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Cryptocurrency For Dummies

In this article we will explain cryptocurrency for dummies. You will learn about cryptocurrency and blockchain, as well as bitcoin. We will also discuss some different kinds of cryptocurrencies like Bitcoin and Ethereum and tell you why you should pay attention to these investments.

Fifty years ago, investing was simple: stocks, bonds and real estate. Today, the investment process has become much more complicated. There are an infinite number of investment choices that can be difficult to understand. One new investment is cryptocurrency.

Although we cannot advise you on what you should invest in, we will share some options for cryptocurrency investing. In addition, we will discuss what cryptocurrency is, the pros and cons of owning crypto and some future predictions. This is a simple explanation of cryptocurrency for dummies.

It seems clear that the future is bright for Bitcoin and Ethereum, as well as several other cryptocurrencies. We will discuss why these two cryptocurrencies deserve serious consideration. We will also briefly discuss some other cryptocurrencies worth noting.

What is Cryptocurrency?

Cryptocurrency is a digital asset. Payments occur between individuals on the internet. In addition, the best cryptocurrency uses cryptography to secure transactions on a network. Block chain technology is part of what makes the network secure. Miners use powerful computers to solve advanced equations to earn Bitcoin or other cryptocurrencies. Finally, mining makes the distributed ledger network secure. In addition, it ensures that transactions are complete. As a result, no one can cheat the system.

What is Block Chain?

The block chain stores data on a public database. The blocks of information include transaction data, participant data and distinguishing data. Each block of data stores thousands of transactions under cryptographic lock and key. A network of computers operates the blockchain. They make the network run and keep it secure by solving algorithmic hashes. The network computers earn cryptocurrency for their work. Understanding cryptocurrency for dummies requires knowing that block chain technology uses a distributed ledger. Bitcoin’s network security hinges on the distributed ledger that the network participates in.

Bitcoin: A Peer-to-Peer Electronic Payment System Created by Satoshi Nakamoto

Bitcoin is an open-source, block chain-based technology. It was designed to be a peer-to-peer payment system. In addition, it is a decentralized electronic payment method. Moreover, it can be conducted semi-anonymously among individuals. Bitcoin is digital cash. Many consider Bitcoin to be the best cryptocurrency to invest in.

It uses block chain technology to maintain its function. For users to send and receive bitcoin, the block chain depends on miners. Miners use computers to complete complex problems. Solving these problems allows the miners to earn Bitcoin.

Satoshi Nakamoto introduced Bitcoin in 2009. The paper entitled, “Bitcoin: A Peer-to-Peer Electronic Cash System.” described Bitcoin. Bitcoin was the first cryptocurrency to experience widespread use and adoption. However, its use case has evolved over the years from a peer-to-peer payment method to a store of value model. Many Bitcoin users hold bitcoin much like you would hold silver or gold in an investment portfolio. In cryptocurrency for dummies we will explain why this is important and revolutionary.

Bitcoin Limited Supply

There is a limited supply of Bitcoin. There are only 21 million coins. Therefore, by definition, it is a deflationary money. This is in stark contrast to how central banks around the world like the Federal Reserve Bank print more money, continuously creating inflation. Understanding cryptocurrency for dummies requires knowing that a deflationary currency gives power back to Bitcoin users.

Currently, approximately 18.5 million Bitcoins exist from mining. In theory, there are only 2.5 million Bitcoins remaining for miners. As a result, 88% of the Bitcoin supply already exist. No more Bitcoins are available for mining when we reach the limited supply. As a result, cryptocurrency mining will cease. In addition, limited supply of it is what is so exciting about the prediction of its price.

Pros of Owning Cryptocurrency

Owning Cryptocurrencies May Save A Failing System

Owning cryptocurrencies requires that you have a future vision that is radically different than our current banking system. In addition, cryptocurrency is inherently risky and volatile for investors. However, many believe that cryptocurrency investment is a vote for monetary freedom and independence from governments.

Bitcoin does not require using a bank; the bitcoin holder is the bank. Making borderless payments between friends became easier and more private. In addition, Bitcoin is deflationary, with only 21 million Bitcoins available for use. And, if you are starting to have doubts about government money printing and overspending, then Bitcoin is an obvious candidate for safe-haven status. Understanding cryptocurrency for dummies requires knowing that bitcoin is a safe, borderless store of value.

Cons of Owning Cryptocurrency

Fraud, Theft and Volatility Are Still Issues with Cryptocurrencies

There are some cons to owning cryptocurrency. In addition, cryptocurrency and the block chain space are a very new industry. Bitcoin is only 11 years old and there have been growing pains in the space. First, cryptocurrency has been vulnerable to fraud in the past. For example, $800 Million worth of Bitcoin was stolen from “Mt. Gox” cryptocurrency exchange in 2014. Second, scams have been a problem in the industry, especially with new projects. Finally, price volatility has frightened away many new potential Bitcoin users. Understanding cryptocurrency for dummies requires knowing that volatility will decrease as more users participate.

