cryptocurrency 101 basics, learning cryptocurrency basics, and fundamentals

cryptocurrency 101 basics, learning cryptocurrency basics, and fundamentals

money like mathematics is a uniquely human creation thousands of years ago we invented it and we haven’t stopped evolving it since money is basically anything that is accepted as a form of payment for products and services today how we pay for things continues to evolve but the link back to traditional financial institutions has remained largely the the same however there’s a rapid emergence of digital products and we’re seeing the digitization of money as well cryptocurrency is a new class of digital currencies that are decentralized and use cryptography to function it looks like we are in the early days of a possible new Revolution in how money is created stored and used if you’re curious about the basics of what cryptocurrency is then this course is for you we’ll briefly cover the origin story of Bitcoin and address the underlying blockchain technology that powers it and almost every other cryptocurrency today then we’ll discuss how cryptocurrency is created and how you can create your own we’ll look into the world of mining an important process in enabling cryptocurrencies to function and you’ll learn what you need to become a minor should you choose to pursue that path let’s Jump Right In the current state of cryptocurrencies has a wild west feel to it a high number of people and organizations are jumping in to get a piece of the action it’s chaotic it’s risky it’s exciting and it’s rapidly changing in barely N9 years since the original cryptocurrency Bitcoin emerged many hundreds of alternative digital currencies have surfaced people are using these old coins or cryptos as they’re often known to buy and sell all types of products and services these cryptos are also being used simply as investment instruments where people try to buy low and sell High cryptocurrency has also enabled a completely new form of raising Capital called an initial coin offering or Ico it’s giving startups in particular a way to raise enormous amounts of cash that would be typically more difficult via traditional fundraising cryptocurrencies are challenging financial institutions and governments all over the world cryptos are disruptive to the status quo financial institutions must figure out how to work with them as ignoring them is no longer possible big players like Barkley credit s and many more are exploring integrating and supporting cryptocurrencies and their underlying blockchain technology into operation s products and services governments are struggling to figure out the right regulation without stifling Innovation but at the same time protecting markets and individuals the race is on and the outcome is uncertain China and South Korea for example have gone as far as Banning icos China was rumored to be looking at outlawing mining or limiting cryptocurrency mining some countries are exploring creating their own National cryptocurrencies such as turkey Israel Sweden and Ecuador and while this seems counter to the decentralized model of crypto the details are yet to be seen the code that runs Bitcoin which is free for anyone to copy and use has given birth to hundreds of old coins as we’ll see in a later video any one of us can create our own digital currency with a modified copy of Bitcoin software while Bitcoin continues to dominate as the most popular and respected of the global cryptocurrencies there’s a massive longtail several others Dominate and hundreds more wait patiently to emerge or die in a noisy and unpredictable Marketplace among the most popular today include ethereum Ripple Bitcoin cash which is different to bitcoin Litecoin Stellar Iota Dash Monero and zcash we can anticipate that this list will change a lot in the months ahead the underlying technology called blockchain that enables most cryptocurrencies to function is being used in a massive number of other uses spanning almost every domain in our economies blockchain technology is being used for Supply management identity management in government for records management immature experiments using the internet of things and with ethereum for example to power a whole new category of applications called distributed apps or daps as we’ll discuss later cryptocurrencies have engaged a large new community of hobbyists and professionals it’s also inspired a significant criminal element which use cryptos and all manner of activity both across the public internet and in the more Sinister hard to reach corners of the dark web law enforcement is on it but the evolving nature of the technology combined with the anonymity of crypto is creating significant challenges additionally The cryptocurrency World is Not Without its share of hacking and fraud to add to the security concerns the current state of cryptocurrencies and the rapid rate of change make it a compelling space to explore sure the risks are significant but so is the upside knowledge is essential particularly if you’re thinking of using cryptocurrency investing in it or creating a business with it and it’ll be really important to keep up with it as I anticipate it’s going to change rapidly in the months and years ahead if you’re relatively new to the subject of cryptocurrency and have read and heard about it through different media channels you may be curious about the differences between the terms blockchain Bitcoin and cryptocurrency I think it can be easy to believe that they are just the same way of saying the same thing but with different terms I’d like to clear that up right now blockchain technology is the technology that enables most cryptocurrencies to work it’s the really techy stuff that functions behind the scenes it’s a unique form of database that stores and facilitates transaction information made with digital money most cryptocurrencies have their own blockchain database with their own set of rules as you can probably now guess Bitcoin runs on top of it its own blockchain in this course we are focusing on cryptocurrencies