Compared to other financial currencies, Bitcoin has very little barrier to entry. If you already own Bitcoin, no verification is required and you can start trading almost instantly. Moreover, Bitcoin is not fiat currency. This simply means the price is not related to the economy or policies of any single country.

And unlike stock markets, there are no official Bitcoin exchanges. Instead, hundreds of Bitcoin exchanges operate 24/7 around the world. Because of no official exchanges, this results in no official Bitcoin price where the currency is known for its rapid and frequent price movements.

Secondly is personal spending. You can use Bitcoin to purchase almost anything! From buying cars to travelling the world.

In December 2013, a Tesla model S was purchased for a reported 91.4bitcoins. The dealer, located in California continues to accept Bitcoin as a means of payment. They have since managed to sell a Lamborghini Gallardo for 216.8 Bitcoin.

You can also travel the world using Bitcoins! Just head to www.cheapair.com. On 22nd November 2013, they announced that they would be the first online travelling agency accepting Bitcoin. You are able to purchase flights, hotels, car rentals and cruises. You can even book the whole package.

Cryptocurrency also provides the chance for you to give back to society. How? By crowd funding. You are able to be part of someone’s success story by donating to a crypto crowd funding project. Companies such as Lighthouse have built their crowd funding platform using Bitcoin.

The perks of donating through this system are you will not be charged for your donation and funds will not be released unless the project meets its criteria. You are also able to withdraw from the campaign before its completion.

You have complete control over the donation! Examples of successful funding campaigns are from Dogecoin, which includes campaigns run for Nascar driver Josh Wise.

The question is, Why Cryptocurrency?

Apart from cryptocurrency being very secure and is run through a decentralized network, there are other properties which projects why cryptocurrencies may be the most talked about topic in town. It has also been considered as potentially an investment vehicle, which may garner massive returns.

Have you heard of Erik Finman? The teenage Bitcoin millionaire who started picking up Bitcoin at only $12 a piece back in May 2011, when he was just 12 years old. He received the Bitcoin as a tip from his brother and a $1000 gift from his grandmother.

He now reportedly owns 403 Bitcoins, which holds a value of roughly $2,600 where it has accumulated to a stash of $1.08 million and change.

There are various concrete reasons why you should invest in cryptocurrency. This will be elaborated further in chapter 6, but let me give you a brief summary on the perks of buying cryptocurrency.

Firstly are its transactional properties. Cryptocurrency transaction is fast and global. Transactions are propagated immediately in the network and are confirmed within minutes. Since the transactions are managed by a global network of computers, they do not take into account your physical location. It is possible for you to send your cryptocurrency to someone in your vicinity, or even if they are living on the other side of the world.

Secondly are their monetary properties. The currencies are in controlled supply thus there is a high chance that the value of the currencies appreciates over time. As mentioned earlier, Bitcoin will somehow reach its final number somewhere in 2140.

Third is their revolutionary property. You have more control of what is going on in your account and how the system works and operate. This is due to the decentralized network of peers which keeps a consensus on account balances and the transactions made. As compared to your physical bank account, which can be changed and controlled by people you don’t see and governed by rules you don’t even know?

The Types Of Cryptocurrency Available

The world of cryptocurrency has always revolved around Bitcoin until recently, when virtual currencies has served a very important purpose in the investment realm and people start flocking to cryptocurrencies as compared to fiat currencies.

Believe it or not, aside from Bitcoin, there are over 800 cryptocurrencies! However, we will only discuss the top 5 most prominent currencies in the market. The 5 cryptocurrencies are:

1. Bitcoin
2. Ethereum
3. Litecoin
4. Monero
5. Ripple

Firstly, is Bitcoin.

This is the first ever cryptocurrency invented and remains by far the most sought after cryptocurrency to date. Bitcoin is known as the digital gold standard in the cryptocurrency network. As explained in the previous module, Bitcoin is the pioneer of Blockchain Technology that made digital money possible.

It is the first ever decentralized peer-to-peer network powered by its users without any central authority or middleman which means, no unnecessary costs are included in the digital money transaction.

Over the years of Bitcoin’s existence, its value has fluctuated tremendously from zero to over $2000 per bitcoin to date. Its transaction volume has also reached 200,000 daily transactions.

One major advantage that it has over other crypotcurrencies is bitcoins are impossible to counterfeit or inflate. The reason being there are only 21 million bitcoins created for mining, no more no less. Therefore it is predicted by 2140, all bitcoins will already be mined.

