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Bitcoin and Cryptocurrencies

Cryptocurrencies

Introduction to cryptocurrencies

Two years ago in 2016, as a business consultant naturally I was researching about Bitcoin. Nobody seemed to care about its existence but recently it became a new financial tool for investment. However, when Bitcoin made its hype in Dec 2017 when it reaches close to $20,000 USD and drops to $10,000. This results in people pumping money cryptocurrencies.

Individuals could launch an ICO, Tech companies bloom into mining companies and Traders turn into cryptocurrencies expert. As a result, countries, governments and regulators around the world are being forced to create laws to regulate virtual currencies. Very little is known about its origin, especially its creator ‘Satoshi Nakamoto’. To begin with our journey,  I would introduce into Bitcoin and cryptocurrencies and answer some of the burning questions if you are looking into exploring

Who is Satoshi Nakamoto?

Satoshi Nakamoto

This is the father of Bitcoin and his name is Satoshi Nakamoto. The truth is ‘Satoshi Nakamoto’ is just an internet alias. He could be a male or female. A group, or even a company. In short, there is much conspiracy theory about his origin. Naturally, he would want to hide his identity for the obvious reason.

Satoshi Nakamoto created the software and system required for the Bitcoin technology. There is a lot of speculation about his origins, not surprising there are also endless conspiracy theories surrounding him. It is believed to started back in 2007 and he is also a brilliance smart person with a lot of forward-thinking ideas on his inventions. This results in Bitcoin being a convergence between technology and business.

What is Bitcoin

This is the first cryptocurrency being invented, it is supposed to be a decentralised digital currency that works without the control of government or bank. As far as it goes back in the early days, this is how it is supposed to work. This results transaction to be done over peer-to-peer directly. Until today not a lot of people does not understand how it works because most currencies are backed by countries but Bitcoin is backed by the people who are using it.

How is Bitcoin created?

Bitcoin is created from the process called mining. In the olden days, Miners going into the mountain to mine for gold using explosives. Keep this picture in your mind and imagine Bitcoin as gold kept in the mountains known as Blocks. The computer represents the miners used in diggings for Bitcoin in the Blocks. After a Block is mined, each miner would be rewarded accordingly. In many examples online, Blocks are considered complex maths formula. In dedication for using your computing power to solve these maths questions, Bitcoin is given as a reward.

How is Bitcoin related to Blockchain

The blockchain is the technology used to safeguard bitcoin. It is an electronic ledger which keeps track of all the transaction in the network. I would prefer to use the picture below to explain the technology.

Blockchain Technology

This is a picture taken from Oreilly.

The picture above A showed a centralised network and this is the common model for most banking transaction because they are the authority and appointed middleman from the government.

Imagine all the dots as a computer and each computer like a book to keep a record on all the transaction has taken place in the network. The is the role of an electronic ledger. After the transaction has taken place the computer would validate the transaction and then broadcast the transaction to all other computers in the network for record keeping. This is the concept of Blockchain explained in B.

C showed a distributed network, it is the future Blockchain that every network would be connected with each other and information would be distributed between everyone network. We are not very far from this ideal stage.

What is ICO?

ICO is known as Initial Coin Offering, The concept is similar to IPO of a company. Cryptocurrencies are startup launches ICO to raise funds for projects. In return for investing in their company, they would give investors virtual currencies known as coins or virtual tokens. The plans and directions for their projects are explained on a whitepaper and agreement with investors are secured in a virtual agreement known as Smart Contracts. However, the danger zone because there are a lot of people making ICO using whitepaper and using whitepaper to make their way for ICO. As an investor, you should exercise prudence before parking your cash to a stranger.

Summary

I have decided to write this article as a guide for dummies. Lots of people jumping into the bandwagon without having a fundamental understanding of the Bitcoin and cryptocurrencies. As a business consultant, I have not shared much information on other cryptocurrencies. In fact, they are similar to Bitcoin but each has their individual direction and focus. Bitcoin is the mother of all virtual currencies.

Blockchain as a technology is made for business to secure data against tampering. It is one of the cores in information technology and had become a norm oversea in data centres. However, people are still conservative with traditional server technology in Singapore.


To find out more about Cryptocurrencies

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