like Bitcoin and others called old coins and not on the underlying blockchain technology however I’ll provide a light description of blockchain in this video because I think it’s useful to put cryptocurrency Concepts in perspective okay so what is blockchain technology a blockchain is a database it’s used to store certain types of data it’s unlike most databases that have come before it and it has specific qualities two of those are at the core of what makes it unique and Powerful it’s a distributed datab base and its entries are immutable in other words it doesn’t sit on one all powerful server and the data stored in it once it’s written cannot be deleted but before I go too deep into this let’s quickly recap traditional databases in a traditional structured database data is stored in columns and rows in multiple tables usually a table stores related data for example a table might contain a person’s name and address it will also contain a unique key called a primary key for each row that can be used to connect to one table to another in a billing system for example another table might contain invoice information for purchase the address of the buyer will likely be referenced via a primary key databases have become very sophisticated and can have complex logic built into them in a client server architecture the database lives on a single logical server data is queried from the client presented as a request to the server which then runs the query and produces a result for the client in web-based architectures there are often at least three tiers the web client the web server and the database much like client server both the web server and database server are centralized often workload is distributed among many physical servers in this way they could be said to be distributed but logically they’re governed by Central rules as a result of phenomena such as social media and massive disperate data sources databases are increasingly unstructured in design while techniques such as natural language processing and text analytics help to manage the data the overall physical database architecture is largely the same this type of setup is hierarchical and relies on Central management somewhere in the environment there’s a set of rules on which on who can use the database and what rights each user has it served the world well and continues to be the dominant model for data management what makes this database architecture useful and Powerful also makes it vulnerable anyone with the right credentials can access and there are too many ways to hack the system system as many high-profile cases have demonstrated over the past few years massive credit card thefts from the likes of Home Depot Target and Numa Marcus are all too common a blockchain database is structured in the sense that it contains specific blocks of data organized in a particular way however there is a big difference in how the database is hosted unlike in a traditional database environment a copy of the blockchain database result Ides on every computer that participates in a given blockchain for example all Bitcoin users will have a full copy of the Bitcoin blockchain database on their Computing device there is no Central server it is not hierarchical in fact we call it peer-to-peer since the architecture is flat in a simplified description when a person first joins a blockchainbased environment the full database is downloaded to their device next as each transaction takes place in the blockchain say Bitcoin currency is sent from one person to another each transaction is recorded in every instance of the blockchain database in this way it is said to be a distributed database in fact there is an industry preference to refer to the database as a distributed Ledger unlike a traditional database for a transaction to be processed and inserted in Into The blockchain Ledger consensus must be reached by all the participating devices we’ll discuss this idea in detail in a later video despite some recent well-known security failures it’s anticipated that blockchain technology will eventually be extremely well secured one of the reasons is because it uses a type of security that requires special paired digital Keys a user of a blockchain has two keys a private key and a public key the private is only ever known to the user its paired public key however can be known by everyone and can be considered the address of the user for sending money within a blockchain to protect the transaction only the user with the private key can be associated with and unlock any transaction sent to their public Key address this works using a technology called cryptography this explains why we refer to digital currency as cryptocurrency or crypto now that you have a basic understanding of blockchain Technology it’s time to talk about its origin remarkably the actual programmer or programmers behind Bitcoin are still unknown we do know that Bitcoin first appeared in January 2009 as open-source software the this is a type of software license which allows anyone to inspect modify and enhance the software the Bitcoin software enabled currency in a digital format to be used without any intermediaries or governing Authority this means that currency could pass from person to person without the need for a bank or any other Financial intermediary in this way it’s the opposite of all other forms of typical currency we know in you news some say Bitcoin was developed as a response to the Great Recession of the late 2000s its inventors wanted to conceive of a new monetary system that did not rely on the whims of a few large Banks as a currency it does not exist in physical form there are no coins or notes it lives natively on the internet when a transaction takes place participants who use Bitcoin their computer specifically validate the transaction and it is recorded in a distributed Ledger that is powered by blockchain technology now you’re probably wondering how can a digital currency possibly have value let’s discuss this to have value typically something must be relatively scarce and