Thanks to its blockchain technology, you have ultimate control over your money and transactions without having to go through a third party such as the bank or Paypal.

Bitcoin transactions are also impossible to be reversed. Therefore, you should only deal with trusted parties as Bitcoin is also used as a means for cyber-crime like dark net markets or ransomware.

Media companies and investment firms in South Korea, India, Australia and Japan have started discussing on how Bitcoin may surpass the value of certain fiat currencies in the future as an alternative monetary system.

ABC News, a national news service in Australia have also reported recently it is likely for Bitcoin to replace even the USD in the next 10 years if it sustains its current exponential growth.

The second most popular currency is Ethereum.

Created by Vitalik Buterin, it has scored itself the second spot in the hierarchy of cryptocurrencies. This digital currency launched in 2015 is predicted to surpass Bitcoin and may be the cryptocurrency of the future. Ethereum is currently worth $279 since its launch.

Is Ethereum similar to Bitcoin?

It is in a way, but not really. Like Bitcoin, Ethereum is a part of a blockchain network. The main difference between the two currencies is that Bitcoin blockchain focuses on tracking ownership of the digital currency while Ethereum blockchain focuses on running the programming code or network. Instead of having to build an entirely original blockchain for each new application, Ethereum enables the development of thousands of different applications in a single platform. In the Ethereum blockchain, miners work to earn Ether. Ether is a crypto token that helps run the network.

Another use of the Ethereum blockchain is its ability to decentralize any services that are centralized. For instance, Ethereum is able to decentralize services like loans provided by banks, online transactions using Paypal as well as voting systems and much more.

Ethereum can also be used to build a Decentralized Autonomous Organization (DAO). A DAO is a fully autonomous organization without a leader. DAOs are run by programming codes on a collection of smart contracts written in the Ethereum blockchain. DAO is designed to replace the structure of a traditional organization and like Bitcoin, eliminating the need for people and a centralized control.

What are the most obvious benefits of Ethereum?

Firstly, a third party cannot make any changes to the data. The system is also tamper and corruption proof. This is because Ethereum is built based on a network formed around a consensus as a result, making censorship impossible. Secondly, just like Bitcoin, Ethereum is backed up by secure cryptography. Therefore, the applications are well protected against any form of hacking. The third cryptocurrency is Litecoin.

When the currency was first launched in 2011, it aspired to be the ‘silver’ to Bitcoin’s ‘gold’. Litecoin also recorded the highest market cap of any other mined cryptocurrency, after Bitcoin after its launch.

The main reason of Litecoin’s creation is to make up what Bitcoin lacked. The main difference between Litecoin and Bitcoin is the 2.5 minute time to generate a block for Litecoin, as opposed to Bitcoin’s 10 minutes.

For miners and technical experts, the Litecoin possesses a very important difference to Bitcoin, and that is a more improved work algorithm which speeds up the hashing power and system altogether.

Are Bitcoins Legal?

Because bitcoin has never been made illegal, and more and more businesses are taking bitcoin, it’s considered a legal currency. Because of that, you should be careful not to use it for illegal activities that may end up causing regulation.

What Happens If You Lose Your Wallet?

Losing your wallet means you’ve lost your bitcoins forever. You could lose a lot of money if you do this. There is no recovery and no entity to help you if this happens. Guard your bitcoins carefully.

Do New Bitcoins Get Created?

Every 10 minutes, a new block of coins is solved. At that time a block reward is determined that states the worth of the block. This is the only way that new bitcoins are created. This takes a lot of electricity which is a factor in the value of the bitcoins.

Are Bitcoins Secure?

Some people worry about the security of bitcoin, but the truth is it’s very secure. The important part is to use trusted software, only work with people you trust, and not trust just anyone on the net. That’s why there is a system in place to prove the work.

Is Bitcoin Data Traceable?

The block chain technology is transparent and makes bitcoins very traceable. Block chain acts as a public ledger for every single financial traction on the bitcoin network. However, everyone uses a pseudonym during transactions, and your wallet key is secret and should be known only to you.

Can You Get a Refund from a Bitcoin Transaction?

There is no refund system. Therefore, you can’t get a refund if you accidentally send the wrong amount of money in a bitcoin transaction. Check your math and check your numbers before you complete any transaction.

Who Can You Pay with Bitcoins?

