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A simple explanation of Cryptocurrency
We sit on a bench in the park. I have one apple in my hand; I give it to you. You now have one apple, and I have no apple. My Apple is physically in your hand. You know that it happened. I was there, you were there, you touched him.
We had no third person required to assist us in the transfer. We did not need a lawyer or bank employee to sit on the couch and to confirm that the apple went from me to you. The apple is yours! I can give you no new apple because I don’t have one anymore.
The apple is no longer in my possession. You now have full control over the apple. You can give it to your friend if you want and then that friend to another friend, and so on.
So that is how a personal exchange looks likes. And it doesn’t matter if I am offering you a banana, a book, a dollar coin.
Now, let’s say that I have one digital apple. Here, I will give you my digital apple. Now it is interesting: how do you know that the digital apple that formerly was mine, now is yours and not someone else’s?
Think about it for a moment. It’s already more complicated, right?
How do you know that I not previously sent this apple as an e-mail attachment to Uncle Peter? Or you friend Janneke? Or my friend Lisa?
I may have a few copies of that digital apple on my computer. Maybe I have it on the internet and have a million people downloaded.
As you can see, this digital exchange is a problem. Sending digital apples isn’t the same as sending physical apples. Let’s try to find a solution.
Document these digital apples in a ledger. A book in which you record all transactions. Of course, someone has to check it.
There is, however, a problem:
1) What if someone, who has access to the software, has made more apples? He would just add a few digital apples to his balance sheet when he wants to!
2) It is not the same as that day when we were on the bench. It was only you and I. With the digital system where not everybody has access to or understand it, and it is easy for attackers to cheat and to enrich themselves at the expense of others. How can I send my digital apple just in the usual way to you? Is there a way to copy our transactions on the bench in the park in digital ways?
What if we gave this cash book to everyone? Instead of putting the cash book on 1 very special computer, it will be on everyone’s computers. All transactions that have ever happened, of all times, in digital apples, are recorded in it. There are countless people working on the calculation of 1 apple on their computer, but all of them a very small part of that digital apple structure. So you can not possibly get to the structure in another computer. At the end of the calculation, all those parts come together and form the apple. The cash book has now been visited and filled in by everyone.
You can not cheat the system. I can not send you digital apples that I do not have because it would not be synchronized with everyone else in the system. It is difficult to beat the system.
Moreover, it is not managed by one person, so I know that there is no one who can simply decide to give themselves more digital apples. The rules of the system have already been defined at the beginning.
Besides, the code and rules are open sources. A bit like Android works. People who understand it can maintain, protect, improve and control.
You can also participate in this network, update the cash journal and check that everything works correctly. To participate in the solution of the copy problem, you could get 25 digital apples as a reward. In fact, that is the only way to make more digital apples in the system. That’s called mining. More about that in a next article.
I have simplified cryptocurrency quite a bit … But that system that I have explained exists. It is called the Bitcoin protocol. And those digital apples are bitcoins or 1 of the 900 other cryptocurrencies in the system.
What makes the ledger possible?
1) It is open source, remember? The total number of apples was defined in the cash book at the beginning. Within the system, I know that they are limited (scarce).
2) When I do an exchange, I have declared that I no longer have a digital apple and that he is now completely yours. It is updated and verified by the cash book.
3) Because the cash book is accurately tracked, we still do not need lawyers to ensure that I did not cheat or make extra copies for myself or sent the same apples twice.
Within the system, the exchange of a digital apple is now just like the exchange of a physical one. It is now just as good as seeing a physical apple that leaves my hand and falls into your pocket. Just like on the bench in the park, the exchange only involved two people. In other words, it behaves like a physical object, but it is still digital.
We can now trade with 1,000 apples, or 1 million apples, or even o.0000001 apples. I can send it at the click of a button, and I can still drop it in your digital bag when I’m in the Netherlands and you at the North Pole. I can even buy several things nowadays. At Bitcoinspot, for example, there is already a whole list of stores and companies that accept Bitcoin. But Bitcoin is not the only digital currency. There are already about 900 different ones, of which there are currently 8 that really matter.
How much value should we give digital money?
Believe me, a lot of people are discussing it right now. There are fierce discussions between economists, politicians, programmers, mining clubs and of course the banks, who in the meantime are also aware that these developments are not to be kept silent. Do not listen to everyone. Some people are smart; some are uninformed. Some say that the system is worth a lot; some say it is actually worth zero. Some say it is digital gold; some say it is a currency. Some people say it will change the world; some say it is just a farce. The fact remains that the Bitcoin alone was worth € 16,000.00 last week and dropped to € 13,000.00 today. That does indicate that the crypto coins will keep a whole lot of people very busy in 2018.
Imagine that at this moment we are really at the edge of a gigantic transition regarding our payment methods as we know now. The ECB (European Central Bank) last week is working on legislation that they are entitled to freeze your savings and even payment account in the event of a threat of the banks to fall. As was the case in Cyprus in 2013.
At the end of December 2017, the Chicago Mercantile Exchange Group will be taking the Bitcoin to Wall Street in the form of ‘futures’. Futures are contracts on the stock exchange, and again, a very different subject that is not important for this article. What is important about this is that the crypto-coin moves clearly from the darkest corners of the web a few years ago, to everyday lives and does not seem to be stopped soon. Ready to use for every person, smart or not smart in computer programming, to be embraced as a new way to handle our money and payments.
You can buy and invest with cryptocurrency at Lions Trader Club for $ 50.00. Even if it is only to get a feeling for it. To understand what it is all about and experience for yourself.
My partner and I have a fair amount invested at Bitclub in different cryptocurrencies and we also mine them ourselves with special computers. You really only do that when you are already a lot of steps further than the first explanation and introduction.
Be very well aware of this:
We have been investing for years now and still not millionaires. Not even close. However, it is very nice to be busy with it and see how it all develops. To know what one is talking about. Of course, we hope to get a passive income out of it in the future, enough to be able to travel.[bctt tweet=” Cryptocurrency explained Please note: This is not a ‘get rich quick’ game! Also, no call to empty your bank account and put everything in cryptocurrency!” username=”De_Budget_Diva”]
You remain solely responsible for your own money!
Think carefully before you start something you don’t fully understand. Start moderation in the beginning, with money that you really can miss and always with a consultant who is known to be reliable. Never give money to invest in cash to someone else or never deposit on a private account of a person who says is an intermediary. Private accounts do not belong to a business plan! Always search on the internet if a company is registered and read the reviews! A good measurement is whether they’re licensed by, for example, a financial supervisor.
How do you feel about cryptocurrency? Or a big change in the payment systems we know? Have you already experienced or possess a digital wallet? Feel free to share below.
Have a great day
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