it must be accepted by others for payment gold silver diamonds and oil for example older derive their value from being both scarce and expensive to mine how might this translate to a digital currency the first characteristic is that there is only a limited amount of Bitcoins available the original Creator stipulated that there would only be ever 21 million Bitcoins the second characteristic is how a person or organization can acquire a Bitcoin like gold acquiring a completely new Bitcoin requires a unique type of mining new Bitcoins are periodically released to the Bitcoin participant Network and can be acquired by solving extremely complex mathematical puzzles these puzzles take considerable computing power so access to participate is limited the computing power requires a lot of computers and a lot of power this incurs a cost to miners much like those mining oil in the wild ocean only those with exceptional resources can participate to have a positive cash flow the value thereafter is calculated similar to any currency by supply and demand in simple terms if demand for Bitcoin is high its value increases less demand price drops can Bitcoin be used to buy anything certainly all manner of organization including many big and small retailers accept Bitcoin wide acceptance has been foundational to its success Bitcoin is certainly not perfect and it’s largely considered a work in progress the software is still developing and maturing issues and risks are still being addressed including for example the recent discovery of web links being written to its blockchain that link to Illegal web page that said Bitcoin has inspired a massive industry of competitor cryptocurrencies called altcoins you may already be familiar with some of them such as ether peercoin Litecoin and ripple there are hundreds more the success of Bitcoin powered by blockchain technology has given birth to a whole new way of creating and using money the cryptocurrency industry still largely in its infancy seems well suited for the needs and expectations of the 21st century but it’s early there Still Remains a lot of challenges and risks ahead when you hear hear or read about crypto Al Bet It takes the form of Bitcoin or ether from the popular ethereum blockchain perhaps Ripple Litecoin peercoin Dogecoin and a few others each of these have enjoyed considerable success in different ways as viable forms of digital money each of them have seen their value rise significantly and sure sometimes drop but still they are largely retaining value at least for now although these are among the most popular and thus most frequently cited there is currently a long tale of well over a thousand other cryptocurrencies the term altcoin is used to describe all these cryptos as a way to note them as alternatives to bitcoin what’s the reason for so many cryptocurrencies right now we’re in a period of significant crypto chaos it’s the Wild West there is little Law and Order and everyone is vying for a piece of the action there are good guys and bad guys it’s equal measure scary and exciting every action carries enormous risk in this wild west anyone who wants to can spin up their own currency with their own set of rules this includes you and me why wouldn’t you want your own UK coin imagine the bragging rights imagine the power your coin could emerge as a favorite bringing you Fame and Fortune you could become part of an historical shift from government-backed currencies fit currencies like the dollar and Euro to a dominant digital money economy first you’d call it anything you want for me perhaps Rik andile coin then you would Define the rules and monetary policy for the currency for example you might have a cap on the total number of coins that could be issued next you may want your coins to be used for specific use for example Jenner coin is used in support of the renewable energy sector perhaps you might want to have your coin use an alternative proof of work and consensus mechanism after all it’s your cryptocurrency you get to make the rules at the beginning you could use your crypto to raise money for a new business idea that’s called an initial coin offering or Ico and it’s something we’ll discuss in detail later I’m guessing you’ll use your coin with good intentions but not everyone will there are plenty of scammers out there in this crypto Wild West there are a lot of bad people in town in the absence of any regulatory oversight and in a climate of irrational exuberance over crypto people are hastily throwing money at unsubstantiated cryptos if you buy a scam crypto there is no recourse you’ve lost your money the crypto Wild West is an unpredictable and risky place but it won’t always be that way in time the market will likely stabilize let’s look at a few examples of old coin and their use the Ripple blockchain uses an altcoin called xrp that powers its crossborder payment system this is an Innovative solution for moving money more quickly between countries if you’ve ever done this the traditional way you’ll know that it can take a few days unless you’re prepared to pay a substantial service fee another example is ether this is the cryptocurrency generated on the E ethereum blockchain a really successful platform for writing smart contracts software programs that run on blockchain technology without any need for a centralized software development platform others include zcash similar to bitcoin but with a focus on transaction privacy Litecoin almost identical to bitcoin but with a faster transactional confirmation process every 2 and 1 half minutes versus 10 minutes with Bitcoin and a last example Iota a cryptocurrency developed specifically to help enable innovation in The Internet of Things if you want to learn a lot more about other old coins and their specialty check out coinmarketcap.com let’s return to the topic of how you might now create your own cry cryptocurrency there is the harder way but one that provides you with maximum control and then there are out of box options that make it easier but provide you less flexibility the harder