Cryptocurrencies For Dummies: A Complete Guide To The Currency Of The Future

 

History of bitcoin

Cryptocurrency, what is it?

Also called cryptocurrency or cryptographic currency, cryptocurrency is a virtual currency whose origins date back to the years of 1995. This type of currency was created for a specific purpose: to allow two totally unknown people to carry out in complete safety monetary transactions without any other external intervention (bank, notary, etc.). Users of this type of currency validate all transactions themselves with their unique signature. All transactions involving crypto-currencies are recorded in a large register, which can be consulted by everyone, the blockchain. The cryptocurrency guarantees complete anonymity for its users to prevent theft and other hacking attempts.

History of cryptocurrencies

Discovering cryptocurrency the currency of the future

The origin of crypto-currencies dates back to 1998 with the work of Wei Dai on ''B-Money'' and then that of Nick Szabo in 2005 on ''Bit Gold''.

Cryptocurrencies For Dummies - A Complete Guide To The Currency Of The Future PDF

The Beginnings of Cryptographic Payment Systems: Wei Dai's B-Money

In 1998, a computer engineer, Wei Dai published the results of this work on B-Money, a new currency that he himself had imagined. It describes the operating principles of this new currency whose payment system is anonymous and distributed.

With B-Money, money transactions were transferred by broadcasting the transaction to all participants. They had the possibility of concluding contracts, and also of terminating them in the event of default. Contracts between two participants were arbitrated by a third party, with its consent. In the event of a disagreement, each of the participants in the transaction disseminated evidence in its favour; they also determined the levels of reparations and fines.

Through B-Money, Wei DAI presents his vision of the world; a world without government, without violence, where privacy is fully respected.

A new form of payment: Nick Szabo's digitized gold

The concept of B-Money presented by Wei Dai in 1998 had a big drawback. With this currency, the servers supposed to centralize the transactions had to pay a deposit according to a mechanism that was not very explicit. Thus, in 2005, another computer engineer specializing in cryptography proposed another electronic currency: Bitgold. Bitgold , which means digitized gold in English, is inspired by transactions with gold and other precious metals.

The advantage with these metals is that they are by nature deflationary. In addition, they are present in limited quantities on Earth, making it easier to control these transactions. But Nick Szabo had, if he wanted his Bitgold to be reliable, to resolve certain difficulties inherent in transactions with gold.

Indeed, you cannot trade gold on the internet (the problem, although partly solved today, nevertheless existed in 2005 when Nick imagined his new currency. In addition, trade with gold was risky , since a transfer can be intercepted and the gold stolen. Nick Szabo then proposed an innovative solution to solve these problems: Bitgolds will be created directly on the internet, and this, at a high price. This involved a chain of proof calculation, or Proof of Work.

But just like Wei Dai's, Nick Szabo's currency suffered from a deficiency: the trust model. Indeed, it did not provide a way to control the number of addresses used to authenticate a transaction chain.

The Electronic Money Revolution: Satoshi Nakamoto's Bitcoin

The hopes of creating a reliable electronic currency had somewhat collapsed with the failure of Nick Szabo's attempt in 2005. It took until 2009 for a light to finally appear at the end of the tunnel.

In February 2009, Satoshi Nakamoto released an announcement regarding his work on bitcoin with the bitcoin software he used with his own computer to create the first bitcoin. Bitcoin is considered to be the very first reliable electronic money. However, no one has been able to identify who its founder, Satoshi Nakamoto, really was.

Why such success for cryptocurrencies?

Cryptocurrencies have been on the rise for a few years. This market registers new investors every day. Bitcoin remains the leader of this market for more than 10 years. This cryptocurrency has a growing trend. It has become an alternative currency adopted by economic actors. Recently PayPal allowed its American users to make cryptocurrency transactions.

This attraction that people have for cryptocurrencies is simply due to the adoption of these tokens by big names like PayPal . There are companies today that accept cryptocurrency payments. This only increases the interest of investors in these cryptocurrencies.

Advantages and disadvantages of cryptocurrencies

best platforms to buy cryptocurrencies 1

Crypto-currencies are considered by many finance specialists as the future of money in the world. Indeed, they have a multitude of advantages. However, this is also not without drawbacks. The advantages and disadvantages that will be presented here are not specific to a particular crypto-currency (indeed, we could not present the advantages and disadvantages of all crypto-currencies, given their constantly growing number).

Advantages of cryptocurrencies

Electronic currencies are considered to be one of the most secure and anonymous forms of monetary transaction in existence. Here are some advantages of these types of currency.

  • Cryptocurrency is a completely free currency: it does not depend on any central bank. In addition, anyone can create their own electronic money from an existing one.
  • Transactions with cryptocurrencies guarantee complete anonymity
  • The quality of transactions is assured
  • Transactions are open: indeed, everyone can consult the history of transactions carried out with the blockchain .
  • Cryptocurrencies are designed for the internet, so they represent an alternative to traditional payment systems.
  • There is no intermediary during the transactions: the money goes directly from the issuer to the recipient.
  • Transactions are irreversible: once the transaction is confirmed, it cannot be undone.
  • Crypto-currency cannot be counterfeited: one cannot reproduce and pass off as such a Bitcoin as one could do with the Dollar or the Euro.

