I remember when I first heard about bitcoin back in 2010. I had read an article on it online and my first impression was “meh, this is something interesting!”, but it was the same kind of impression that goes on the rack with reading a cool National Geographic magazine. I wouldn’t have thought back then at what opportunities it might arise.
Then in 2012 I experimented a little with mining. It was the “GPU” mining era, before the rise of ASICs capable of performances on the order of GHASH/s( nowadays it’s literally useless to use a video card for mining). I think I generated a total of around 1BTC at the time. I lost most of it on satoshi dice though! (felt too confident, eh?). Besides bitcoin, there was also litecoin and some opportunity to mine there too, but I did not pay attention because I thought it will have no value. I kinda lost all interest.
Flash forward 1 year: me and a dorm colleague are hitting the desks with our heads. Even if we saved half a bitcoin we could have bought a laptop on that! Yeah, it was that bitcoin craze of autumn 2013 when it went up to 1000$ and beyond. I don’t know what happened then, I’m not financial analyst, but it was the first time I would have surely enjoyed the NZT pill.
We’re savouring the last bits of summer 2014 and a lot of interesting stuff lies ahead of us. The cryptocurrency world feels saturated with insertprefixcoins, it seems like each week one new bitcoin copycat comes out!
But what’s the deal with these digital coins( I have to be careful with these names, there’s an actual cryptocurrency named digitalcoin) anyway? How do they work? I think this is the key thing to bitcoins being accepted by the masses: understanding. Nobody said explaining bitcoins to the average Joe is easy!
I didn’t spend my nights researching the whole technology and its inner working either, and I’m no master at explaining in plain english, but here goes, the short story( which to some extent applies to all bitcoin derived currencies):
Bitcoins are a form of currency that is digital and decentralized. This means there is no central authority that maintains and controls the market. It is all influenced by its users and the transactions they do. So how can a bitcoin have any value? This is a bit of a mystery to me too, but it has something to do with its limited supply and how many adopters that have invested in it there are. The bitcoin supply will be limited at maximum 21 million bitcoins, but that limit will be reached in the far future, because bitcoins are generated by mining. Wait, what? Here comes the question that we skipped earlier, when I mentioned transactions. Normally, with real money, a transaction is verified by traditional means( an agreement, for example), or by central authorities like banks. But with bitcoin it’s a different story. All transactions go into a public ledger, the block chain. Here, miners( volunteers that use computing power to work with encrypted information) verify the transactions which are associated with a buyer and seller address, and in the process create bitcoins. Every transaction that has been made in history is put there and it’s publicly accessible, that’s why bitcoin is a pseudonymous currency. Or, as this guy explains, a digital armor is put around the information describing those transactions.
You can easily get started with bitcoins by first downloading a wallet, and you’ll have to do your research here too to see what best fits your needs. Linky
When writing this article the bitcoin was valued at 569$. It easy to track the bitcoin market and all of the cyrptocurrency markets by looking on some dedicated sites. Bitcoinity is really good for a fast glance. If you want to consult the market capitalization of bitcoin, other coins and a top of the highest valued markets you can go to coinmarketcap or cryptmarketcap.
If you ever want to get started with bitcoins but don’t want to invest in it, only want to experiment for fun, you can always try faucets(a site that gives bitcoins for free) and mini-games. Back in the day faucets would pour bitcoins into your address, but now they give out very little. A good place to start is land of bitcoins, which helps you keep track of faucets and collects bitcoin that can easily be transferred to your microwallet(a useful site for working with microtransactions). Another fun stuff to try is this site: freebitcoin. The site is actually a mini-game where you have to “roll a dice”, and if you’re lucky you can get up to 200$ worth of bitcoin. Needless to say, you have to be really lucky to get that amount :).
If you want to see where you can spend these bitcoins in real places, you ca consult this map: coinmap.
But enough about bitcoin, what about these other cryptocurrencies that appeared everywhere? What’s the deal about them?
Well, there are indeed some bitcoin copycats with a changed name that bring nothing new to the scene. But most of them have a slight, if not big, variation from the original.
Litecoin is currently the second economy in the cryptocurrency world, and it doesn’t bring a lot of new stuff to the scene. When it was conceived, it was thought of it as the “silver” of bitcoin. But the innovation started with “peercoin”, one of the first currencies to use the Proof-of-Stake mechanism. Huh? I forgot to explain that. The way the bitcoin network approves transactions is called proof-of-work. This is the mechanism that lies at the heart of the whole system. It is indeed energy and time consuming. Proof-of-Stake, on the other hand, requires only that its users have the wallet application opened. The ownership of money is enough for the authorization of transactions in the block chain. Don’t ask me the details about this one, there’s some really crazy shit you can delve into if you want to really get informed.
Now, one of the currencies I’m looking forward to see grow is the Reddcoin.
Reddcoin is an emerging market that appeared this year and it is described as a “social” currency. It uses a proof-of-stake-and-velocity mechanism, and this already goes beyond my ability to explain. But the fact is that the way it will be integrated with social sites and services, I think this will make it successful. Already users are using it to “tip” other users on reddit, twitter and twitch!
Actually, if you use this currency, why not tip me also for this article? Here’s my address:
Well, I hope you enjoyed this long article, and let’s hope for the best!