way which I guess is subjective is to copy the existing code that powers Bitcoin Yes you heard me right copy the existing Bitcoin code it’s called forking or specifically a software Fork it’s perfectly legal and supported Bitcoin is open source it’s free for anyone to copy and modify hundreds of today’s cryptocurrencies were created this way if you’d like to get your hands on a copy it’s available from several sources as an example you can get it from the software repository GitHub right here once you spin off your own copy of the Bitcoin source code to make any modifications will require you to have programming skills changes to the source code requires knowledge in C++ this requirement will certainly limit the number of people who can go this route however as you can imagine there is an ecosystem of providers who can do the specific work for you for a price let’s look at the easy way but less flexible way of creating your own crypto for this you’ll use one of the many outof boox often wizard driven Solutions available online as an example you can take a look at wallet Builders this service provides a free version that lets you create a cryptocoin as a test service to get some experience you might consider giving that a try however in order to go live with your crypto they do have a fee structure other services include crypto lifee and coin Creator you can also check out the waves platform these Services tend to be less flexible because you are limited to the capabilities they offer if you want to find a happy medium between the best but more complex option of programming in the Bitcoin code and the commercial wizard driven Solutions another option is to use the ethereum blockchain to create your crypto you’ll need some deeper technical skills but there are some great support tools available you can learn more here realizing that creating your own cryptocurrency is a real possibility can be eye openening but the technical work of creating crypto is by far the easiest part maintaining and sustaining a tradable digital currency is exceptionally difficult and most will fail it’s worth noting the remarkable fact that today anyone with an internet connection can create a Bonafide digital currency it speaks to the low entry barriers that the digital Revolution is enabling for all manner of capabilities from spinning up an e-commerce store over a weekend to easily coordinating Global events online there are many reasons why a person or organization may want to create a cryptocurrency and we discussed several in the last video what will become clear quickly is that creating a cryptocurrency is the easiest part of having a successful cryptocoin most will fail so the question becomes what are some of the things we must do and things that must go right to have a chance of success the first thing to recognize is that creating and nurturing a cryptocurrency is a long-term Endeavor for some some the first pass of creating the code might just take a day however we’ll assume that we want to create our own parameters for example how much currency will be available will it be capped or unlimited will we use proof of work or some other consensus mechanism do we want more or less privacy around transactions is it a public cryptocurrency or do we want to Define it for certain usage say within an organization or industry these are some highl business decisions but there are also a whole host of technical parameters we may want to Define too such as the hashing algorithm or block size in addition despite promoting the security benefits of the underlying blockchain technology security remains an issue with cryptocurrencies constant effort is required to fend off hackers and Shore up f abilities all of these choices mean that coding is required and ongoing maintenance of the code will be needed and of course modifications of the code won’t stop there there will be a need to add or remove features as time passes in response to community needs security issues and other challenges such as scalability understanding the long-term commitment and attendance expenses the need to Foster a community of developers and the challenges of meeting all requirements must not be understated the next hurdle and not a trivial one at all is to make both Miners and users aware of your cryptocurrency we’re talking marketing here how do you bring attention to your money when there’s so much competition and crypto Marketplace noise cryptocurrencies like ether Litecoin and zcash have done a great job of creating and fostering a variety of communities these include communities of Interest meetups significant social media Footprints events blogger pickups and online Forum participation this creates enthusiasts who further champion and promote a new coin particularly when it is observed that the founders are motivated deliberate and committed to the long term there is strategy here andur an element of luck if you have to sequence this put effort into getting your mining Community established first miners create energy and momentum and will help build cryptocoin credibility users effectively the buyers of the currency will build as volume of currency increases and price follows additional communities that will be essential within a short period will include merchants and exchanges depending on the strategy you might decide to work on having a particular Merchant accept your currency unless you have a good friend who owns a business and is prepared to make a bet on you or you have an incredible Network that gets you the same result this won’t be easy at all Litecoin for example has been successful in getting considerable retailer support as you can see here a good strategy good timing and good luck really helps the same can be said for exchanges that’s really the Holy Grail if your cryptocurrency can be bought sold and exchanged for other cryptocurrency or feed currency you’ve hit the jackpot many of the most reputable crypto exchanges only support a small number of cryptocurrencies but this is changing too as the market matures and public