What is Cryptocurrency and what are its uses?
In this premiere episode of Cryptopulse, hosts Ben and Kevin set the tone for the show – introducing concepts for beginners to make sense of the Cryptocurrency World, starting by answering the primary question – What is Cryptocurrency?.
With the advent of the mainstream adoption of bitcoin, it is important for every potential investor to understand the foundation of Cryptocurrency. We wish to enable every listener to make informed investment decisions.
COVERED IN THIS EPISODE:
- What are Ben & Kevin’s backgrounds?
- What is Cryptocurrency?
- How did the invention of currencies come about?
- What is a Fiat Currency, and what are the drawbacks of its use?
- What is Crypto Mining?
- What are common daily uses of Cryptocurrency?
MENTIONED IN THIS EPISODE:
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Information provided by Cryptopulse via this group, website, social media channels and any other medium DOES NOT constitute financial advice, investment recommendations OR any other type of advice whatsoever.
The Cryptopulse team are not professional financial advisors. Trading and purchasing cryptocurrencies do carry risks and anybody wishing to partake in such activities should seek professional advice.
We don’t like the law stuff, we like the crypto stuff!
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By Kevin Basham — 4 years ago
WHAT IS LITECOIN?
Lіtесоіn (LTC оr Ł ) is a рееr-tо-рееr сrурtосurrеnсу аnd open ѕоurсе software project released under MIT/X11 lісеnѕеѕ. Crеаtіоn аnd transfer оf соіnѕ іѕ bаѕеd on an ореn-source сrурtоgrарhіс рrоtосоl and іѕ nоt mаnаgеd bу аnу сеntrаl authority. Whіlе inspired bу, and in mоѕt regards technically almost іdеntісаl tо Bіtсоіn (BTC), Litecoin іѕ far quісkеr аnd cheaper.
At the time of writing this article (2nd Jan 2018), Litecoin sits at $254 per coin.
How much is Litecoin worth?
On December 18th 2017, Litecoin reached its all-time high, $360.93, which, when compared to the price one year before ($4.40), was an incredible 8200% rise. This is wholly reflective of a booming cryptocurrency marketplace, whose total market cap ballooned from $17.7bn to around $650bn in just one year, an increase of over 3,600%.
Where can Litecoin be used?
Litecoin is frequently compared to Bitcoin, which functions almost exactly the same, aside from the cost of transactions, which are around 1/50th of the size. For many cryptocurrency traders and users, Litecoin pricing acts more rationally than Bitcoin, and with a more sustainable future.
As we see some online stores begin to accept cryptocurrencies, we will see it possible to buy jewelry, groceries, clothes, electronics and more. Since the value of Litecoin is determined by demand on currency trading websites like Bittrex, Binance, GDAX, and Coinbase, it is possible to envision an online shopping platform where the price of products constantly changes to reflect the value of the accepted coins.
As well as trading and purchasing, it is possible to mine this crypto, though this is a very technical activity and requires a decent amount of computer knowledge. A good computer is enough to mine coins very slowly, but a serious miner would use processing units that rapidly solve mathematical equations that support the blockchain.
The rise in popularity of Litecoin and other cryptocurrencies is largely in response to the demand for alternative currency options that separate themselves from centralised banks and governments. The other side of the demand is from traders and investors who have realized the massive potential that cryptocurrencies have to offer, and so many stock and forex traders have changed market (remember, the market grew from $17.7bn to $650bn in one year). Cryptocurrency is arguably easier to enter for traders, meaning that in 2017, millions of beginners, as well as seasoned traders, began buying and selling different coins.
Litecoin as a worldwide tool
Litecoins can be used anywhere (though illegally in some nations), by anyone. The fees experience by Litecoin users are lower than those of credit card companies and bank transfers. As an example, one person in France can send a payment to someone in China in seconds, with both parties receiving proof of the transaction (which will be stored on the blockchain). Litecoin was designed to enable quick and cheap payments that are as simple as sending an email.
How many Litecoin are there?
There can only ever be 84 million Litecoins, and as it stands, 55.58 million have been released or mined already, meaning almost 30 million coins are still fair game for miners. The figure of 84 million was based on the 21 million limit of Bitcoin, and the fact that Litecoin was designed to be 4x faster than Bitcoin.
A fixed amount of coins also means that inflation will not affect the overall value of the currency, unlike currencies such as the dollar, pound or euro. For forex traders who feel that a currency might drop in value, they may purchase Litecoins and hold on to their investment before selling back into their currency (hopefully at a profit). External influences (such as governments) can manipulate the value of their currency through inflation and quantitative easing, but the same cannot be done with Litecoin, making it more sustainable long term.
Who created Litecoin?
Litecoin was created by Charlie Lee in October 2011. Lee is a former employee of Google, who designed it to complement Bitcoin by solving some of its issues, like transaction times, fees, and concentrated mining pools. Charlie Lee took the core code from Bitcoin and made his modifications to the code and protocol to work in a way that he felt would best allow for the large-scale adoption of the currency.