Future Predictions of Bitcoin and Ethereum Prices

Reputable Investors Foresee Exponential Growth in Bitcoin and Ethereum Markets

It seems clear that in 2021, Bitcoin and Ethereum will begin the next phase of expansion and adoption. As a result, the price of both cryptocurrencies will likely go much, much higher. These are certainly important when considering a cryptocurrency to invest in.

Anthony Pompliano and Max Keiser, two well-known investors in the Bitcoin space believe that Bitcoin price will exceed $100,000 in the next few years. Other investors like Mike Novogratz and Chamath Palihapitiya believe Bitcoin price is destined to go even higher. For example, Bitcoin may reach $400,000 and $1,000,000, respectively.

As for Ethereum, investors are optimistic about its future price as well. Because Ethereum’s market capitalization is only $40 Billion, there is much room for growth. Continual adoption of Ethereum by institutional investors could easily lead to a $200 Billion market capitalization, equating to a $1,500 ETH price. Investors such as Nigel Green and Blockfyre co-founder Simon Dedic predicted much higher prices ($2,500 – $9,000) for Ethereum in the future.

It should be noted that several of the investors mentioned are worth Billions. They have a clear track record of investing in markets. As a result, their predictions are serious. Understanding cryptocurrency for dummies requires knowing that Bitcoin price will likely climb much higher.

Bitcoin Continues to Grow

There are a couple of things to understand about Bitcoin growth. First, Bitcoin is growing in popularity and use worldwide. Users are adopting Bitcoin as a store of value like gold and using it as a payment method in places where banks do not exist. Second, Bitcoin is growing in price.

When users began mining Bitcoin on laptops in 2009, it had little value. Yet today 1 Bitcoin can be exchanged for $12,000! Around 2020, billions of Dollars of institutional money began to flow into cryptocurrency investment. Is cryptocurrency for dummies? It has been declared “dead” many times, but Bitcoin not only survives, but thrives.

Examples of Institutional Money Investments in Bitcoin:

The list of investors and cryptocurrency investment continues to grow each day. When considering what cryptocurrency to invest in, look at what professionals invest in as well.

Bitcoin Security

The Security of Bitcoin is Based Upon a Strong User Network

The security of the Bitcoin network has proven itself time and again. Over the 11-year history of Bitcoin there have been many challenges to the network that could have spelled failure. However, Bitcoin lives on. However, it is important to note that many of the most infamous Bitcoin hacks have been of the exchanges that transact Bitcoin. As a result, experts have faulted the exchanges lack of security for the hacks and not the Bitcoin network itself.

Block chain networks like Bitcoin handle transactions of cryptocurrency on a distributed ledger. This means that the mining computers that run the network share information on the ledger and ultimately, must reach a consensus. As a result, the more computer users that operate on the network means the ledger becomes more distributed among users. This inherently creates security and decreases the chances of one hacker group to gain control of the network. This also ensures that Bitcoin is a solid cryptocurrency investment.

One other security factor is the price of Bitcoin. Bitcoin’s network was fragile and was new. From the start, Bitcoin had few users, low capitalization and a weaker network. However, currently Bitcoin price is approximately $12,000. Hacking the Bitcoin network today is nearly impossible. The network is impenetrable without $Billions in capital. Understanding cryptocurrency for dummies requires knowing that it is impossible to hack Bitcoin.

Community Support

Bitcoin has a long history of community support. It has a growing community and network of individuals who believe in the project and who contribute to Bitcoin’s success. The Bitcoin community includes people like crypto enthusiasts, coders, technology developers, Bitcoin users and block chain startups. Ideas are shared on Reddit and Telegram, two popular Bitcoin communities.

$240 Billion Market Capitalization of Bitcoin

The total market capitalization of Bitcoin is around $240 Billion dollars and growing. Bitcoin has always been the dominant cryptocurrency in the market and remains so. Moreover, its market dominance is approximately 60% against the other cryptocurrencies. Moreover, approximately $6 out of every $10 in the cryptocurrency market is used to purchase Bitcoin. Clearly, cryptocurrency investment starts with Bitcoin. This is 240 Billion reasons why cryptocurrency for dummies is not for dummies.

Other Cryptocurrencies to Consider

Here are some other cryptocurrencies that are worth looking at more deeply. Although Bitcoin is the most dominant and most secure cryptocurrency, there are many other cryptocurrencies that have strong security and strong use case value. A cryptocurrency investment portfolio may include other cryptocurrencies. Understanding cryptocurrency for dummies requires knowing that each project serves a different purpose.

Ethereum (ETH)

A Block Chain Project That Uses Smart Contracts to Power Other Projects

Ethereum is an open-source, decentralized block chain project. Smart contracts are one thing that Ethereum is known for. It provides open access to money, via the Ether cryptocurrency coin (ETH), and technology, exemplified by the thousands of applications that are operating on the Ethereum network. The ETH coin of Ethereum is second only to bitcoin in market capitalization.

