So I’ve discovered the world of Crypto Currencies recently. Now I’m not a financial person or anything like that. I dont know much about how money works so my views are simply from a user base or technical point of view. But I must admit, I’m pretty excited.
Crypto Currencies are internet based “money” that works over p2p (similar to how torrents work). You can obtain coins and spend them on stuff or trade them for real world money. What is interesting, is that it is decentralised, which means there is no need for a ledger, or a bank to deal with the transactions. it is all taken care of over the p2p network. So money is sent directly from one person to another. Its like the internet equivalent of cash.
The banks hate it, because its cutting them out of business. The law hates it because for most part, its anonymous and they cant freeze assets, which of course could leave it open to being used for dodgy business. Which is exactly where it started with trading being done on the infamous Silk Road. Crime doesn’t pay, and I do believe that law enforcement should be able to freeze assets of crime and I’m really not sure if this will be possible with crypto currency. So there is a bit of a worry there.
But put that aside, because the world is run by genuine good people, not assholes. Crypto currencies are freaking AWESOME!! Why? Because transactions can take place free of charge. You can send money from one side of the world to the other without pesky banks taking a cut. Plus a coin is a coin, it has the same value all over. Unlike having to convert between EUR, USD and GBP wherever youre sending money to.
The other benefit of course is for micro transactions. Scan a QR code as youre grabbing a coffee, or getting on the bus with your phone, and you send some Bitcoin to that person or company with no bank charges. No longer will i see “Minimum £10 spend to use a credit card”, no more fumbling for change.
Now that bitcoin has surfaced from the underground, I believe it could be a viable method of online money which is growing in value, so at the moment, buying some could be an investment opportunity. An investment which the boat has already been missed in someway. A couple of years ago bitcoin was worth about $10. Now its worth over $700 a coin. Damnit! Why didn’t I know about this before! I could have been rich!!
Another interesting aspect of online currency is how you can make it. To run the network, there is an army of miners who basically leave their computers running 24/7 doing calculations and confirming transactions. By doing that, they earn commission and the coins are released to them. So instead of a company, ie Bitcoin getting together and investing in a server room and infrastructure to run the network. The end users run the network! Its brilliant! There are no costs at all. Because people who have decent spec PCs can leave them running, let them process the transactions and then they earn some money out of it.
The mining has caused a bit of an arms race though. In order to control the flow of the currency (so it doesn’t devalue by being mined so quickly) a difficulty level is set. Which means the more people who mine, the thinner the profits are spread. The faster equipment you have, the more share of the profits you can get. This is leading the end users to invest in faster hardware to mine faster to earn more coins.
There are a number of different coins out there. Literally there are hundres. Which I’m sure over time it’ll all windle down to just two or three. The most prominent and most valuable one is the Bitcoin. Currently sitting at nearly $800 a coin. To mine the bitcoin you need some very specialised hardware, known as ASIC processors, which for a decent one will set you back a few thousand.
Then there is Litecoin, which seems to be Bitcoins younger brother. To mine this you need a good array of high end graphics cards.
But interestingly, there is another coin called the DOGEcoin, which you can still mine using a normal laptop. Ok its worth practically nothing, but I think its a great introduction for learning how the whole thing works without having to worry about anything!
So yeah, watch this space. The way we use money online could changing!
Might be worth making a few investments on crypto currency stock exchanges!