One of the main goals was to reduce block confirmation timings from 10 minutes to 2.5 minutes, so that more transactions could be confirmed. This made Litecoin 4x faster than Bitcoin. Each 2.5 minutes, a Litecoin block is mined, and 25 coins are generated. This means that at the moment, 14,400 Litecoins are being mined every day, the maximum amount possible.
Litecoin has so much scope for growth, potential uses, and wide adoption. Right now, we must observe which companies begin adopting it and accepting transactions for their products and services. Other than that, the future of Litecoin is anyone’s guess.
By Kevin Basham — 4 years ago
Top 10 Myths about Bitcoin
You can hardly escape the hype around Bitcoin, it’s everywhere, filling columns in newspapers, creating discussions on TV and spreading its way across the many various social media platforms, such as Facebook, Twitter & Instagram. The most difficult thing to do for anyone trying to educate themselves is to sort the truths from the lies, which is why we’ve busted the Top 10 Myths about Bitcoin, so you can know exactly what to look out for!
Bitcoin is worthless
Many people do not understand (or are not yet willing to understand) the value of a global, decentralized, portable, peer-to-peer, censorship-resistant digital payment network, simply because it’s not backed by anything such as a government or a commodity such as gold or silver. The fact that Bitcoin can be used and transferred without the need of a bank account or the involvement of a central government is a HUGE plus when compared to traditional currencies.
There are, however, varying opinions on this point. Some believe that Bitcoin’s scarcity is the main attribute that gives it value, while others claim that Bitcoins are useful because they are required in order to use the world’s most prominent and secure decentralized ledger.
Bitcoin is not backed by anything
Some argue that Bitcoin is not backed by anything, like a precious metal or a traditional currency would be, thus making it incredibly risky.
So, let’s make the first comparison of gold or silver. Firstly, the value of these materials is purely based on what people are prepared to pay for them. Some people see gold as a safe haven from volatile currencies and other global market conditions. There’s nothing wrong with this, however, gold and silver are inflationary because they are viewed as scarce, but nobody knows how much gold is available on planet earth, so there is a flaw to the value.
Traditional currencies (FIAT currencies) were once backed by the value of gold. When we came off the gold standard in 1931 due to the Great Depression, currencies were no longer backed by anything physical. Traditional currencies are now backed by a central government. Maybe you’re fortunate enough to live in a country where your government and currency are quite stable, however, for many this isn’t that case and they can manipulate prices, just look at Zimbabwe and Brazil for example. In November 2008, the monthly inflation for Zimbabwe was 79,600,000,000%. In 2016, five major banks in Brazil (including HSBC and Barclays) were fined for creating a cartel in offshore foreign exchange markets.
The bottom line is that traditional currencies are backed by public faith. If an entire country stops believing that the currency works, has value, or that those who control it are acting responsibly, then the value of that currency is going to start seriously dropping.
Criminals use Bitcoin
The argument that criminals use Bitcoin and other cryptocurrencies is absolutely true. Of course criminals use Bitcoin! However, criminals also use cash, like dollars, euros, pounds, or whichever currency is desired at the time.
The problem with cash is that every transaction is NOT recorded and therefore cannot be accounted for on a public ledger, unlike Bitcoin. The fact remains that criminals will use the tools which allow them to complete their work as efficiently and discretely as possible.
The idea that criminals are using the internet and its tools, and therefore Bitcoin should be stopped or banned is quite laughable in reality. Perhaps automobiles should never have hit our roads because they allow criminals to make smooth getaways from crime scenes! Let’s not allow the concept of criminals using Bitcoin as a deterrent for what is a great piece of modern technology.
Bitcoin is in a bubble
At the time of writing this, nearly $600 billion has been poured into the cryptocurrency market, with more than a third of that ($218bn) on Bitcoin alone. The technologies in play have been designed to revolutionize money, data and transactions, allowing currencies to be disconnected or decentralized from governments, who, as we mentioned, like to meddle.
“Absolute power corrupts absolutely”. Think of this Lord Acton quote as a reason to support decentralization. Roman emperors considered themselves gods and went mad with power, even Napoleon declared himself an emperor and now those who rule our governments also want to control our money. This isn’t right.
Let’s use the .com boom as an example of a bubble. There was a great deal of hype around the technology and huge amounts of money poured in. Thousands of companies thought that they would be the next big thing and threw ‘dumb money’ at their ideas. People were investing without understanding. Prices were speculative, and when the market his $5 trillion, the bubble burst.
But, we still have the internet? We still have companies trying to be the next big thing. We have more functionality than ever before. This is because the 90% of websites who jumped in without a clue simply went away, and the useful 10% remained, like Google, Amazon, eBay etc. Learning what to do and what not to do, further down the line we saw new .com businesses arrive, like Facebook, Netflix and Twitter.
If we take the .com bubble and apply the same logic, then the useless or poorly designed cryptocurrencies will be the first to crumble when the bubble bursts. This would indicate that the best thing to do is pay attention to the cryptocurrencies that have longevity, and follow the news about ICOs and stock exchange listings.
An alternative theory is ‘mini-bursts’, in which the market will jump up ten steps and then fall five steps, and repeat. If you see the history of Bitcoin pricing, this autonomous correcting of prices after a rally is always there. We must look at the bubble in its entirety, be bullish and cautious, educate ourselves, remain optimistic and learn from the mistakes of the past.
