come under the category of ALTCOIN (Alternative Bitcoin). The one thing they have in common is that they are all produced using a technology known as BLOCKCHAIN which solves mathematical problems to generate more coins and approve transactions.
Bitcoin is a Digital Currency, created and held electronically which can be used to purchase almost anything, with almost instantaneous transactions and very low fees. Unlike todays currencies around the world, Bitcoin is not printed, and is decentralised, meaning it is not controlled by any single institution (Bank or Government). They’re produced by people and businesses running computers all around the globe, in a process known as MINING. Using software that solves mathematical problems, this is a community of people which can be joined by anyone, and uses computing power in a distributed network. This network also processes ALL transactions made with the virtual currency, effectively making bitcoin its own payment network.
The bitcoin protocol – the rules that make bitcoin work – say that only 21 million bitcoins can ever be created by miners. However, these coins can be divided into smaller parts of which the smallest divisible amount is one hundred millionth of a bitcoin and is called a ‘Satoshi’, after the founder of bitcoin. Once 21 Million Bitcoin have been mined, which is said will happen around 2040, No more Bitcoin will be produced. This does not mean that you will no longer be able to buy or use Bitcoin, it should in theory see the currency’s value increase and decrease like any other currency due to supply and demand. Think of it like Oil, when there is excess oil in stockpiles, the price falls because it is over supplied, when those stocks fall, the price will rise because there is a higher demand for what oil is left. The same principles will apply to Bitcoin.
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