Crypto Information

To understand the basics of crypto, it's basically imaginary money - similar to your bank card, credit card, investment account or bank balance. It's not "real" physical cash like dollar bills or coin, it's a number on paper or in an account that has a value. To understand that concept, one has to understand how any money is even "created". In real money or fiat currency as it's called, years ago a person might find gold or silver and it was valuable, but carrying coins or a bar of silver was not convenient, so that metal was deposited in a secure trusted place and a "receipt" of it's current value was printed in a complex manner with a serial number on paper to carry and use instead. That became what we now call money and could be conveniently used anywhere to buy or sell. The idea then involved where carrying or storing huge sums of money on paper was not convenient either sometimes, so now we put the paper money in a trusted secure place and have tamper proof plastic cards instead whose only value is a number on paper in a account. Crypto simply takes that concept one step further and is just an accounting system of numbers to used to place a value on transactions. Any coin in simple terms derives most of it's basic value in how popular it is to be in use or how difficult it is to acquire.

How then is crypto "made" and what are block chains ? Earlier we noted that governments are "trusted" to store gold and also create "receipts" for the gold or silver they safe keep, basically they print money. In crypto it's similar - except in that not only does it safe keep value but it can safe keep transactions as well because - as it says - it's encrypted. Only the storage knows the  value but not precisely who it belongs to, all they know is someone has a key and if they have the right keys then the contents of the "safe" must belong to them,  and in a transaction only the two parties involved in doing it could know who the other may be. Other differences are that if one loses their safety deposit box key - the bank will verify ID and issue a new key - in crypto - lose your keys - your money is also lost. Where a government can print and issue money - in crypto - due to the nature of how it's designed and accounted for - anyone can create and issue coins.

Crypto is made on block chain - which is basically a digital block of information of transactions and the accounting of it. Each information block is encrypted and linked by encryption to the previous block so as to make it impossible to change any verified previous transactions. All the blocks linked are like a chain - so it's called block chain. Each block chain then contains all transactions right from the beginning for whatever coin it represents. How then are coins made and is a block chain started? Basically whoever invents a new coin has to create the first block using a computer script and give the coin a value as well as define how many coins, how hard they are to get and so on. That is called the genesis block.

Imagine a normal accountant who gets a ledger - but it has no pages in it, to get a page to do any work, he first has to solve a jigsaw puzzle - so he gets his friends to help, and each one does a portion of the work. When the puzzle is done they glue all the pieces together so it can't be changed and get paid for their efforts depending how much work each did. Each one gets a "share" of the prize. Then the puzzle is glued securely over the first page of the accounting ledger so no one can tamper with it .... then they do more "work", writing in the transactions to see how much each got and when all agree it's verified accurate the next page goes into the ledger, they do another puzzle and glue it in place also and get paid and then glue the first page to the second, so no one can change anything. But the "money" they are paid in was invented by the owner, very similar to the coupons stores and restaurants have. How it becomes of value is when one person having some sells the ones he has to another person who wants some, or perhaps one has one coupon and likes a different store better so then trades for that item. The value is then increased if the coupon is in short supply or it's very popular and lots of people are using it.

Coins are generally increased and more put in circulation by "mining". Mining simply means that numerous computers anywhere are using a software that is recording all the transactions and then doing the calculations to solve a math puzzle to prove it's all correct and tamper proof. When a certain number of computers all confirm the puzzle answer is correct then a new block is "found" or added then more coins are created due to that because initially each block had a value and the total amount of coins is changed each time a block is added to increase the supply, more digital coupons are printed. As more blocks are added, the initial script used generally also makes the math problems harder so it takes longer to get new coins made and that can also increase the value. Each time coins are used in any way, paying the miners, moving to a wallet, used for a purchase, sent to an exchange for trade or to do trade - there is a transaction fee involved - similar to a bank charge - this fund is used to pay the "miners" or accounting computers for their work.

In mining coins, a block generally has a pay "reward" that is set in the coin creation when the script is made - to create a new block requires the computer to calculate "hashes" to do the encryption - that is known as hash power, the hashes each computer that is working on the block does are counted and when the block is "found" - verified to be accurate - the reward is then divided among the miners according to how many hashes each did. This then turns into a share of the reward and when there are enough shares - then that miner gets the coins they have earned.

A few other terms one hears are coins, tokens and satoshi. The inventor of a block chain script is who makes a new coin, if other people use the same script to make a new block chain with different changes then they have created a token based on that block chain. A satoshi is the smallest unit of bitcoin recorded, 0.00000001 BTC or  one hundredth of a million of one coin, the concept is basically that there are 100 pennies in one dollar. One bitcoin can have a hundred million "pennies". One also hears the terms altcoin and stable coin. Anything not a bitcoin is an alternative coin, called an altcoin. A stable coin is generally any coin that has a reserve of real currency or assets equal and the amount of coin in circulation is equal in value to that, similar to gold and the dollar - only as many dollars can be printed or circulated as there are gold reserves of the same value.

Overall it's not hard to understand if one keeps in mind that all crypto is only numbers on paper in an account or digital wallet and the larger or smaller the number - the more or less value one has. The value depends on which coin one has, similar to real money - the dollar has a different value than the pound or euro. Crypto gets it's value from being in popular use and how difficult it is to get and because people also use real money to get some - it's value is also related to that. Mining coins is simply computers getting paid in coin to do math puzzles with several having to agree to be sure transactions are correct and all is secure.

Can you actually create real money from nothing ? Yes you can. Suppose you are working and using your computer or just browsing or doing something else or even nothing, just have it turned on. When miner software is running - you can still keep doing what you are doing - but it also is mining coins and automatically putting them in your exchange account to trade. What does that cost ? A few minutes to set up the miner and click start then let it run minimized (a dos window) as you do whatever you normally do. Trading a few times will increase the coin you have far faster than you can mine and you can trade for better value coins. The concept of trading is easy to understand too, it's like an auction sale - when prices are low, buy, when they rise, sell or just put in a low or high bid and it will buy or sell automatically using limit orders at the price you tell it to. Those coins then go to a different exchange, get sold to the highest bidder and you have real money on a card to go use or withdraw as cash if you wish, same as any normal bank card works.

Think of it like this - a computer just turned on takes nothing for electricity and even less cost on solar and a cpu miner does not make it work very much if the miner is set right, it's simply turned on 24/7. Now imagine a leaky water tap - as it drips it fills a bucket and can do that quickly if the tap drips lots - when full one empties it. Imagine each drop of water is a coin ... or a penny or a fraction of either - how much is a bucket full of copper or of pennies worth ? And it does that night and day - all you have to do is keep emptying the bucket. You don't even have to do that - most mining pools auto deposit to whatever wallet you tell them to at set intervals or coin amounts. It's sort of like someone handing you a money tree isn't it ?

Mining Pools