Okay, crypto, blockchain, Bitcoin, Safemoon, China, proposed US government regulations, Dogecoin, and Elon Musk are all trending topics these days when it comes to the world of crypto. But...what is it?

Here we go and I'll try to keep jargon terms to a minimum without further explanation.

Cryptocurrency 101: Basics

Cryptocurrency is a digital currency. Cryptocurrency is based on blockchain technology (more on that later). It uses cryptography to secure transactions and to verify the transfer of funds. Blockchain is often used in conjunction with cryptocurrency.

From a wiki for cryptocurrency, blockchain “is a continuously growing list of records called blocks, these blocks are linked and secured using cryptography. Each block typically contains a hash pointer as a link to a previous block, a timestamp, and transaction data. By design, there is no centralized database or mint for these currencies.” It provides an entire ecosystem that allows peer-to-peer value exchange through encrypted software technology [source]. First, you can transfer funds between accounts by checking the balance of one account and sending funds from that account to another.

For example, I have 5 Mooncoin in my wallet. I want to send 1 to Safemoon for something we are working on together. (The Mooncoin currency is a fun one.) I check my wallet and see that I have 5 Mooncoin. Then I go to Safemoon's address, a string of characters and numbers: "XMFivvts4Q56TE5QZ3XSbrci4m4sK6bboMJwvxXp9Db5PYF 8Uu". Then, I send 1 Mooncoin. Within minutes, Safemoon knows she has 1 Mooncoin and I no longer have 5 Mooncoin. If we want to buy or sell from others, we can check the price of the currency against other currencies like Bitcoin to figure out the value.

Wait, stop. Blockchain...let's talk about it really quick then get back on track. Blockchain is simply a ledger like a checkbook registry or spreadsheet to track items. Of course, there is a much more technical foundation for securing those items tracked within a blockchain and so on, but if no one can understand the complex tech, how can we trust it and use it? Right?

This is where cryptocurrency comes into play and why I have spent the last few years involved in it.

Cryptocurrency is a trustless system. Trustless systems are those lacking the need for centralized trust like financial institutions, governments, etc. In other words, these transactions occur without a third-party service providing guarantees about whether or not funds will be available when needed. This is often referred to as “self-executing contractual states” or “smart contracts”.

How can a system provide trustless transactions? A list of transactions is compiled into a ledger. These transactions are grouped in blocks that are chained together to ensure that no party can make a change to the records without the consent of every other party on the network.

You can keep reading this article about the basics of cryptocurrency via AaronVick.com.

Disclaimer:

Cryptocurrencies are highly speculative and risky investments. It is important to do your research before choosing any coins or tokens you want to invest in. Cryptocurrencies can still be a solid investment, but you should not expect huge returns in the short term.

This post is by no means meant to discourage anyone from investing in cryptocurrencies and blockchain technology. I am merely trying to convey that there are a lot of unknowns and high risks involved with this new technology. It may take years for cryptocurrencies to catch on, but there is also the possibility that they will never break into mainstream use at all.