There are heated discussions about every single piece of cryptocurrency news. And about 80% of people write lies, trying to convince others that it’s just a scam, without knowing the basics of cryptocurrency. And some people do ask the right questions but do not get answers to them at all. Thus, in order to get a person acquainted with the market of cryptocurrency, we’ve decided to compile the most asked questions about it and give our answers to them, so that you can explain cryptocurrency when needed.
Explain Cryptocurrency – Question 1: What is cryptocurrency?
It is a currency that is based on programming code and which cannot exist in the form of cash (with the exception of Bitcoin Cash Notes). Like any currency, it has a value relative to other currencies. Anyone can create a new cryptocurrency, but in order for it to have value and become a medium of exchange, public recognition is necessary.
Explain Cryptocurrency – Question 2: Why do we need cryptocurrency?
For the same reason why you need any form of money: for it to be a reliable way to pay for products and services.
Explain Cryptocurrency – Question 3: How is cryptocurrency different from ordinary money?
It is quite different:
- There is no single control center for the cryptocurrency. They work due to the fact that many users simultaneously run the same wallet program.
- You can’t prohibit cryptocurrency, as the failure of a single network node does not affect the entire network.
- Cryptocurrency cannot be withdrawn/taken away, as only the person who knows the access key to the wallet has access to the money.
- You can’t bind cryptocurrency to a specific person (as with ordinary cash), since a user generates an access key and a wallet address themselves.
- You can’t prohibit, cancel or change a cryptocurrency transfer.
- Cryptocurrencies cannot be printed as pieces of paper, causing inflation. Instead, new coins are produced but not uncontrollably since the production schedule for new coins is laid in the initial code, and it cannot be changed in the future, at least until all users install a proposed update.
Explain Cryptocurrency – Question 4: What is mining?
The process of producing new coins of cryptocurrency. To process transactions, computing power is needed; miners receive a cash reward for processing transactions. Anyone can mine.
Explain Cryptocurrency – Question 5: Can I earn money on cryptocurrencies?
Yes, and there are many ways to do so. But there is no freebie – there are investments and risks. Thus, you must be smart about the way in which you use your time and money.
Explain Cryptocurrency – Question 6: What are some cryptocurrencies that are currently available?
There are cryptocurrencies a limited number of coins, currencies with infinite inflation, those that are open, those that are completely anonymous, and those that have different terms of payment processing. Now there are more than a thousand cryptocurrencies on the market, but not more than five are common among the masses. Here are the top 5 most popular cryptocurrencies in the world.
Litecoin (LTC) is a slightly modified version of Bitcoin. Slightly faster payments (2.5 min vs. 10 min for BTC) and the ability to process more transactions per unit of time.
DASH – instant payments for add. commission to pay in real life stores. The normal term is 2.5 min.
Monero (XMR) is a completely anonymous currency. Even complex algorithms from the NSA will not be able to track the cryptocurrency flow. (In other cryptocurrencies, this is also very difficult, but it is subject to the special services, yet it is still very much impossible with Monero).
Ethereum (ETH) – it was created not for payments but for smart contracts (this is a completely different topic for another time). It is very popular, almost like Bitcoin, but it is not as popular for online purchases.
Explain Cryptocurrency – Incorrect Statement 1: This is just a pyramid scheme.
No, it isn’t. Such an illusion may occur due to the rapidly growing exchange rate of cryptocurrencies, but they have nothing to do with pyramids, nor schemes.
Explain Cryptocurrency – Incorrect Statement 2: This is an economic bubble that will burst at some point.
It is extremely unlikely. Cryptocurrency money is not a useless product; it is convenient to store your money as cryptocurrency and to make payments. Cryptocurrencies will disappear only if all states prohibit them.
Explain Cryptocurrency – Incorrect Statement 3: It is too good to be true.
Programmers are smart people. A person wrote the code for a cryptocurrency and posted it on the Internet. The code of all cryptocurrencies can be accessed online by each and every single user; all of them have been verified by thousands of users.
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