Bitcoin and the world of cryptocurrencies, explained

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Three hundred and thirty-one years ago, the first paper money was printed in the United States. The Massachusetts Bay Colony is said to have issued these first bills to fund military action during King William’s War. Flash forward until today, and these bills are as ubiquitous as the pound sterling or the Chinese renminbi. In recent years, however, there has also been talk of these bills being replaced by a new form of money: cryptocurrency.

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What is cryptocurrency? Is it really likely to replace our current treasury system? Stacker answers all of these questions and more in our deeper look at Bitcoin and the world of cryptocurrencies. Using news stories, financial websites, and industry resources, we’ve answered the 10 most pressing questions you ask yourself about cryptocurrencies. Although the subject is complex, we have done our best to discuss it in layman’s terms and have avoided the more technical aspects which tend to bog down the discussion rather than move it forward.

So read on to find out who invented this new form of silver, how it’s mined, and what exactly Elon Musk has to do with it all. You are sure to come away with a better understanding of what Bitcoin is and how it affects your life.

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What is a cryptocurrency?
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What is a cryptocurrency?

First of all: what is a cryptocurrency? In short, these are digital currencies that are protected by cryptography (a method of saving information using complex codes). This encryption makes them incredibly secure and nearly impossible to forge or duplicate. Most cryptocurrencies work using a new technology called blockchain, a decentralized technology spread across many computers.

What is a blockchain?
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What is a blockchain?

As noted above, blockchains are a new form of technology that records information. Called distributed ledger technology, these blockchains maintain records on a large number of computers (rather than a single computer server), grouping the data into sequential blocks. Once locked in place, these blocks cannot be changed or tampered with, meaning records of who mined or spent a currency are never questioned, and cryptocurrencies can never be stolen. like a credit card.

Is there a central authority overseeing cryptocurrencies?
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Is there a central authority overseeing cryptocurrencies?

No. By their very definition, Bitcoin and other cryptocurrencies are completely democratic and are not overseen by a central authority like the US dollar. A true peer-to-peer payment network, cryptocurrencies can only work if all participants use the same software and follow the same rules. This is a strong incentive to maintain consensus, otherwise Bitcoin will cease to have value and all users will lose their cryptocurrency wealth.

How are cryptocurrencies mined?
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How are cryptocurrencies mined?

The interesting thing about cryptocurrencies, and bitcoin in particular, is that they largely perpetuate themselves (with the exception of the genesis block). New bitcoins are mined (or minted) by being the first person to properly verify a megabyte of existing bitcoin transactions. It’s incredibly time-consuming work that involves a lot of computing power, but these days it’s not the only way to get bitcoin. Bitcoin can also be bought or earned by posting an article on a website that pays via cryptocurrency.

Can bitcoin be used in everyday purchases?
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Can bitcoin be used in everyday purchases?

Yes and no. In 2021, much of what cryptocurrencies are is more theoretical than practical, which is further demonstrated by their purchasing power or lack of it. While bitcoin can and has been used to buy real things (you can use a third-party app called Purse to use bitcoin to buy items on Amazon, and it has often been used on the Silk Road to buy money. drugs), you certainly can’t just walk into a grocery store and buy a gallon of milk with a bitcoin or two. In fact, even apps like Purse or PayPal, which allow purchases to be made with bitcoin, convert the cryptocurrency into fiat currency before making the transaction, so that you don’t technically spend that bitcoin or Dogecoin, but rather its legal value.

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Why were cryptocurrencies invented?
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Why were cryptocurrencies invented?

So if you can’t spend a bitcoin or a unit of cryptocurrency, why were they invented? The answer may be found in the text of Bitcoin’s genesis block, which reads: “The Times 03 / Jan / 2009 Chancellor on edge of second bailout for banks.” (Alluding to a London Times headline.) This seems to imply that the founder lacked confidence in the banking system and was looking for another way to store and protect his wealth, as well as wanting to disrupt control of the money supply and empower the individual regarding his finances.

Who Created Cryptocurrencies?

Bitcoin is widely regarded as the world’s premier cryptocurrency. Yet although it has been around for a little over a decade, no one really knows who founded it. The original Bitcoin white paper that describes how the currency works was published by Satoshi Nakamoto, the same person who mined the first block of bitcoin, but the identity of the individual (or group of individuals) remains unclear. mystery. There are dozens of theories about who they are, but none have been definitively proven, making them a holy grail mystery of our time.

Why are cryptocurrencies important?
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Why are cryptocurrencies important?

Financial experts are not yet convinced that Bitcoin, or similar cryptocurrencies, will replace the dollar, pound, or yen in any real way. However, as a scientific and technological innovation, cryptocurrencies are extremely important. In particular, the blockchain system that governs most of these currencies has the power to change the future. Blockchain allows us to move information securely and authentically and can be adapted for things like voting, keeping inventory records, and identifying exploited labor practices.

How many types of cryptocurrency are there?
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How many types of cryptocurrency are there?

The number of cryptocurrencies keeps growing, so it can be difficult to determine the exact number, but as of April 2021, there were over 10,000 different types of cryptocurrency. This includes coins, like bitcoin and Dogecoin, as well as tokens, which represent a tradable asset or utility (like 10 hours of free streaming on a service or a certain number of loyalty points from a business).

How does Elon Musk fit into all of this?
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How does Elon Musk fit into all of this?

Almost all cryptocurrency talk is directed to Elon Musk, so how exactly does he fit into all of this? Only as a strong supporter and believer in cryptocurrencies, really. Many have theorized that Musk is actually Nakamoto (he isn’t) or the mastermind behind Dogecoin (that would be Jackson Palmer), but in reality, Musk is quite simply one of the more outspoken tech leaders on the subject. His two companies, Tesla and SpaceX, are heavily invested in cryptocurrency and have committed to accepting them as cash-equivalent payments for goods and services, but other than that, Musk is no more. special in the development or growth of these. cryptocurrencies that you or me.

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