One of the most debated and closely-watched topics in the world of finance over the last half-decade has been cryptocurrency. From the validity of them as digital assets to price predictions, cryptocurrencies are mainstream news these days.
Aside from the price, though, many people still don’t quite know how cryptocurrencies work and their uses, should you attain a sum of these virtual coins. So, here’s the underpinning knowledge that you need to know about cryptocurrency operations.
How do cryptocurrencies work?
To explain how cryptocurrencies across the board work, you need to understand the goal of Bitcoin’s creator, Satoshi Nakamoto. The inventor behind this pseudonym aimed to create a trustworthy and reliable peer-to-peer method of making online payments to circumvent the financial institutions governing traditional money.Given that the whitepaper for Bitcoin was released in 2008, many see it as a reaction to the 2007 Financial Crisis brought on by the US housing bubble bursting.
Ensuring the trust and reliability of this new financial system, Bitcoin was built on a novel technology known as the blockchain. Blockchains are distributed public ledgers that log transactions, combining the details of the seller and buyer into a hash that’s bound to others to create a block. The blockchain can only build more blocks of these records and can never have blocks removed, with any discrepancies immediately becoming apparent should unauthorised alterations be attempted.
Being a distributed public ledger, the blockchain relies on people, known as ‘miners,’ to maintain the blockchain and its records, rewarding them with coins of the blockchain’s cryptocurrency. To do this, miners setup computers to solve cryptographic hash puzzles that forge new blocks from the hashes collected, essentially being a proof-of-work for tracking the transaction of each block. This method checks, verifies, and identifies every transaction of the cryptocurrency and links it to the public ledger.
Once these miners receive cryptocurrency coins as payment, they’ll store them in a form of wallet. These can be a software-based wallet on a digital device or a hardware wallet that connects via a USB. From there, they can do with them as they wish, from playing them at crypto casinos to sending them to friends and businesses.
Where can you use cryptocurrencies in 2021?
The original cryptocurrency, Bitcoin, was intended for use as a digital currency. Its adoption in this regard has been slow, but many companies are coming around to the idea of dealing in crypto. The movement received a huge boost from PayPal, which will add a feature that lets its users buy, sell, and store major cryptocurrencies.
Even before PayPal weighed in, many significant companies were accepting cryptocurrencies, with Microsoft being the prime example, followed by Virgin Galactic, Whole Foods, and Starbucks. These often require a companion app that links to your wallet to perform the transactions. Another more two-way sector that accepts cryptocurrencies is that of online crypto casinos.
Some leading regulated gaming sites were swift to get on the cryptocurrency bandwagon due to the inherent benefits offered to players who use the payment method. As the coins are decentralised, offer anonymity, can be accepted without conversion fees, and are automatically verified, crypto casinos have gained notoriety in the sector.
Even though they weren’t designed to be investments, the volatility of cryptocurrency prices has also made them a popular medium of exchange like Bitiq. Still, there are many ways to use your coins as was originally intended.