Cryptocurrencies and How They Can Profit You

What are Cryptocurrencies?

Cryptocurrencies are not like anything we are used to having in our bank accounts or wallets. They are not cash or credit cards. Cryptocurrencies are Decentralized currencies, which simply means they are not affiliated with any central bank or institution. Decentralised currencies follow rules that exist outside the traditional financial system and on a computer network.

In 2009, Bitcoin, the first decentralized digital currency introduced the technology known as the blockchain. Today there are quite a few cryptocurrencies built using blockchain technology like Ethereum, Dash etc. Imagine the blockchain as a huge ledger in which every transaction on the network is recorded making sure no user can cheat the system by spending the same money twice. Thousands of specially equipped users (computers) around the world known as miners verify these transactions. Recording these transactions on the blockchain earns these miners bitcoin. Nobody needs permission to become a user or a miner and no single institution is in charge of the system.

But one may ask why go through the trouble of using Cryptocurrencies, when there is cash, debit and credit. Some people see it as a political statement and are in favour of currency that is not controlled by corporations/governments and functions outside of existing bank systems (banks that charge high transaction fees). Others view them as investment opportunities because when you’re able to buy in at low prices and sell when they go up, you can make a lot of money. And just like cash transactions, there is no exchange of personal information when using crypto currencies and users can make transactions online anonymously.

Let’s talk about Bitcoin. Remember back when Ghana was Gold Coast? When we had so much gold it was literally spewing off our shores? I’m sure someone once said, “What is that?” Shiny gold rocks? That’s not real money, No we only accept seashells/cowries here.

We have far since evolved past trading seashells, cowries, pieces of gold etc to the current fiat currency system. Now as countries like Greece/Argentina collapse under the debt of fraudulent currency creation and inflation etc, the world is just about ready for digital currency, led by bitcoin.

When we use our computers and use Word documents or other files we usually save them in folders. A folder with documents, photos, spreadsheets, music files, etc. could be called our database.

When we use Twitter, for example, we don't keep that "database" of photos, text, messages, links, etc in our computer, Twitter keeps a database of all our activities on their servers in a datacenter, which is a building full of servers (powerful computers).

In the case of Bitcoin instead of using Twitter, or any other service, to store our stuff in their databases, we download a software(wallet) that is more or less like Whatsapp, and instead of sending and receiving voice or video or text between us we send and receive units called bitcoins.

Imagine 5 friends around a table and everybody with a laptop and a copy of Bitcoin. Each laptop has the complete database of the Bitcoin list of accounts and transactions. When friend A sends 1 bitcoin to friend B it sends the message to all 5 laptops and they all check that the balance is correct, the accounts, etc. and after checking they all agree to post the new transaction on the databases that they all have on their computers.

The Bitcoin database is called a blockchain, because of how it operates, and the process by which all computers check transactions and reach an agreement is called "consensus" (there is another process called mining which is how new bitcoin is created).

The world changing invention of Bitcoin is that all computers participating in the network can keep this "distributed" database updated and with all latest transactions without the need of a central player like Facebook, Twitter (or a bank) to be the guarantor of security and clearance of bitcoin movements. This was not possible before!

The combination of the blockchain and the consensus process of all machines participating in the network keeps it secure and attackers (hackers) could falsify or corrupt the database only if they had more than 50% of the computing power of all the network. Because by now there are so many (and powerful) computers involved, hacking Bitcoin is so costly that it is nearly impossible. Pretty smart don’t you think?

The Bitcoin network and its database, the blockchain, only handles and posts accounts and new transactions so it is used as money where the balances are passed from account to account as everybody enters transactions.

In the case of Ethereum it is the same invention, BUT instead of only handling accounts and transactions it can also store smart contacts (computer programs) like:

“If account A has $xx balance and if today is April 1st, 2017

Then transfer $6 to B account, if not do nothing”

And as the above program can be set up on Ethereum and would live in the Ethereum database forever (because it is stored in thousands of computers around the world) people may store any kind of program that can execute orders of any kind and responding to any kind of parameters like dates, quantities, sports results, or anything else that happens in the real world.

Since the Ethereum database is stored in thousands of powerful computers and laptops around the world collectively they may be described as a single computer because they all have the same database and can communicate between each other. Collectively they have so much computing power that by sharing it (and the database with the money and programs) they may be an incredibly powerful multiservice datacenter for the world and for many purposes. Read here All about ETHEREUM & why you should invest now.

Bitcoin is better than traditional banks, Western Union and most investment companies. Never before has the average man been given so much financial access. Cryptocurrency markets are open for trading 24/7/365. Your wallet is available to you almost instantly and transactions are made free, fast and securely every day with no need to deal with customer service or go to a ‘branch’ and wait in long queues. Bitcoin is probably more real than the cash in your pocket. There is no such thing as a fake or counterfeit bitcoin but the cash you have right now could be fake. Any physical currency has and will get duplicated after a few years in circulation, this is why they print/mint new currency notes/coins every few years. Counterfeiting is expensive and brings distrust to the currency and the market. Again, something bitcoin technology has been designed to stop from day 1.

Here’s a video on how bitcoin is changing lives in Africa.