participation greatly increases finally success with a cryptocurrency May lie with intent if we return to basics for a moment we have to remind ourselves that the fundamental purpose of money is to acquire products and services a compelling cryptocurrency offers people an alternative form of money for the digital age something that enables them to for example spend with anonymity or avoid Financial fees or to complete International transactions quickly or maybe all of these and more however if we only view our cryptocurrency as a tradable asset class where the intent is to Simply make money from changes in its value this can undermine its credibility and quickly limit its potential a cryptocurrency with tight integration with exchanges and Merchants where Brokers and other stakeholders view it as a credible mechanism for the exchange of value will have a greater chance of success making money and speculation has a place but it’s becoming the domain of dubious getrich schemes and scammers in cryptocurrency the evidence is getting clearer that these cryptocurrencies have little chance of long-term success an organization has several ways to raise money startups are particularly constrained because traditional financial institutions are typically reluctant to invest in new companies that are unproven and with little collateral instead startups can raise money through their own savings through family and friends and if they are lucky from investors established organizations can raise Capital through traditional Financial Services and by having an initial public offering where they sell shares of the Enterprise to investors with the emergence of blockchain technology and cryptocurrencies a new form of raising Capital has emerged called an initial coin offering or Ico this process enables a startup to sell a predetermined number of tokens or a new cryptocurrency if the startup is offering that to investors the investor typically purchases with cryptocurrency such as Bitcoin or ethereum in some instances cash is used too the investor isn’t buying a share of the startup but instead is relying on the value of the token or cryptocurrency to increase as it is traded through specific exchanges indefinitely after the sale ends the first Ico was held in 2013 and as of late 2017 there were as many as 50 new icos being issued per month these icos have been generating enormous amounts of money in record time an Ico called filecoin raised $200 million within its first hour how do we know what icos are available there are many websites now supporting the initial offerings as well as a subsequent trading once the Ico is closed and the business has been launched these include coin schedule Ico alert and token lot token exchanges include next exchange and token desk there are few restrictions on who can buy into an Ico since the startup is taking money from a global audience of investors the amount raised can be large a risk with icos is that they are raising money pre-product it makes the investment highly speculative there is significant debate on whether and how icos should be regulated as of early 2018 both China and South Korea have banned icos all countries are evaluating this sudden new model and the future of icos remain fluid the US Securities and Exchange Commission the SEC which is tasked with protecting the country’s investors do not offer any oversight for icos at this time they have issued alerts and consider ico’s exceptionally risky Investments the question on the sec’s role depends on whether the token being offered represents an actual security a security is broadly defined as an instrument of investment in the form of a document such as a stock certificate or Bond providing evidence of ownership if so then the rules of the SEC kick in without getting too deep into this to determine whether cryptocurrency or token can be considered security requires something called the hoe test the basic concept of the test is whether the answer to these two questions is yes or no is there an expectation that the purchase token will make money for the investor and second do the management of the Enterprise providing the token work to make its value increase while certainly not comprehensive this is the basic concept if the answer is yes to both then it’s a security the conclusion is that a cryptocurrency and a token issued in an Ico could be a security but it’s not definite if it’s deemed to be a security there are a lot of obligations from the seller that must be met otherwise the legal consequences are significant it’s my opinion that this area will heat up in the months ahead as crypto currency tokens and icos mature and more of the population begins to participate another trigger will be when traditional investment Brokers begin to make these new digital products and services mainstream offerings finally the SEC has indicated that it is supportive of icos so they plan to see how they can play the right role in other words unlike many other countries the US doesn’t want to seek a way to ban them moreover it wants to find a way to appropriately regulate them to protect investors so where does that leave us with icos on the one hand they represent an incredible way for startups in particular to quickly raise a lot of money that’s important because great ideas need funding it’s giving entrepreneurs more options and confidence and generally that’s a good thing for an economy there are legitimate Ico successes both for the startup and investor some examples include NXT Iota ethereum Neo and Stratus on the other hand making it too easy attracts bad ideas with good marketing and scammers both will make your money disappear quickly in addition without any protection from the SEC or any other governing or enforcement Authority the risks of an Ico particularly to the investor are exceptionally High I’m not pessimistic about icos as I think the model has an opportunity to mature in the months and years ahead but right now there’s certainly a fair amount of unpredictability cryptocurrencies exist at a fairly high level of