Cryptocurrency Explained: The Ultimate Guide for Mastering and Earning a living with Bitcoin, Ethereum and other Altcoins

By HijezGlobal

The most informative Cryptocurrency Bible in the market.

Today cryptocurrencies have become a global phenomenon known to most people. While still somehow geeky and not understood by most people especially Newcomers, information provided in this book unlocks the secretive world of cryptocurrency and how to master it.

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• Language: English
• Publisher: HijezGlobal
• Release date: Jan 8, 2018
• ISBN: 9781983679476

Book preview

Chapter 1

Basics of Cryptocurrency

What is Cryptocurrency?

Sometimes known as coins, cryptocurrencies are a 21st century creation — a mixture of digital assets, huge amounts of computing power and a network of servers on which to store shared data.

Unlike everyday money, they are decentralised — meaning they are not issued or guaranteed by a central bank and therefore fall outside the purview of regulators. The currencies are secured against hacking by cryptography and can be converted into real-world money anonymously. This has attracted some criminal elements, a point emphasised by regulators and critics.

The first cryptocurrency to capture the public imagination was Bitcoin, which was launched in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. Since then, numerous other cryptocurrencies have been created, including Ethereum, Ripple, Litecoin and Dash. These are frequently called altcoins, as a blend of bitcoin alternative. They have different characteristics, which allow users to treat them very differently. That, in turn, partly underpins their appeal and valuations. Bitcoin sees itself as an alternative to central bank currency; Ethereum as crypto-fuel that is not to be used as a currency. Ripple is software aimed at financial markets, such as foreign exchange.

Six Most Popular Cryptocurrencies

Bitcoin is attracting enormous attention from investors, who keep driving the price to new records, but it is not the only cryptocurrency in existence. As fears grow that Bitcoin will prove to be a bubble, more and more people are starting to consider its rivals.There are now hundreds of cryptocurrencies and, while they have significant differences, all are based on blockchain technology.

Bitcoin

A Launched in 2009, Bitcoin is the original digital currency. It was created as an alternative to existing forms of currency, as it relies on a blockchain network rather than any bank or government.

A record of all transactions is held by every member of its network, and participants called miners work to solve complex mathematical equations to verify new transactions. This require large amounts of computing power and the miners are rewarded with new Bitcoins; they also earn Bitcoin from transaction fees.

Only 21 million Bitcoins can ever be created. Bitcoin is not truly anonymous. Transactions are stored publicly, but are effectively under a numerical pseudonym.

Bitcoin’s success has led to problems with the speed at which the network can confirm transactions, the cost of transactions, and the amount of energy consumed through computing power per transaction. Differences in opinion about these issues have led to offshoots such as Bitcoin Cash, which prioritises fast, cheap payments, with more coherent control over upgrades, over Bitcoin proponents’ core goal of remaining a public system with no central control.

Ethereum

Rather than just hosting a cryptocurrency, Ethereum’s network also allows computer applications to run on it. Advocates say it is a more useful development of Bitcoin. For instance, a file-storing application could be set up, where instead of relying on a single company such as Dropbox to keep your file, you store it on a decentralised network. The network also offers so-called smart contracts, which can be set up to execute commands when certain conditions are met, such as a required number of people agreeing to a payment.

Ethereum’s currency is called Ether, which can again be mined by solving equations to validate new transactions on the network. Transactions can be processed more quickly and efficiently than with Bitcoin.

However, Ether is not explicitly a currency like Bitcoin, although it can be used to pay for services on the Ethereum network, such as the cost of running an application. Following the attack on the DAO in 2016, Ethereum was split into Ethereum (ETH) and Ethereum Classic (ETC). Ethereum (ETH) has a market capitalization of $4.46 billion, second after Bitcoin among all cryptocurrencies.

Bitcoin Cash

That’s Bitcoin Cash is an offshoot of Bitcoin. It resulted from a split, called a hard fork in cryptocurrency circles, earlier in 2017. A fork is essentially a software update. If enough of the participants in a particular currency choose to switch to the new software, the currency carries on as before. But if there no such agreement, a new, competing digital currency can be created. This is what happened with Bitcoin Cash.

It has many similarities with Bitcoin, but its software is able to process transactions more quickly, at lower cost, and to maintain that speed by altering the difficulty of mining.

Critics argue that in order to achieve these aims Bitcoin Cash has to be more centralised and less secure than Bitcoin. Bitcoin Cash cannot be spent at all of the places that accept Bitcoin. The fact that its price has shot up lately despite this suggests that the vast majority of buyers are speculators hoping for a quick profit.

Ripple

Ripple is significantly different from the other currencies here. It still uses a blockchain network to validate transactions, but that network consists of participating financial institutions. Ripple’s finite number of coins, called XRP, were not mined but issued. Ripple itself is a company, which has received funding from investors, so the currency has central control.

Transactions are instant, and in place of a transaction fee a small amount of XRP is destroyed every time a transaction is made. This is for security reasons – to make it very expensive for someone to attempt to overload the network by putting through lots of transactions. Unlike Bitcoin, Ripple isn’t aiming to replace the world’s existing financial system, just to upgrade it.

Litecoin

Litecoin began life in 2011 in an attempt to improve on Bitcoin. It has been described as the silver to Bitcoin’s gold. It is a cryptocurrency that involves mining, but has some technical differences.

These include the ability to confirm transactions more quickly and the use of different algorithms when