10 Things You Need to Know About Cryptocurrencies
In 2008, Satoshi Nakamoto invented cryptocurrency and in 2009, Bitcoin, the original cryptocurrency, became open source, and cryptocurrency, as we know it today, was born. In the eleven years that have followed, cryptocurrency has grown from a futuristic idea into a profitable investment opportunity and a worldwide digital exchange, accepted by hundreds of thousands of retailers.
Whether you’re new to the concept of cryptocurrency or are considering purchasing some yourself, here are ten things that you need to know.
#1: Most Cryptocurrencies Are Decentralized
One of the key things that makes a cryptocurrency so different from the money we use every day, is that it is entirely digital and is operated on an online peer-to-peer decentralized network known as Blockchain. No government, bank, or financial authority owns or governs decentralized cryptocurrencies and their entire operations are sustained through peer-to-peer interactions and mathematics alone. This decentralization means that your cryptocurrency cannot be seized by any authority and is secure so long as you protect your digital private keys. Although most cryptocurrencies, such as Bitcoin, are decentralized, cryptocurrencies can be whatever they want and there are some Altcoins that operate in closed systems.
#2: The Founder of Cryptocurrency Remains Unknown
Although fans of crypto all know Satoshi Nakamoto to be the founder of Bitcoin and cryptocurrency, this name is in fact a pseudonym and his real identity remains unknown. Satoshi Nakamoto began writing the code for Bitcoin in 207, publishing a paper on cryptocurrency to the cryptography mailing list at metzdowd.com in 2008 and releasing the first open version of Bitcoin in 2009. Nakamoto continued to work with other developers on the Bitcoin software until the middle of 2010 when he handed over control to a colleague, Gavin Andresen. From then on, Satoshi Nakamoto has remained a ghost and hasn’t touched his own Bitcoin since 2009, making his coins worth more than $19 billion in today’s market.
#3: There Are Thousands of Cryptocurrencies in the World
Although Bitcoin remains the dominant cryptocurrency and is, therefore, the one which the media most often reports on, there are in fact more than 2000 cryptocurrencies currently in operation with new cryptocurrencies being created all the time. It’s actually fairly easy to create a new cryptocurrency using Open Source, so although this number is high, the market is very top-heavy with leading currencies such as Bitcoin and Ethereum, holding most of the market, while the majority of newcomers flatline or disappear within their first year or so.
#4: Cryptocurrencies Are Now Taxed
As soon as Bitcoin began to take off, and some serious profit began to emerge, Governments across the world started to take note, and very quickly taxes were introduced on crypto assets. At present, most governments don’t see cryptocurrency as a real currency, in fact, it remains illegal in parts of the world. However, in countries such as the UK and the US, who are global leaders in cryptocurrency, there are tax regulations to follow. Currently, the tax regulations on cryptocurrency vary from location to location but in general, you can expect to pay tax on any crypto assets received from an employer as a form of non-cash payment or received from mining, airdrops or crypto transactions. Crypto tax is still a relatively new phenomenon and tax regulations vary from country to country, so make sure to check out the regulations near you.
#5: Cryptocurrencies Are Held in a Secure Digital Wallet
In order to use cryptocurrency, you’ll need a cryptocurrency wallet. Essentially, a wallet acts as your online banking app, providing secure storage for crypto coins, and also enabling you to send and receive transactions. Some wallets are built for a single cryptocurrency and others can hold multiple coins from different cryptocurrencies. Some are managed by yourself whereas others, such as those on exchanges, are managed by the exchange. Although the wallet analogy is handy, it’s important to remember that your crypto balance is held within the blockchain and doesn’t physically exist within your wallet, your wallet simply provides you with a connection to the blockchain when you wish to use it. There are many different types of crypto-wallets available including Desktop Wallets, App Wallets, and Hardware Wallets.
#6: Cryptocurrencies Weren’t Designed to Be Investments
Although it has been made clear that investing in the right cryptocurrency can make you a lot of money, cryptocurrencies were not actually invented as investment platforms but as currencies for the exchange of goods. Currently, there are around 100,000 retailers that accept Bitcoin as payment, including companies such as Microsoft and Expedia. This number is predicted to continue to rise as more people begin using cryptocurrencies, however, at present, retail opportunities with crypto are still quite limited.
#7: Bitcoin Mining Regulates the Currency
At first glance, Bitcoin mining can seem like a very complex concept but is essentially a decentralized way to issue Bitcoin currency. Bitcoin miners use a special software to solve complex mathematical problems in the blockchain, keeping the network safe by approving transactions, ensuring fairness, and keeping the Bitcoin site stable and secure. Bitcoin miners earn themselves Bitcoin by receiving the fees paid in each Bitcoin transaction and they also award themselves a number of bitcoins for every Block that they discover.
#8: Cryptocurrencies Still Aren’t Legal in Some Countries
Bitcoin and cryptocurrencies may be legal and taxed in countries such as the United States of America and the United Kingdom, but they are not seen favorably in other areas of the world. Currently, cryptocurrencies are banned in 18 countries, including Bolivia, China, Iceland, and Algeria, and are seen as hostile in 18 countries including Brazil, India, and Iran. More than 25% of the world remains on the fence about cryptocurrencies, including Argentina, Columbia, and New Zealand, where the government has yet to make any statement about their view of cryptocurrencies. Lastly, things are improving in Russia, Mexico, and most of Europe who are now starting to see cryptocurrencies more favorably and are working towards legal recognition of cryptocurrencies and the constriction of more robust frameworks.
#9: Exchanges Can Help You to Buy, Trade and Sell Your Currencies
Exchanges are online businesses created to help consumers buy, trade, and sell cryptocurrencies. Cryptocurrencies can be purchased on these platforms using fiat currency such as dollars, or pounds, making them a great tool for those who are new to crypto-investment. Some exchanges are better geared towards new cryptocurrency investors, whereas others are designed for more seasoned professionals and also sell lesser-known forms of a cryptocurrency called Altcoin, which can only be purchased using Bitcoin and not with fiat currency. For new crypto-investors, exchanges also act as crypto wallets and so there’s no need to find or maintain one separately.
#10: Bitcoin ATM’s Now Exist
A lot has changed since the invention of cryptocurrency. In the past 12 years, more and more people are buying and investing in cryptocurrencies and more cryptocurrencies are emerging, more retailers are accepting crypto-payments and we are now even seeing the emergence of Bitcoin ATMs. Bitcoin ATMs allow users to trade common currency such as dollars, for Bitcoin, and some also allow the trade of Bitcoin for a common currency. The first Bitcoin ATM was installed in Vancouver Canada, with more cropping up in major cities in the months to follow, making it normal to see the word Bitcoin on the street.
So there you have it – 10 facts that you need to know about cryptocurrencies. Do you own any cryptocurrency or do you plan to do so in the future? Let me know in the comments, I’d love to hear your thoughts!