Frequently Asked Questions: Cryptocurrency
➔ What is cryptocurrency?
“Cryptocurrency” is a rapidly growing subcategory of digital money. Many different cryptocurrencies have entered the market since the invention of Bitcoin in 2009. The name cryptocurrency alludes to each currency’s use of cryptography as a means of security and control. These currencies are conventionally decentralized, stemming control from their own individual blockchain transaction database.
➔ What is Bitcoin?
Bitcoin is described as many things: cryptocurrency, payment system, digital money; however, at the most elementary level, `Bitcoin is a network of users that enables this payment system and cryptocurrency, and it is the first of its kind. This digital asset exists as data. It is decentralized and possesses no physical properties. In layman terms, it is cash for the internet.
➔ What is blockchain technology and is this Bitcoin architecture safe?
The technological architecture behind Bitcoin and other cryptocurrencies is referred to by the term “blockchain.” The underlying idea behind blockchain technology is the record of every single transaction in a currency’s history. This interconnected network spans the computers of all bitcoin users, and in the case of a transaction, this network reaches into its records to verify the legitimate ownership of the selling party. Once this verification process is completed and double-checked, the transaction is grouped with other pending transactions, and the computing power of users known as “miners” use Bitcoin software to verify the entire “block” of transactions. This multi-step verification architecture is itself immune to the risks of hackers, and blocks of transactions only become safer and safer as more blocks are added to the historical records.
➔ What makes a cryptocurrency’s value real?
Unlike the U.S dollar, cryptocurrencies do not have any centralized regulation. Unlike gold and silver, cryptocurrencies have no physical properties contributing to their value. Just like the U.S. dollar, cryptos are driven in large part by the public’s willingness to trust and adopt them as a form of payment. One can gauge this willingness by the ever-increasing number of firms accepting cryptocurrencies as legitimate forms of payment. Bitcoin describes the value of cryptocurrencies to be derived from “the properties of mathematics.” These properties include traditional monetary attributes such as scarcity, recognizable, and durability, and they take other traditional attributes like durability and portability to the next level.
➔ What makes cryptocurrencies so attractive?
The key benefit of such cryptocurrencies is the freedom they offer to be participating parties. Buyers and sellers no longer have to concern themselves with limits imposed by distance, governmental restrictions, and bank holidays. This freedom is greatly complimented by a secure control users have over their funds. Merchants cannot charge users without consent, and payments require minimal personal information. These elements are extremely effective in preventing theft of funds and identify, and the lack of personal information allows merchants to expand their operations to areas where credit cards are not available or fraud is a great concern.
➔ What prevents these attractive elements from being realized?
Crypto is a relatively new, developing technology with great potential; however, its success will ultimately be determined by public awareness of its utility. More and more businesses are making the move daily to accept different cryptos. These businesses are very aware of the advantages such a payment method affords them, yet there is great potential for businesses to still make the move. As they do, all businesses will benefit more and more from the network effects of the Bitcoin technology.
➔ How do I manage ownership of my cryptocurrencies?
Each cryptocurrency is a component of its own individual blockchain network. Thus, each unit is inseparable from the transaction records known as the blockchain. Despite the connection of one’s funds to the blockchain, a user can store his crypto credentials and access them on a wallet. Each unit produces “keys,” one public and one private, which allow access to their specific unit. These wallets, offered in a range of formats, allow users to collect and store keys for storage, thus functioning similarly to a physical wallet.
➔ Where can I use my cryptocurrency?
Recent surges in crypto popularity have been greatly complimented by vendor willingness to accept crypto as a form of payment. Companies large and small have made the move to sell products online in exchange for cryptocurrencies. Notable merchants include:
o Apple App Store o Bloomberg
o CVS
o Dell
o Dish Network o Home Depot o Kmart
o Microsoft
o PayPal / EBay
o Sacramento Kings o Sears
o Square
o Subway
o Chicago Sun-Times o Target
o Tesla
o Victoria’s Secret
o Virgin Airline
o Virgin Mobile
o Whole Foods
➔ What do notable investors think about cryptocurrency?
Cryptocurrency has caught the attention of many notable entrepreneurs and economists. Among the many backers of cryptocurrencies are Microsoft’s Bill Gates, Virgin Group’s Richard Branson, and PayPal’s Peter Thiel. Each of these billionaire’s companies have made the decision to accept cryptocurrencies. Gates and Thiel have even invested in the industry itself. Former Chairman of the United States Federal Reserve, Ben Bernanke, stated he believes the currencies hold long-term promise given they “promote a faster, more secure and more efficient payment system.”