Disadvantages of cryptocurrency

Despite all these advantages, electronic money still has disadvantages.

  • Electronic money payment networks are still underdeveloped to date, although significant advances are constantly emerging.
  • The consumer is divided and is sometimes spoiled for choice as to which currency to choose. Indeed, there are a very large number of crypto-currencies, and new ones are regularly emerging.
  • Crypto-currencies cannot be produced unlimitedly, a threshold not to be exceeded being set. This therefore entails risks of inflation or deflation.
  • It is not possible to transact with certain electronic currencies in certain countries, such as Russia and other Eastern European countries.
  • Mining , a process for creating electric currencies, requires increasingly high energy consumption.

Can we pay with cryptocurrency?

Cryptocurrencies are becoming more and more popular. While most of those who invest in cryptocurrencies buy them in the hope of seeing their value increase over time to resell them, today they are fully usable currencies. Despite the fact that the places that accept cryptos as currencies to buy goods and services are limited, the structures that accept them are increasingly important. The crypto debit card is so far the payment method recognized by these structures.

Today, it is possible to make a travel reservation on Travala using cryptocurrencies. This site accepts over 40 different cryptos. It is also possible today to afford a new car using bitcoin. The bitcars site accepts the purchase of vintage or luxury cars using bitcoin.

Blockchain, what is it and how does it work?

Definition and operation

Today, we can no longer talk about electronic money without talking about the blockchain. The blockchain or even chain of blocks is the accounting register of electronic money, and in particular of Bitcoin. It is a technology for storing and transmitting information, transparent, secure, and operating without a central control body.

By extension, a blockchain constitutes a database which contains the history of all the exchanges carried out between its users since its creation. This database is secure and distributed: it is shared by its various users, without intermediaries, which allows everyone to check the validity of the chain. The verified information is grouped into blocks at regular time intervals, linked and secured with cryptography, thus forming a chain, hence the name blockchain.

A blockchain is therefore a public, anonymous and tamper-proof accounting ledger. Thus, the mathematician Jean-Paul Delahaye imagines the blockchain as “a very large notebook, which everyone can read freely and free of charge, on which everyone can write, but which is impossible to erase and indestructible. »

Blockchain: the origins

The very first blockchain appeared in 2008. It allowed the operation of the first electronic money: Satoshi Nakamoto's Bitcoin with which it was designed. However, nowadays it is no longer used only for Bitcoin, but for several other electronic currencies; and some companies and governments are even considering its use for more than e-money.

The blockchain is very promising today, given the many applications that can be made of it.

Mining: an important step in the creation and transactions of crypto-currencies


Cryptocurrency transactions need to be transmitted and validated by the computers that make up the network. Thus, any individual can participate in this validation step, provided that he has the necessary computing power. As soon as a transaction is validated, each computer that participated in its validation receives a certain amount of electronic money (much like a commission) according to its participation in the calculations that allowed the validation. It is this stage at which people can participate in the completion of the transaction that is called mining: the people who carry it out are called miners; they participate in monetary creation.

However, to participate in mining, it is necessary to have equipment, computers with the necessary computing power, hence the high energy consumption. Mining works much the same way as finding gold and other precious methods:

  • At first, there are a small number of people panning for gold. It is therefore quite easy to find them.
  • Then the information spreads. Many people therefore start looking for it, making gold difficult to find, and therefore rarer.
  • So a lot of people are starting to invest in technology to pan for gold. This means that researchers who do not have enough advanced technologies are forced to give up.
  • The value of gold then increases, since it is rare, limited. At the same time, the chance of finding them decreases.

The pattern is much the same with crypto-currencies where we notice the emergence of several megastructures specialized in mining. Thus, for the most popular electronic currency, Bitcoin, we have entered a phase where mining requires a significant investment in hardware for any new person who wants to follow the movement.

It is also very difficult to generate blocks (mine) because of the large amount of energy required. The most appropriate solution to start mining is therefore to join a pool of block generators, especially when it comes to Bitcoin. On the other hand, with other less popular currencies (Altcoin), the competition for mining is less weak and the generation of blocks more accessible.

What is the difference between NFTs and cryptocurrencies?

french nft platform

Although both digital assets (NFT and cryptocurrencies) use blockchain for their transactions, they are different from each other in several ways. Cryptocurrencies are fungible, i.e. interchangeable, digital assets, while NFTs are non-fungible tokens .

Similarly, these assets also differ in their source code. This is because most NFTs are based on the Ethereum blockchain which keeps all digital records of every transaction. This mode of operation allows it to generate an immutable ledger of NFT transactions. Also, the only protocols accepted for the creation of NFTs are Smart Contracts ERC-721 and ERC-1115. Having an NFT is like holding a unique token with specific inscriptions.

