cryptocurrency works? (Guide for dummies)
Individuals could launch an ICO, Tech companies bloom into mining companies, Traders turn into cryptocurrency expert and people go crazy when they hear the word Blockchain. As a result, countries, governments and regulators around the world are being forced to create laws to regulate virtual currencies. Until today very little is known about its origin, especially its creator ‘Satoshi Nakamoto’.
This is a global phenomenon but as a business consultant based in Singapore, we would be talking about cryptocurrency in our perspective.
Who is 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. The internet only establishes four possible read identities and they are Hal Finney, Nick Szabo, Dorian Nakamoto and Craig Wright. It is also interesting to note that one of the bitcoin founder dead in Singapore but she did not even hit our headlines. Satoshi Nakamoto wallet is also a hot topic among treasure hunters/hackers (rumoured to worth one million bitcoin). People are also selling Satoshi Nakamoto book in his name. Do not be surprised to find more merchandise in his name.
The only legacy left behind is “Satoshi Nakamoto white paper” (also known as bitcoin white paper). With original reference on Bitcoin, implementation and deployment. You could find his email in the white paper and who knows he might reply to your email.
What is B
This is the first cryptocurrency being invented, it is supposed to be a decentralised digital currency that works without the control of any governments or banks. As far as it goes back in the early days, this is how it is supposed to work. This
How to get bitcoins?
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
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. Cryptocurrency 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.
What is Cryptocurrency Exchange
This is another business that which allows investors to buy, sell and trade cryptocurrencies. Most cryptocurrency exchange provides two services; Flat exchange and C2C.
This exchange allows customers to purchase cryptocurrency using government-backed currencies. USD is one of the most popular currency and local exchange would allow the use of local currency such as SGD for example.
C2C (cryptocurrency to cryptocurrency)
Cryptocurrency would be paired with another cryptocurrency and the customers could trade in the exchange making gains from the fluctuations. This is similar to stocks or currency exchange.
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