abstraction for example there’s no underlying supporting raw material such as silver or gold there’s no no centralized management and as of now no federal government backing and limited regulation and yet it works as a currency fundamental to any currency is the confidence of the user in its use for example we have confidence in fat currency that is government backed currency because it carries the full faith and credit of a national government in cryptocurrencies for the most part it is Miners and the mining process that provides confidence in their legitimacy probably the most important question in a cryptocurrency transaction is does the payer the person giving money have a cryptocurrency available to make the payment in a traditional centralized system the bank will manage this if someone tries to write a check for an amount they don’t have eventually the transaction will fail how can this be achieved in cryptocurrency we’ve seen in an earlier video that cryptocurrencies run on a blockchain this blockchain technology basically a type of database is stored in its entirety on each participant’s computer when one user in this blockchain wants to pay another user a process of consensus must be met by all participants to allow the transaction this is at the heart of the magic that blockchain creates if consensus is not reached that is participant computers don’t agree that the transaction is legitimate then it can’t take place consensus is the governance in the decentralized model that replaces the bank in the centralized model we can say then that mining is the process that enables consensus I’ll keep the description of the mining process here relatively simple Alice wants to pay Bob with cryptocurrency Bob’s address is known to Alice it’s his public key in this example we’ll say Alice wants to send five Bitcoins her transaction is first broke to the Bitcoin blockchain signed with her private key her private key Associates Alice with the Bitcoins that she owns now when she broadcasts her transaction special users called miners are waiting to receive the transaction request miners act to validate transactions and pass this information onto more users of the Bitcoin blockchain so they can also confirm the transaction this is the consensus process miners are incentivized to do this work because they receive compensation a tiny amount of Bitcoin in this case but what is the work that they are doing first first miners validate Alice has the five Bitcoins they do this by checking her sign transaction with the Bitcoins associated with her then using information in the transaction request a Minor’s computer’s processing power is used to solve a complex mathematical problem this problem takes some input data from the transaction and must transpose it to a predetermined output or Target using a special algorithm it’s the stuff that computers are really good at computers can cycle through enormous volumes of guesses at rapid speed until a Target is reached the first minor to solve the problem is awarded the Bitcoins that minor then broadcast a solution to the Bitcoin blockchain that’s what’s called proof of work which is further validated to be correct then finally to all participants of the blockchain where consensus is reached and the new transaction is approved and added as a block to the blockchain it all sounds terribly complex but it solves a few important challenges first it solves What’s called the double spend problem we don’t want Alice exploiting a Time window in the transaction to spend money that she has already committed as a basic example if Alice only has five Bitcoins we don’t want her to give five to Bob and at the same time give five to Stephanie proof of work creates rigor to every request and a fake second spend would be caught and rejected during or just after the first request the second important reason for the proof of work process is to create the immutability of the blockchain you’ll recall that the mathematical problem that the minor solves uses input from the proposed transaction to create a new bput each subsequent transaction uses parts of this new app outut as an input to the next output in other words every new transaction is dependent on every single previous transaction in the blockchain since proof of work is required for a new transaction and this is a rigorous process of both mathematics time and Computing processing power to change a previous transaction say to falsify a record such as faking a Bitcoin amount associated with a user would require all subsequent transactions to be recreated too the energy and cost to do this is effectively restrictive without leaps and processing capability which could happen in some distant future it becomes impossible to change prior records this is how immutability is achieved why all this seems complicated and convoluted let’s return to some Basics mining is valuable because it enables cryptocurrency to function but it’s also lucrative for the minor if your computer can solve lots of of the mathematical problems you’ll be awarded cryptocurrency you’re creating money using the processing capabilities of your computer returning to Bitcoin in its early days beginning in 2009 there weren’t many Bitcoin miners so lots of them accumulated Bitcoin rewards at the time they were not worth much at all over time though Bitcoin began to rise in value and more miners participated responding to the higher volume of miners the Bitcoin software increased the complexity of the mathematical problems in fact the software is designed to adjust based on minor participation more complexity meant that miners needed more computing power instead of just one personal computer they would need better Hardware now the entry barriers were increasing anyone could still participate but only those with a lot of computing power were likely to quickly solve an increasingly difficult new mathematic problem and thus earn new Bitcoin rewards technically anyone with a computer connected to the internet can engage in cryptocurrency mining particularly in the first years