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Bitcoin Basics

Bitcoin

Lets go over some of the basics about bitcoin.

Cryptocurrency vs Altcoins. The only difference is that cryptocurrency covers all digital currency (Bitcoin and altcoins), while altcoins are alternatives to Bitcoin.

Blockchain is a digital ledger where transactions for cryptocurrencies are publicly recorded. The blockchain is stored on nodes, that verify transactions.

Bitcoin Mining sounds intense, but only for the computer. When a computer is "mining" it is racing against other miners on the network to solve a mathematical equation and seal the current block.

Cryptocurrencies are digital assets that can be bought, sold, traded, transferred (etc) digitally. The network for cryptocurrencies is virtually impossible to hack/manipulate since a dishonest group would have to take control of 51% of the network. The network is huge. Bitoin's network is in exohash sphere.

Similar to precious metals, cryptocurrencies can be broken down into smaller sizes. For instance, if you want to own some gold, you don't have to purchase an ounce of gold. Instead, you could pick up $50 or $600 worth depending on how much you want.

All cryptocurrencies tend to vary, but the smallest piece of Bitcoin is currently a Satoshi. Which is a hundred millionth of a bitcoin.

Wallets are unique addresses where you can send cryptocurrencies to.

Another way to view cryptocurrencies could be similar to an equities market. In this equities market, the firm you are purchasing equity towards would be the cryptocurrency. The number of shares you own would be the number of coins owned. The value of the stock/coin is determined by buyers and sellers of the stock/coin. In addition to this equities market would be the ability to use your shares to make purchases, or transfer value to others. Instead of a firm being behind the crypto, you would have the blockchain and network behind the crypto.

Bitcoin is the most well known cryptocurrency today. I consider it a safe haven because people in other parts of the world are able to buy and hold bitcoin as a way to protect themselves from hyperinflation.


Chart from Coinbase.com

Comments

  1. Great primer! Do you think Bitcoin/Altcoins are better investment or trade?

    ReplyDelete
    Replies
    1. Great question! The problem is that there is a lot of digicoins (altcoins) out there. The rapid rise in Bitcoin (somewhere around 100% over since January 2017) is slightly worrisome, but if Bitcoin becomes a global currency then its market cap isn't close to where it could be. That said, one issue that I see is the infrastructure. It needs to find a way to speed up transaction times. That is why I like XRP/XLM. Ethereum is also a really fascinating one. I would try and avoid buying at the highs by waiting for consolidation in the price. Then taking a long view. Hopefully that sort of helps.

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