The CEO of Bitcoin is the only one getting rich
Bitcoin is not a company, it’s a technology (actually, it’s a protocol, but let’s keep it simple) just like the internet and nobody owns the internet. There are different stakeholders in Bitcoin, which includes Bitcoin owners, miners, development teams, and investors.
The founder of Bitcoin is unknown, except for an alias they used called Satoshi Nakamoto. It is rumoured that Nakamoto has more than 1 million Bitcoins, which would make him or her a billionaire if they were to sell. However, since some test transactions in 2009, Nakamoto has never touched the Bitcoins. If they are getting rich, they’re doing it in another way.
You can’t spend Bitcoin anywhere
We are at the start. As we’ve written before, wide adoption of payment methods takes time, as we can observe throughout history with coins, paper money and plastic cards. Money used to be stored under mattresses or in cash boxes, now we manage it from our mobile phones; our approach to money has constantly changed throughout time. Despite being right at the start of this journey, companies like Overstock and Microsoft are already accepting Bitcoin.
The Litecoin Foundation report that they are seeing more companies create methods to facilitate transactions with their cryptocurrency too. Bitcoin may instead become a digital storage for future value, rather than an everyday currency used to purchase goods and services (it’s most likely that both will occur). The reason for this is that other cryptocurrencies have been designed for faster transactions and lower fees, like Litecoin, Monero & Bitcoin Cash.
Bitcoin is illegal because it’s not legal tender
In Venezuela, Bitcoins are illegal, both to mine and to own. But, you just have to look at the sorry state of their government and situation to understand that this isn’t reflective of Bitcoin, but something more oppressive. Those who choose to mine Bitcoin in Venezuela are helping bring themselves and their families out of poverty, thanks to the decentralized nature of the cryptocurrency, even at the risk of jail time.
Because Bitcoin is borderless and doesn’t exist in just one country, it thrives on the blockchain, meaning that it is immune to the economic crises of any one country (like Venezuela).
Aside from Venezuela, Kyrgyzstan, Iceland, Bolivia, Vietnam and Ecuador have all banned Bitcoin. China and Russia have some technicalities on usage too. But, if you’re from the US or Canada, the UK, Australia, New Zealand, or the European Union you’re able to use Bitcoin, and may find out soon that your country has included digital currency in new tax laws to make things more accommodating.
Bitcoins are used primarily to launder money
As we wrote before, Bitcoin transactions are all kept in a ledger that is publicly accessible. So, if you choose to launder money through Bitcoin, you’re making the mistake of leaving a trace. There are more efficient methods of money laundering, we can only assume. Whether people are using it to launder money or not, it’s certainly not the primary use.
It has been mentioned by many cryptocurrency experts that the reason so many governments and institutions support decentralised cryptocurrencies is because these ecosystems are much cleaner and contain less dirty money than traditional banks! Banks are incentivised to get as much money inside them as possible, allowing for corruption and paying off fines when caught. With Bitcoin, there’s no incentive to launder money.
Bitcoin can be hacked and I’ll lose my money
When Bitcoin first launched, this myth may have been truer, but over time, security has increased tenfold.
Exchanges, such as Bitfinex, Gdax, Binance and Coinbene offer 2-factor authentication when logging in, meaning that a mobile device is required to confirm your identity. As well as this, when signing up for an exchange, you are required to provide pictures of your passport or identity, making your account even more secure.
For those who are concerned about losing their Bitcoin to hackers, it is very common to store your coins and protect your crypto-assets in a soft or hard wallet. Soft, or software wallet, is a programme on your computer that stores your Bitcoin safely, though they are not perfect, it is possible to hack them. Hard, or hardware wallets have 0 reports of theft, and the reason for that is that they are encrypted physical devices, such as hard drives, pen drives or miniature digital signage tools. Whilst the devices themselves could be stolen, the Bitcoins they contain cannot (unless the login information is stolen too).
For those who keep their money in their exchange wallets, there is little to worry about, unless you are trading noticeably large amounts that might gain the unwanted attention of highly skilled hackers.
Bitcoin is the only ‘real’ cryptocurrency
There are many different cryptocurrencies and crypto-assets, in fact, at the time of writing this there are 1000’s available. Many of them are built on the Bitcoin protocol, so in fact use a ‘system’ which is proven to scale.
Litecoin, for example, was developed by former Google employee Charlie Lee, who improved on the current system by making it faster, and with lower fees. There are also other cryptocurrencies, such as Monero and ZCash, which allow anonymous transfers. In addition, we also have Ethereum, which can be best explained as a giant, decentralised world computer with the ability to run smart contracts and also allows developers to build ‘crypto-assets’ on top of it.
There are a lot of cryptocurrencies out there which serve different purposes, but in this early stage of using this type of technology, and the enormous opportunities to raise millions through ICOs, there will be a lot of bad ideas, inexperienced teams, and projects which are likely to fail (See point 4 about the Bitcoin ‘bubble’).
The bottom line is that Bitcoin has scaled the most, in the most secure way so far, and continues to lead the march in terms of their market cap.