Ethereum uses a payment system for ETH (Ethereum token). In addition, it implements smart contracts and allowing whole new projects to run on top of the Ethereum block chain. For example, “CryptoKitties” was launched in November 2017. CryptoKitties was a decentralized application. It is a digital collecting and trading app of virtual felines that works on Ethereum.

Monero (XMR)

Created in 2014 from a fork in the Bitcoin block chain, Monero is a privacy coin. Monero uses what it calls an “obfuscated public ledger” which makes transactions of Monero private. Moreover, Monero is a tested privacy payment method. The project has longevity and a working record of privacy.

Monero gets a bad reputation at times. For example, it has been used on the dark web as an illegal payment method. However, it should be noted that paper currency such as the US Dollar can also be used for illegal purposes. Privacy for legal transactions is an important aspect for money and Monero is the foremost privacy cryptocurrency on the web.

XRP (XRP)

XRP is a currency that operates on a digital payment platform known as RippleNet. The company known as Ripple operates XRP. The currency is not technically a cryptocurrency and does not operate on a block chain. Instead, XRP is a centralized, distributed ledger technology. XRP was designed as a payment system. It is a competitor to the SWIFT payment system. The SWIFT system is used by banks worldwide.

Chainlink (LINK)

Developed in 2017, Chainlink is a decentralized network that connects smart contracts with real world data. The Chainlink decentralized oracle network is operated by node operators. Operators that maintain nodes are paid LINK cryptocurrency. The nodes connect the system like links in a chain. Chainlink runs on the Ethereum network and plays a critical role in execution of smart contracts. It is one of the new rising stars of the cryptocurrency revolution.

Polkadot (DOT)

Another new rising star in the cryptocurrency space is Polkadot. The Web3 Foundation created Polkadot. Its primary function is to facilitate the operation of block chains together. The DOT coin functions in three ways: staking, bonding and networking. Finally, Polkadot contains special tools like specialization, scale and inoperability which act as catalysts between block chains.

Binance Coin (BNB)

Binance coin is a utility token. It is used to pay for Binance exchange fees. It also helps power the Binance decentralized exchange (DEX). The Binance coin is a deflationary coin. It is burned frequently by Binance. Part of the reason that BNB is so popular and successful is due the success of the Binance exchange.

Litecoin (LTC)

For a long time, Litecoin was silver as Bitcoin is to gold. It was the little brother of Bitcoin. And much like Bitcoin, it is a peer-to-peer payment method using block chain technology. Created by legendary crypto investor, Charlie Lee, Litecoin is slower than bitcoin and has been the quiet cryptocurrency for a long time. Litecoin has a strong support network online. In addition, it is accepted as a payment method worldwide. There are many Litecoin wallets.

Cardano (ADA)

Named after Gerolamo Cardano, a 16th century Italian polymath, the Cardano project began in 2015. It is an open-source software project. Moreover, it innovates the design of cryptocurrency. Cardano has a long-term plan called the Road Map. Cardano’s most notorious feature is its implementation of peer-reviewed research. Research and peer review are a part of project development. It has a $3 Billion market capitalization.

A team of academics, researchers and developers managed Cardano. They focus on solving cryptocurrency problems. Moreover, Cardano does not focus on one use case scenario for cryptocurrency; instead it appears to be tacking many problems at once, such as currency, proof of stake, smart contracts, scalability, security and even scripting. In addition, Cardano uses the delegated proof-of-stake method to maintain the network functionality. This is different because it is more efficient for electricity consumption.

Future Predictions

It seems clear that in 2021, Bitcoin will begin its next phase of expansion and adoption. As a result, Bitcoin’s price will likely go much, much higher.

Anthony Pompliano and Max Keiser, two well-known investors in the cryptocurrency space believe that the Bitcoin price will exceed $100,000 in the next few years. Other investors like Mike Novogratz and Chamath Palihapitiya believe it is destined to go even higher to levels like $400,000 and $1,000,000, respectively. It should be noted that the investors mentioned are worth Billions cumulatively and clearly understand money and markets. As a result, their predictions should be seriously considered.

Hopefully our article, “Cryptocurrency for Dummies” has helped you better understand cryptocurrency and Bitcoin. While understanding the concepts takes time, eventually we hope that you see that Bitcoin and cryptocurrencies have real value. In addition, they will play an important role in the future of money.

Read More:

Prediction of Bitcoin Price

The Fastest Growing Cryptocurrency

Best Cryptocurrency

Disclaimer: It is important to note that Piggy Bank Coins does not provide financial advice. We do not endorse or recommend any financial investments. Instead, we provide information for educational purposes to those seeking knowledge regarding personal finance. However, in the spirit of transparency, note that the author is an investor in cryptocurrencies, precious metals and some equities.

In addition, The Federal Trade Commission (FTC) requires that Piggy Bank Coins disclose to readers that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. Moreover, we try our best to keep things fair and balanced, to help you make the best choice for you.

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