Bitcoin, Ethereum and More. An Introduction to Cryptocurrency
In 2008 a new currency was revealed to the world. Satoshi Nakamoto published a research paper that outlined a design for a digital currency called Bitcoin. The revelation solved one of the internet’s biggest questions, how to create digital money. Recently you may have seen that Bitcoin values are rising and falling at amazing rates, but why? And how do you take advantage of the madness and hype around cryptocurrency?
Bitcoin and other Cryptocurrency first and foremost are not the same as traditional currency, and perhaps the main difference is that it is not controlled by any central authority (banks, governments, etc.) Cryptocurrencies are “mined” by miners using computers and hardware to monitor and process transactions and the network the currency is based on. Miners receive the correlated digital currency in exchange for their work. Bitcoin maybe be one of the most well known of the available cryptocurrency types, but it isn’t the only one available, or the only one making the news. Litecoin, Ethereum, and Zcash are just some of the major contenders and each has its own privacy and trading capacities.
The buzz around cryptocurrency and specifically Bitcoin reached new heights last month as the price per “coin” surged to $19,500 USD. This made headlines as investors and other individuals raced to put money into the coins hoping to strike gold. However, last week, there was a sudden drop, with coins trading down to $9,200 USD (as of today the current value of one coin is $10,542.92 USD). The drop was sudden and rattled those that had recently sunk money into the volatile market.
When the price surge occurred, Bitcoin’s electricity consumption hit a record high of 42.1 terawatt-hours. Energy consumption and carbon dioxide emissions are a point of contention for many, as the rate of emissions rivals that of the entire country of New Zealand (roughly 20 million metric tons per year).
The process of grouping Bitcoin transactions and mining the transactions is to blame for the high use of electricity. Vox writer Umair Irfan says, “this process is like finding solutions to complicated math problems that become progressively more difficult. It’s a competitive process, with one miner receiving the award, currently 12.5 bitcoins, roughly every 10 minutes, so there’s a strong incentive to throw as much processor power — and thereby electricity — at the mining effort.” Or as Alex Hern of the Guardian says, the process is, “a competition to waste the most electricity possible by doing pointless arithmetic quintillions of times a second.”
You do not have to mine your own cryptocurrency as it is relatively easy to purchase online, but buyer beware: the value does fluctuate, as discussed previously. To get started investing in Bitcoin or Ethereum simply download the Coinbase app and create an account. Add an account to make payments from and tap ”Buy”. There are weekly purchasing limits based upon the type of payment account you set up, but you are now ready to start investing.
Once you purchase your chosen cryptocurrency you can either save it or spend it. Some of the things bitcoin is spent on include food delivery, socks, gaming, as well as being used as ante when placing online bets. The world of cryptocurrency is becoming much more accessible to the general public, and will thusly stay newsworthy as the interest in diversified finance and the community of cryptocurrency investors grows.