Some schools around the world are taking bitcoin for tuition payments. Schools like Simon Fraser University in Vancouver, Canada, and Mexico’s Universidad de las Americas Puebla and others are taking bitcoin.

Even companies like Dell are taking bitcoin. You can actually pay in bitcoin to over 300K stores and companies around the world.

Do Bitcoins Use Energy?

Using bitcoin takes more energy than a credit card by almost 400 times. That’s a lot of energy and factors into the worth of the bitcoins.

An interesting fact about bitcoin is that Finland exempts bitcoin from value added tax (CAT). This is a tax that is added to goods and services automatically in some countries. Finland has exempted bitcoin from VAT because it is considered a commodity.

Bitcoin is complicated, to say the least. Hopefully, these facts help you think about bitcoin in a new way. The more you learn about bitcoin, the less likely you are to fall prey to a scam and the more likely you are to use it wisely. You can find out a lot about bitcoin from various websites. Try Bitcoin.org, bitcoinmining.com, and Blockgeeks.com.

Mining

This word is simple to understand because even though it means finding bitcoins digitally using specialized software and code, it is a lot like mining for gold. Gold is finite like bitcoin, so the idea fits. Each miner gets transaction fees for each transaction they confirm, and are also awarded bitcoins for each verified block (see below).

Private Key

This is like your handle or username, but it’s a string of numbers (up to 78 of them) that gives you access to a wallet that contains the bitcoins. It’s more like a password if you think of it, and is tied to a wallet via your alias.

Wallet

This is a cloud place that enables you to collect private keys and manage those keys to let you make transactions using the bitcoin network. It works just like a wallet that is physical. It contains and lets you access the bitcoins that you have. You can have more than one wallet.

Blocks

Blocks connect every transaction together, forming block chains that are verified every ten minutes via mining. This process ensures that you avoid double spending, since technically a bitcoin can easily be copied on your own computer inside your wallets. Using this method makes it impossible to spend copies.

Block Chain

This is the public record of the bitcoin transactions. It’s really a very orderly ledger of blocks, maintaining a chain in chronological order of all transactions. Anyone on the net can download the block chain to view with a block explorer.

Block Explorer

This is like a browser that lets you look at the contents of blocks so that you can view the transactions and the history of all the balances and addresses of the transactions.

Halving

Because there will never be more than 21 million bitcoins issued, they are halved every four years with the last one happening in 2140. This essentially means that the number of bitcoins it takes to form a block is decreased by half or 50 percent.

Confirmation

When a transaction is verified by a network, it’s considered a confirmation. The process that does this is what is known as mining (see above). Once a transaction has been confirmed, it cannot be reversed or changed.

Change

This is the same concept that you have with fiat money. You pay 5 bucks for something that cost 4.50 and you get back 50 cents. This is no different with bitcoin.

Address

When you use bitcoin, you provide an address for that particular unit or transaction. Each address can only be used for one transaction.

Signature

This refers to a cryptographic signature, which is really a mathematical formula that lets someone prove that they own the bitcoin. For example, your wallet and the private keys associated to that wallet, enables you to provide a signature so that no one can steal your bitcoins.

As you learn more about bitcoin and cryptocurrencies, you’re going to come across even more new terms that mean something important. Some of the terms seem obvious (like mining), but others are a little harder to understand. Take the time to learn all that you can so that you can make good choices when it comes to using bitcoin.

If you want to invest in digital currency, you should learn about the many others that exist. Follow what’s happening, pay attention to the news and what financial investors are saying, and you can be very successful with this type of investing.

1. Litecoin (LTC) – You can learn about Litecoin at Litecoinpool.org. This cryptocurrency is a peer-to-peer online currency that enables almost zero-cost payments around the world for goods and services. It’s becoming quite popular due to the high cost of transactions with other types of cryptocurrencies. Miners get 25 new litecoins per block, which is halved about every four years.

2. Ethereum (ETH) – In order to get more ETH miners, you can work to earn it, or buy it with fiat currency. First, you have to buy a mining contract, which means you agree to give part of your earnings to the mining company.

3. Zcash (ZEC) – This open, permission-free cryptocurrency lets you keep your transaction more private. It shields the sender and recipient as well as the value of the block chain. Yet, the transactions are still safe and fully encrypted. They’re very new, so watch them before you participate.

4. Dash – This digital currency allows you to have digital cash that you can use anywhere so that you can make instant payments privately online or in a store using an open-source platform. You make purchases from your Dash Wallet. Go to Dash.org to find out more, sign up to be a merchant, or to find merchants.

