DEV Community

Cover image for What Is Crypto and How Does It Work ?
Bek Brace
Bek Brace

Posted on

What Is Crypto and How Does It Work ?

I hate changes ! I like to use what I know and what I'm used to use .. if that makes any sense!
I love real cigarettes (when I used to smoke!) and never had Vype or e-cigarettes, I like to date real women drinking coffee and having a human interaction [have you seen that video in Japan where there was a wedding between a man and his digital girlfriend living in a hologram ?!] and of course I love real money in coin and paper ..

As technology evolves, things around us change, take a look to Zuckerberg's Meta where he wants to have a paralel world using Augmented reality, where people live virtually and trade virtually using digital money .. the term “digital money” is frequently used to characterize cryptocurrency. While this definition is accurate, it falls short of capturing what makes cryptocurrency so special and intriguing to so many investors.

Let's talk a little bit about "what is Crypto?"

Cryptocurrency is, at its foundation, a value system.
When you buy a cryptocurrency, you then are betting that the asset’s value will rise in the future, similar to how stock market investors purchase securities in the hopes of seeing the company’s stock price rise .. exact same concept

Stock values are based on discounted projections of future cash flows .. and because there is no underlying corporation, there is no valuation metric for cryptocurrencies; the value of a cryptocurrency is solely determined by investor appetite [acquiring or getting rid of] .. as a matter of fact there are two elements that determine the cryptocurrency’s value:

1- The chance of other investors buying whatever cryptocurrency they want.
2- The utility of that cryptocurrency’s blockchain

Let's discuss this further and ask :
What is cryptocurrency really and how does it actually work?

Blockchain technology is the heart and soul of cryptocurrency, but what exactly is a blockchain?

Simply put, a blockchain is a digital ledger of transactions. This database (or ledger) is shared over a network of computer systems. The ledger is not controlled by a single system. Instead, a blockchain is maintained and transactions are authenticated by a decentralized network of computers.

Those who are in favor of blockchain technology [ and I - miraculously - became one of them!] claim that it can improve data openness, trust, and security when shared across a network.

Detractors claim that blockchain is inconvenient, inefficient, expensive, and wasteful of energy.

If a rational crypto investor believes in the power and utility of a digital asset’s underlying blockchain, they will purchase it. All cryptocurrencies are built on the blockchain, which means that crypto investors are betting (whether they realize it or not) on the blockchain’s robustness and attractiveness.

On the underlying blockchain, cryptocurrency transactions are recorded in eternity. In the form of ‘blocks,’ groups of transactions are added to the ‘chain,’ which authenticate the transactions’ legitimacy and keep the network up and operating. The shared ledger, which is open to the public, records all batches of transactions. Anyone can look at the transactions on the biggest blockchains, such as Bitcoin (BTC) and Ethereum (ETH), at any time (ETH).

However, why do users devote computing resources to verifying blockchain transactions?

They are compensated with the underlying cryptocurrency, to be sure. A proof-of-work (PoW) mechanism is an incentive-driven system. Miners are the computers that ‘work’ to ‘verify’ the authenticity of blockchain transactions. Miners receive freshly generated crypto currencies in exchange for their energy.

By the way, I am preparing some quick tutorials with streamlit on blockchain and crypto, if you're into Python programming, I think you'll like it :)

Back to our crypto-talk .. So, cryptocurrency investors - and this could be you - do not keep their funds in regular bank accounts, right? You have digital addresses instead. These addresses include private and public keys, which are long sequences of numbers and letters that allow cryptocurrency users to send and receive money. Unlocking and sending cryptocurrency requires private keys. Public keys are made available to the public and allow the possessor to receive cryptocurrency from anyone.

Bitcoin, without a doubt, has shifted the paradigm; there has never been anything quite like it before, and it has created an altogether new platform for investing, and a new way of thinking about money.

I still love real things , but to tell the truth cryptocurrency is the future of global finance, maybe next year maybe in 10 or 20 years, either way it's gonna happen and you better be ready.

Discussion (2)

Collapse
aloha112 profile image
aLOHa1-12 • Edited on

This is exactly what I learned from the courses and articles on investorjunkie.com/ to be prepared for the future of cryptocurrencies. I have many friends and acquaintances who invest in cryptocurrencies because it's fashionable. Just because that's what many do, and they don't want to be left behind. But I think you have to understand how the system works first, to believe in what you do. Even if it is a riskier market, I chose to invest in crypto, but I am sure it is worth it because the future is online money and virtual reality.