of Bitcoin very few could have predicted the significant increase in value that said the value of Bitcoin is a rather fickle proposition ultimately its value is determined by the confidence that after you buy Bitcoin you’re able to sell it to someone else at a higher price than what you bought it for any number of factors can impact its rise or full for example a major retailer or economic sector showing support can raise value whereas the imposition of a government regulation could lead to a significant fall in value over the past few years the price of popular cryptocurrencies such as Bitcoin ether Litecoin and pcoin have all generally trended upward for this reason buying these currencies with the intent to Simply sell later to realize a profit is popular it is also an area of debate and contention since far too many are using cryptos for this purpose and not as money to buy products and services one argument says that if the preponderance of use is for buying and selling for profit then sustainability as a currency May not be maintained as a cryptocurrency gets more popular and more miners participate the computer processor and power requirements increase this is because the complexity of the mathematical problem to solve increases relative to the number of miners engaged with the significant popularity of Bitcoin the computing power now required to have a chance to be a winning minor has grown it’s now close to Impossible to succeed by simply using a regular home computer the basic calculation that is required is that the money that can be earned from mining must be higher than the combined cost of purchasing Hardware maintenance and paying for ongoing electricity needs that said with so many old coins even people with a regular home computer can still mine and get old coin rewards let’s look at a variety of hardware and software scenarios first a big disclaimer here all my dollar assumptions here are examples and may not reflect reality anymore you mine and trade at your own risk we’ll start with a basic setup we’ll say that a regular home computer can be purchased for $1,000 you’ll need the mining software that is free to download from the respective cryptocurrency website it will run on most operating systems you might also choose a local wallet to store your private key sometimes special software is required which the specific altcoin will identify for example G is the program that communicates with the ethereum network and access the relay between your computer its hardware and the rest of the ethereum network okay so let’s say you can earn $5 per day mining with this computer that’s not unreasonable for some of the newer popular coins such as p coin and feathercoin earning $5 per day and with electricity cost of $1 to power your PC for 24 hours the payback period will be just a little less than nine months not bad however you’re not going to get rich here we also assume you have an existing internet connection and that the computer will not be available for any other use you might also need a fan to keep the machine cool not as likely with a home computer but air conditioning and the attendant costs become essential with more processing power to increase your earnings will require a bigger investment in computing power high performance home computers for say computer AED design or gaming can be anywhere from 5,000 to $110,000 and more computers with additional graphical processing units or gpus are great for fast processing and subsequently are perfect for mining they also consume much more power which increases your electrical bill if you’re just wanting to experiment or create a small passive income you’ll need to do the math to figure out what makes sense to you these examples are all for the entrylevel miner so what might the hardware and software requirements look like to make some real money for this you’re going to need what’s called a mining rig the smaller rigs are made up of the usual home computer parts like hard drives and central processing units CPUs but with more emphasis on graphical processing units gpus a good starting configuration might be six gpus the rig can’t be configured in the typical computer case so a special housing unit is now required they come with their own fans but you’ll need additional cooling it’s also going to get really noisy all this processing will require more power wattage too a standard computer uses around 500 watts this new rig is going to need at least uh 1,200 Watts there are no special Ram or hard drive requirements uh 4 gabt of RAM and a 120 GB SSD hard drive will suffice to increase processing more rigs can be built and they can be tethered together these mining rigs can fill a car garage and at Industrial Level the scale of current bitcoin new mining for example entire Warehouse floors and large data centers are being used searching online for mining rigs will provide you lots of options for you from DIY to pre-built it’s an exciting and growing space to increase your own processing capabilities you can join a mining pool this is when multiple people combine their mining rigs over the internet to jointly mine the same cryptos check out minergate as an example there’s also mining software that enables you to dynamically change mining to different old coins that are more profitable in addition in order to avoid Hardware costs it’s possible to participate in Cloud mining in this setup you simply pay for the use of mining rigs that are run by a provider to learn more check out Genesis mining as an example cryptocurrency mining can be a fun hobby and for many it can be a real money earner it’s certainly not for everyone and the risks remain high we’ll discuss those next

cryptocurrency 101 basics, learning cryptocurrency basics, and fundamentals. #learning #elearning #education

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timestamps
0:00 | intro
0:05 | cryptocurrency
1:33 | environment
6:22 | blockchain
13:07 | bitcoin
17:56 | methods
25:59 | challenges
32:27 | initial coin offering (ico)
38:45 | mining
46:05 | requirements