5. Ripple (XRP) – You can use Ripple to make fast payments all over the world online (and offline in some cases) and at a lower cost than bitcoin. The block chain technology that is used is much more scalable and secure than some other types of cryptocurrency.

6. Monero (XMR) – This secure, private, and untraceable cryptocurrency is used all over the world. You act as your very own bank, and no one can see how much you have. You cannot be blacklisted by vendors. It works sort of like the old gold standard that fiat money used to use.

Even though there are other digital currencies, remember that right now bitcoin is the leader. Having said that, it doesn’t mean the others won’t catch up. Many others are becoming popular as people try to think of new ways to pay for what they want.

Cryptocurrency is one of a kind digital currency without likeness. Because not many payments nowadays are without the involvement of a third-party, lower risk payment, little to no fraud cases and most of all, universal in its usage.  However, considering the online nature of Cryptocurrency, there are flaws that come with it. There are a few major setbacks concerning Cryptocurrency.

In most cases, people are still unaware of the digital currency world and the potential it holds. This is similar to when the usage of credit card was first announced and the reception towards it is fairly similar to Cryptocurrency. Back then, people wouldn’t even think that paying things using a mere card is possible, what’s more using a whole new digital currency.

Because it is different, and it doesn’t involve cash directly, people shy away from it and constantly doubting its effectiveness. Additionally, it involves online access to make it work. The idea of having to pay things or transfer money online is convenient to some but most are still skeptical about it. In order to make Cryptocurrency acceptable around us, the people need to be
educated about it to be able to include it in their daily lives. One way to do it is through networking. But fact is, there are not many places online where people can learn about it.

Lack of Protection And Guarantee

In the case of traditional currency, there’s Central Bank who governs the authority on every nation’s money. No higher authority can suddenly decide that they no longer want to use their country’s currency to trade without protest and rejection.

There are proceedings to follow, documents to file, approvals, and many other protocols to follow. However, that is not the case with our digital currency. There is no Central Bank who governs Bitcoin, which means no one can guarantee its minimum valuation. The value of Bitcoin for example, will fall tremendously should a major group of merchants decided to just ‘discard’ Bitcoins and leave the system. This will inevitably put other users who have invest thousands of dollars into Bitcoins.

Technical Shortcomings

When online banking made its way to our life, there’s always a risk of a sudden server failure, power shortage, and even hardware lags. If it happens and you ended up getting charge but didn’t receive the online movie tickets or flight tickets, you can always call bank service provider, or go to the physical bank instead and declares your case.

Most of the cases if you show evidence of your payment you will get proper compensations or feedbacks. That is not how it works with Cryptocurrency. First of all, this currency does not have a bank to negotiate and help you around. There is no fixed number that you could call and ask for clarification. So, if you bought your goods using Bitcoins for example, and the merchant didn’t send the items you purchased, there is nothing you can do to reverse the transaction or refund. You can’t complain it to the police or any relating authority for that matter.

Similar to data corruptions or virus infections, if you hard drive crashes and your wallet file is corrupted your Bitcoin is lost forever. There is nothing you can you do restore it and those ‘coins’ will be ‘orphaned’ in the system.

Studies show that Bitcoin experienced a drop in its price. It seems like a cheaper cryptocurrency by the name Ether, reached its highest at $40 a unit. That’s right. Although the mechanism behind Ether prevents it from being used as a direct payment method, this cryptocurrency seems to have brighter future ahead. This is all thanks to its smart contract concepts.

On the other hand, cryptocurrencies who is concerned over privacy are starting to gain more prominent favor amongst users. Bitcoin, unfortunately despite their security measures, it continues to have loopholes that can be exploited for access to users’ personal data. But this doesn’t stop users from investing to Bitcoin. Up to this day, Bitcoin is still being accepted as a means of payment.

The level of acceptance is clearly bringing this alternative currency to the mainstream. Some companies are genuinely considering to invest in this currency, further fueling its journey to the world of financial currency. Are we going to witness a new norm of currency by cryptocurrency one day? Researchers concluded that it is still too early to predict that it would, but one thing is for sure that this currency is slowly making its way to the world.

The most targeted group of all would be the technologically savvy individuals and most of us are already part of this group. More than 50% of our time spent online and it won’t be long until it reaches a hundred. One day, we might even consider using Cryptocurrency as our standard currency for a more universal transaction.