Cryptocurrency and money

Have you ever thought about what money really is, how much money there is and where it comes from? Is cryptocurrency money or is it just a fad? What is the difference between Bitcoin and the Dollar? Let’s dissect the definition of money and answer these and some other questions.

Bitcoins in the physical

Content:

1. Essence and history of money

2. Where do cryptocurrencies come from?

3. Who participates in cryptocurrency emission

4. Differences between cryptocurrencies

5. Differences between Bitcoin and the Dollar

6. What affects cryptocurrency prices?

7. Cryptocurrency—money of the future

8. How to invest in cryptocurrencies

9. The world is moving toward crypto

1. Essence and history of money

Money is a universal equivalent to any good or service. It substantially simplifies everyday life and gives freedom.

Throughout history, money has always existed in different forms:

1. The first money ever was actually items: shellfish shells on Pacific ocean islands, animal hides in Slavic countries, and so on. These natural currencies had approximate value, which was lost over time due to a number of objective reasons.

2. Gold was the first universal holder of value which was determined by weight, and its authenticity was easy to verify. Gold was used all around the world and didn’t lose value as time went on.

3. But gold supplies were limited, which started slowing down development. The problem was solved by introducing paper bank notes and metal coins. Those, too, became a wrench in the wheel: maintenance cost extra resources.

4. Today, bank notes and coins are gradually being replaced by electronic money, less demanding in terms of maintenance. But electronic money, too, turned out to be imperfect: unending emission speeds up inflation, traceable capital is no friend to anonymity.

5. This is why cryptocurrency came into being: it has the advantages and no shortcoming of the previous forms of money. Cryptocurrency is invulnerable to manipulations and counterfeiting, its price relentlessly goes up (in the long run), and it is anonymous.

2. Where do cryptocurrencies come from?

The first cryptocurrency, Bitcoin, launched in 2009. Today their number exceeds 900. But a lot of people still have no idea as to where cryptocurrencies come from or who needs them.

Bitcoin was designed as a digital analog of gold. And it is produced in a similar way—it is mined in digital space using computers.

Mining is the generation of new blocks and maintaining a distributed cryptocurrency chain. Dedicating computing power to new transaction blocks, miners get rewards in the form of cryptocurrency units.

Mining is the process of crypto token production

3. Who participates in cryptocurrency emission?

Anybody can participate in mining. What’s needed is capable equipment: computers or laptops with sufficiently powerful processors and graphics cards, or ASIC devices.

In order to start mining, you have to choose a fork, a pool, a miner, to set up and launch equipment, and create a crypto wallet.

Forks are altcoins or cryptocoins based on Bitcoin’s foundation. When choosing a fork, mining profitability is calculated with the encryption algorithm factored in.

Forks in a nutshell

4. Differences between cryptocurrencies

Cryptocurrencies differ on hashing algorithm, mining difficulty, attack resilience, required number of confirmations, etc.

Every cryptocurrency has its perks.

• Litecoin uses the Scrypt algorithm, whereas Bitcoin—SHA-256.

• Bitcoin network block generation time is 10 minutes, whereas Ethereum—14.5 seconds.

• Namecoin is both a cryptocurrency and a system or alternative DNS servers.

Different strokes for different folks

5. Differences between Bitcoin and the Dollar

Let’s consider some of the differences between cryptocurrency and fiat money by comparing Bitcoin with the Dollar:

• All participants in the Bitcoin ecosystem are equal, nobody has the power to freeze or cancel a transaction; whereas a USD-denominated transfer requires bank approval before it can go through.

• Bitcoin transactions are free from commissions; fiat money transfers are possible only through banks or payment systems that impose their conditions and commissions.

• The total number of bitcoins is capped at 21 million; the Federal Reserve simply prints money whenever it deems necessary—the more bank notes there are, the less value each holds. For instance, as of June 2018, there were $1.62 trillion Federal Reserve notes in circulation.

• Bitcoins are cryptographically protected, therefore it is impossible to counterfeit them; dollars can be simply printed on a printer, plus Fed servers are not as secure as Bitcoin’s blockchain.

6. What affects cryptocurrency prices

Demand is the main factor that shapes the price of a cryptocurrency: higher popularity means higher price. This is one more reason to liken cryptocurrency to precious metals: if people didn’t seek owning gold, it wouldn’t cost more that cast iron.

The next factor—technical parameters: more advanced technologies at the foundation of a cryptocurrency translate into higher demand for it. Nobody would want to invest in something that doesn’t kindle optimism. For example, thanks to the Smart Contracts technology, Ethereum managed to slip into the second place in terms of market cap.  

Besides that, cryptocurrency prices are affected by public sentiment. This is a new phenomenon and people approach the unknown with caution, that’s why events and statements by politicians significantly affect crypto market moves.

Bitcoin’s purchasing power

7. Cryptocurrency is the future of money

It is widely known, that the first thing that was sold for bitcoins was pizza (two pizzas to be precise)—in 2010 it cost 10,000 bitcoins. In 7 years that amount of crypto was worth $50,000,000.

Property is now sold for cryptocurrency:

Pay with Bitcoin for a house

Bitcoin is cashed by ATMs:

Bitcoin ATM

8. How to invest in cryptocurrencies?

Cryptocurrency is a promising industry that is rapidly developing. If you want to extract profits from cryptocurrency investment, the sooner you start, the better.

A great way to do it—go to exchanger monitor OKchanger. In order to buy bitcoins, you’ll need some electronic currency, PayPal USD, for example.

In the table on the left-hand side click on PayPal USD and Bitcoin BTC. The monitor will display a list of appropriate services:

PayPal USD to Bitcoin exchangers

Select an exchanger, preferably the one at the top of the list since it offers the best exchange rate. Click on its name and get redirected to its website where you once again select the currencies and how much you’d like to exchange. After that, you’ll be prompted to create an order:

PayPal USD to Bitcoin exchange form

Fill out the form and click “Submit” below:

Pay the specified amount in PayPal USD and expect Bitcoin in your crypto wallet.

9. The world is moving toward crypto

We are witnessing a gradual transition from the fiat-based financial system to a cryptographic one. Data encryption and distributed chain of blocks technologies contain immense potential that is accessible to anyone with no strings attached. It is accessible to you too.

It’s been 8 years since the creation of Bitcoin. This allows us to track the trajectory of the cryptocurrency industry. In order to draw a line, all it takes is two dots:

• The price of Bitcoin goes up and down, but rises in the long term: from $0,06 in 2010 to almost $5000 on September 1, 2017.

• Bitcoin is slowly seeping into the settlements realm: as a payment method, cryptocurrency is accepted in restaurants and in the real estate market.

Can you see where the price is going?