What is a decentralized application (DApp)?

We call decentralized application (Decentralized Application) or DApp a software application that works partially or totally thanks to a set of different actors. Most of the time, it uses one or more smart contracts that run on one or more blockchains.

Decentralized applications often come with a transparent user interface, a peer to peer message communication protocol , a distributed model of data storage, and a decentralized system of name resolutions. These applications are opposed to centralized applications.

How to acquire cryptocurrencies?

Difference between NFTs and cryptocurrencies

There are two ways to buy crypto-currencies  : you can buy them directly on simple purchase platforms or sites or on exchange platforms, which we will discuss later. Simple purchase sites are well-designed platforms that manage certain currency transaction processes, allowing neophytes to easily acquire electronic money.

Coinbase: one of the pioneers in the sale of electronic money

If you are just starting out and want to buy e-money, one of the first sites you will come across is surely Coinbase . This site has made buying cryptocurrency fast and secure.

After Coinbase, there are also several other sites offering similar services with slight differences in fees charged and transaction time. We can mention: Cex , Coinhouse , Paymium .

Main Cryptocurrency Exchanges

Top Bitcoin Exchanges

Apart from simple purchase platforms, there are also exchange or trading platforms where users can sell and buy electronic currencies . However, it is recommended to use trading platforms only if you already have electronic money. These platforms have the advantage of allowing exchanges with several currencies.

HitBTC is one of the most popular in the business. Very easy to learn, this site allows you to trade with most existing cryptocurrencies.

BitRex is also a trading platform. It allows transactions with some not very popular currencies. However, its handling remains a bit complicated.

Other sites where you can acquire cryptocurrencies by trading them are: Bitfinex ,  Kraken , Poloniex , Livecoin , Binance .

How to choose your Wallet or electronic wallet?

virtual currencies

When you start trading with cryptocurrencies, you will very quickly need a Wallet. A Wallet is an electronic wallet that stores, receives and sends cryptocurrency. In general, three main types can be distinguished.

  • Wallets that are automatically installed when you create an account on a shopping or trading platform. The most popular are those of the Kraken , Poloniex and Coinbase platforms .
  • Multi-wallet wallets that allow the use of several cryptocurrencies at the same time. Basically, it's as if you can have Euros, Dollars and Yen in your account. The most used multi-wallet wallet is Jaxx closely followed by Coinomi .
  • Single-currency wallets. Each cryptocurrency has its own and official one.

The choice of a wallet depends on the use to be made of it: if you want to use only Bitcoin, a simple wallet is the most appropriate. On the other hand, if you plan to use several crypto-currencies, then choose a multi-wallet wallet.

Top 10 Cryptocurrencies

Top 10 Cryptocurrencies

Here we will introduce the ten most popular cryptocurrencies .

  • Satoshi Nakamoto 's Bitcoin remains the most popular cryptocurrency with a money supply of $680 billion
  • Ether with $ 283 billion
  • Then we have Tether , 78 billion dollars
  • BNB , $ 60 billion
  • The USD Coin , $49 billion
  • Cardano , $ 34 million
  • Ripple , $ 28 billion
  • The Solana , $27 billion
  • The Terra , $21 million
  • Dogecoin , $ 18 million.

The most promising cryptocurrencies in 2022

In which promising cryptocurrency should you invest in 2022? This is the question that many cryptocurrency investors have been asking themselves since the start of this new year. Here is for you our top 3 of the most promising cryptocurrencies in 2022.

  • Bitcoin : despite the fact that this cryptocurrency is a little expensive at the moment, the fact remains that it remains the first crypto of the future in 2022. It can still break records and reach new heights. You should know that it is the latter that has dominated the entire cryptographic market for more than 10 years. This cryptocurrency has great legitimacy today, as it is widely used around the world for purchases of goods and services as a method of payment. It offers a low volatility rate compared to altcoins. It enjoys the network effect and has significant liquidity
  • Ethereum is an open source platform that is often used by developers to create cryptocurrencies and decentralized applications. It remains the leader in concepts like non-fungible tokens (NFTs), DeFi (decentralized finance) and smart contracts. This platform benefits just like Bitcoin from a network effect which only increases the number of investors.
  • Litecoin was born in 2020, a little over 2 years ago It very quickly found a place in the safest cryptocurrencies because of the ease of these exchanges.
  • Ripplee is already known for its digital transaction protocol than for its cryptocurrency This is the first project to have received support from traditional financial organizations. This token is tied to a technology platform that is used as a means to facilitate cross-border payments and transfers of funds. It is in partnership with many institutions. It is also one of the cheapest cryptocurrencies on the market. For some analysts, the Ripple could reach 100 dollars within a few months.

In conclusion, the crypto-currency business is very developed today. These new currencies of the future offer interesting alternatives to old currencies.

Enregistrer un commentaire

Post a Comment (0)

Plus récente Plus ancienne